Retiring in 3 Years and Need $5,000/Month—Here’s the Portfolio to Build Now

Retirement is almost here? No need to fear! Even if your monthly goal of earning $5,000 in dividends starts in just three months, it’s possible to achieve this by carefully investing in high-yield exchange traded funds (ETFs).

To get dividends/distributions totaling $5,000 per month or $60,000 per year, you can use a combination of diversified income-producing ETFs and single-stock-focused funds. Assuming you’ll have saved up $500,000 for retirement three years from now, you will need to achieve a 12% average annual yield to get $60,000 worth of income per year.

The plan is to allocate 80% of your investable capital toward a pair a diversified ETFs that offer annual yields of around 12% to 15%. Then, to put you decisively above the $5,000-per-month threshold, you could invest the remaining 20% of your retirement funds in a few ETFs that derive high yields from single stocks. So, let’s dive right in and see how this powerful plan works.

2 Diversified ETFs With High Yields

The first part of the plan is to devote 80% of your investable retirement savings toward two diversified ETFs. More specifically you can allocate 40% of your capital toward the NEOS NASDAQ-100 High Income ETF (NASDAQ:QQQI) and other 40% toward the NEOS S&P 500 High Income ETF (BATS:SPYI).

To earn passive income of $5,000 per month when you retire in three years, you’ll need to achieve at least 12% average annual yield on a $500,000 investment. The NEOS NASDAQ-100 High Income ETF exceeds the 12% objective with an annual distribution rate of 14.65%.

You’ll end up paying annualized operating fees of 0.68%, but even after subtracting that, QQQI’s yield would still be above 12%. There’s still the question of whether this is safe yield, though.

I would assess the NEOS NASDAQ-100 High Income ETF as reasonably safe because this diversified fund invests in approximately 100 well-known technology firms. Based on the NASDAQ 100 index, the QQQI ETF’s holdings include tech leaders like Apple (NASDAQ:AAPL), NVIDIA (NASDAQ:NVDA), Broadcom (NASDAQ:AVGO), and Meta Platforms (NASDAQ:META).

Furthermore, the NEOS NASDAQ-100 High Income ETF pays out its cash distributions each and every month. Consequently, you may be able to take advantage of the compounding effect by reinvesting the distributions.

For even more diversification, you can match your QQQI allocation with an equal-sized investment in the NEOS S&P 500 High Income ETF. Centered around the prestigious S&P 500 large-cap stock index, the SPYI ETF includes around 500 stocks in its list of holdings.

You’ll probably recognize many of the names on that holdings list, such as Coca-Cola (NYSE:KO), Bank of America (NYSE:BAC), Occidental Petroleum (NYSE:OXY), and Home Depot (NYSE:HD). Since the fund includes so many famous names across multiple market sectors, you can invest in the NEOS S&P 500 High Income ETF with confidence.

Like QQQI, the SPYI ETF pays its distributions on a monthly basis, so that’s a nice benefit. Will the NEOS S&P 500 High Income ETF achieve a 12% yield, though? The fund currently advertises an annual distribution rate of 12.15%, but you’ll have to pay operating fees totaling 0.68%.

Remember, though, that you can invest equally in the NEOS NASDAQ-100 High Income ETF and the NEOS S&P 500 High Income ETF. That way, you should average 12% yield or more (assuming there are no distribution cuts) with 80% of your portfolio.

Boost Your Yield With Single-Stock Funds

Just to make sure that you’ll achieve at least $5,000 of monthly passive income, you can dedicate the remaining 20% of your portfolio toward a handful of single-stock funds. These ETFs are riskier because they’re not diversified, but their annual yields are quite impressive.

I’m referring to four ETFs which all pay their distributions on a monthly basis. You can go here for detailed explanation of the four funds, but I’ll provide a quick summary right now.

The YieldMax AAPL Option Income Strategy ETF (NYSEARCA:APLY) indirectly derives income from Apple stock. It advertises an annual distribution rate of 26.97% but you’ll have to deduct operating expenses of 1.06%. That still leaves you with an expected net yield of 26.97% – 1.06%, or 25.91%, which is nothing to sneeze at.

Here are three similar ETFs to consider:

• The YieldMax GOOGL Option Income Strategy ETF (NYSEARCA:GOOY); based on the stock of Google parent company Alphabet (NASDAQ:GOOGL); annual distribution rate of 33.14% – 1.2% worth of operating expenses = expected net yield of 31.94%.
• The YieldMax AMZN Option Income Strategy ETF (NYSEARCA:AMZY); based on Amazon (NASDAQ:AMZN) stock; annual distribution rate of 47.52% – 1.17% worth of operating expenses = expected net yield of 46.35%.
• The YieldMax NVDA Option Income Strategy ETF (NYSEARCA:NVDY); based on NVIDIA stock; annual distribution rate of 50.19% – 1.27% worth of operating expenses = expected net yield of 48.92%.

Balancing Safety and Risk

Since they involve more risk, you wouldn’t want to invest too much of your retirement money in APLY, GOOY, AMZY, and NVDY. However, it’s not excessive to allocate 5% toward each ETF for a total of 20%. After all, these are four gigantic technology firms and the huge yields will quickly boost your portfolio’s total yield above 12%.

Besides, 80% of your investment account would be invested in the NEOS S&P 500 High Income ETF and the NEOS S&P 500 High Income ETF, which are safer because they’re more diversified. If you get started today, you can use these ETFs to build a safety-and-risk-balanced retirement portfolio generating $5,000 per month or more.

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