A $100,000 allocation across covered-call ETFs and a BDC targets $9,000 annual income with a 9% blended yield.
A $100,000 investment split evenly among three monthly-paying funds aims to generate $9,000 to $10,300 annually, equating to a 9% blended yield. The strategy combines covered-call ETFs and a business development company to achieve the target income of $750 per month.
The required yield exceeds current returns from S&P 500 index funds or bond ladders, prompting retirees to seek alternative income sources. Covered-call ETFs cap equity gains in exchange for option premiums, while BDCs lend to private firms at floating rates, which may compress if the Federal Reserve cuts interest rates.
Tax efficiency is critical, as ordinary-income tax treatment can reduce cash flow by 20% to 30% in taxable accounts. Placing the portfolio in an IRA is recommended to mitigate this impact.