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Retirement planning involves a delicate balance between risk and reward, especially when the aim is to generate enough income to sustain a certain lifestyle.

For many, dividend stocks and ETFs like JPMorgan Equity Premium Income ETF (NYSE:JEPI) are the way to get there as they offer reliable income without selling shares. Still, can such investments fund a comfortable retirement, particularly for those seeking to semi-retire or retire early?

Enter a 39-year-old Reddit user with $500,000 in savings eyeing to break from the corporate grind in one to two years. He aims to generate $60,000 annually or $5,000 monthly from his investments, so he’s considering JEPI as a potential solution but is concerned about the risks involved.

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“Numbers make sense but is this probably a very high risk... thoughts? What other stocks can I mix in my semi-retirement portfolio?” he asked in a Reddit post he made.

Investors in the r/JEPI community have jumped to the comment section to offer their advice, so let’s break down the recommendations the poster has received.

$500,000 All-In in JEPI to Semi-Retire in 1-2 Years? Reddit Debates His Plan

JEPI Alone May Not Be Enough

Several commenters pointed out that JEPI's current yield of around 7% would generate around $35,000 annually from a $500,000 investment, far short of the $60,000 target.

“If you want $5,000 a month, you selected the worst fund. JEPI has a yield of 7%, so your yearly earnings will be about $35,000. Also, you need a taxable account to do this. [Neos S&P 500 High Income ETF (NYSE: SPYI)] is a better choice since its yield is 11% which would generate an income of $55,000 a year. Additionally, it incorporates a tax loss harvesting strategy to lower the tax on the paid dividend,” a Redditor wrote.

“SPYI will get you closer to $60,000,” another Redditor wrote.

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A Reddit user also highlighted the mismatch between the target and what JEPI offers and mentioned that even higher yield options might not be a solution.

“The only flaw in your plan is that $500,000 in JEPI doesn't produce $60,000 a year... Even if you went with $500,000 of higher volatility [JPMorgan Nasdaq Equity Premium Income ETF (NASDAQ: JEPQ)], it still wouldn't produce $60,000 a year,” he said.

One comment recommended two other ETFs that would, according to him, bring the poster closer to his goal.

“Consider [Neos Nasdaq 100 High Income ETF (NASDAQ: QQQI)] or [Simplify Volatility Premium ETF (NYSE: SVOL)] and you will be a little closer to your goal. However, you may lose some capital but both are comparable to JEPQ, but with 3%-6% higher dividends. Either way, you will struggle to make $60,000 a year, approximately 11.5% in dividends without a decent amount of risk of losing some capital along the way,” he explained.

This Redditor suggested a covered call ETF with a 12% dividend yield per year, which would help the investor reach his income target.

“[Global X NASDAQ 100 Covered Call ETF (NASDAQ: QYLD)] would get you there. It pays around 12% and gives a monthly dividend. Good luck with your time off!”

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Diversify Your Investments

Many commenters emphasized how important diversification is in investing as it reduces risk and ensures a more stable income stream.

“Try a diversified portfolio: SPYI, JEPI, JEPQ, QYLD, [Blackrock Multi-Sector Income Trust (NYSE: BIT], [Schwab U.S. Dividend Equity ETF (NYSE: SCHD)]. Also, 2-year T-bills are a little less income but very low risk over that time frame,” a Reddit user suggested.

One Redditor recommended a specific allocation approach and mentioned reinvesting the dividends to keep the portfolio’s value in the long run.

“I would do SPYI 60% and QQQI 40% and then I would reinvest at least 15% of the dividends to guarantee it doesn't lose value over the next 20-30 years,” he said.

“I would do 50/50 JEPI/JEPQ and live outside the U.S. for at least all but 45 days of the year. You would pay zero taxes on the first $14,000 of dividends you make. Also, living abroad is fun and significantly cheaper (depending on where you live),” another comment reads.

One user highlighted the risks of relying solely on JEPI and suggested the investor look into closed-end funds for tax benefits.

“There are a few concerns I would have with going all in on JEPI though: taxes, a short history with the ETF, and inconsistent distributions. If you went with a few [closed-end funds] such as [Eaton Vance Enhanced Equity Income Fund (NYSE: EOI)] and [Eaton Vance Enhanced Equity Income Fund II (NYSE: EOS)], you could solve all three of those issues. They use long-term capital gains and/or return of capital in their distributions giving them a much more favorable tax treatment. Additionally, both [closed-end funds] have had better total returns than JEPI,” he wrote. 

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This article Investor With $500K Eyes Semi-Retirement At 39 – 'Can JEPI Fund My $60K A Year Lifestyle Or Am I Taking On Too Much Risk?' originally appeared on Benzinga.com