Covered-call ETFs offering 8%+ yields generate mostly non-qualified income taxed at ordinary rates in taxable accounts, reducing net returns. Holding four specific ETFs—SPYI, JEPI, JEPQ, and DIVO—in a Roth IRA shields investors from these taxes, preserving the full yield. For example, a $500,000 investment yielding 8% loses $9,600 annually to taxes at a 24% bracket in a taxable account, but none in a Roth IRA, compounding into substantial long-term gains. Investors should prioritize placing these high non-qualified income ETFs in Roth accounts to maximize after-tax income and consider Roth conversions carefully.
Covered call ETFs from NEOS Investments generate high income by selling options on U.S. equity indexes, with distribution rates between 12% and 14%. These ETFs perform best in volatile, range-bound markets by harvesting option premiums driven by impl...
Retirees relying on the JPMorgan Equity Premium Income ETF (JEPI) for monthly income may face tax challenges due to a $12,000 senior deduction phase-out starting at $150,000 modified adjusted gross income (MAGI). JEPI's distributions are mostly ordin...
The NEOS S&P 500 High Income ETF (SPYI) offers a headline yield near 12%, but about 95% of its payouts this year are return of capital, meaning investors are getting back their own principal rather than income. SPYI charges a high 0.68% fee compared ...
Money market funds currently offer yields around 3.5%, closely matching headline inflation, resulting in near-zero real returns for investors. Despite this, a record $8.44 trillion remains parked in these funds due to their safety and liquidity. To i...
