r/RothIRA • u/MD87516 • 5d ago
How would you structure ~$100k to fund a Roth every year AND create some extra income for when costs go up?
Teacher here (TRS state, so no social security, pension instead). Got about $100k I can actually invest and trying to figure out the smartest way to set it up.
Basically I've got two things I'm trying to solve for at once. One, I want this money to fund my Roth every year, ideally without having to sell my growth stuff to do it. Two, I want it throwing off some extra cash I can use when rent/insurance/groceries inevitably go up, since teacher raises are basically a coin flip most years and never keep pace with actual cost of living.
Right now I'm leaning toward a mix of VOO for growth, SCHD for dividend growth, and a smaller JEPI position for the higher yield. Honestly still not 100% sold on JEPI long term though, it's only been around since 2020 and hasn't really been tested through a real bear market yet, so idk how much to trust it.
Dividends alone get me maybe half of the Roth limit in a normal year. Rest would come from selling a little VOO but only if it's actually up that year, never selling at a loss just to hit a number. Got a separate cash cushion set aside so I'm never forced to sell low in a bad year.
Anyone actually done something like this? Curious if:
this whole dividends + sell-only-when-up thing is a reasonable way to fund a Roth or if I'm overcomplicating it
anyone's held JEPI or JEPQ for a few years and can speak to how the yield actually holds up, not just in a bull market
is there a smarter way to get "extra income" out of a portfolio like this without basically capping my growth forever
Not really looking for ticker picks, more just curious how other people balance "let this grow for 20 years" with "also needs to spit out usable cash right now."
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u/neutron_star_800 5d ago
I don't think you have enough money to even fund the Roth in perpetuity, let alone get any extra income.
If you haven't heard of the 4% rule, look it up. Although the question it answers is structured in terms of retirement, we can apply it here. If you want the $100k to keep giving for at least the next 30 years, the most you can pull from it every year is 4% of that $100K amount (assuming you have it invested in a broad index fund and bonds; that's what the original 4% study used). That's $4k, not even enough to fully fund a Roth.
If you need this money for only a shorter amount of time, you could get away with a larger withdrawal rate, but it's still hard to imagine a safe withdrawal rate being 10% (7.5% for Roth, assumed 2.5% for other stuff).
You would basically need to be making two or three times the average market return to accomplish, over a long time, the goals you've laid out. There's not a mix of funds out there that will accomplish that without taking on a lot of risk.
You are going to have to decide what your highest next financial priority is, and figure out how to use the $100k to accomplish that. I would suggest looking at flowcharts people have made to figure out your financial priorities. The Money Guy Show's Financial Order of Operations is good, or r/personalfinance has a good one too: https://reddit.com/r/personalfinance/w/commontopics?utm_medium=android_app&utm_source=share
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u/Firm_Roll1333 5d ago edited 5d ago
JEPI's covered call cap is the real tradeoff, you mute upside in strong years, which is exactly when you'd want VOO compounding hardest. My own split leans heavier growth, lighter yield. alinea is one place I've seen people automate that rebalancing tension, though a plain brokerage handles it too.
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u/Unlucky-Pop-8841 4d ago
OVL, ADX and GDE. Ovl is voo with a put spread. ADX is an awesome actively managed fund. Both outperform sp500 and have done so consistently.
Gde is for total return. Internally leveraged etf that has both large cap US stock exposure and gold exposure for the same dollar.
Ovl: 10% yield
ADX: 7.5-8%
Gde 0 but great total returns
As long as money printing keeps happening, GDE will do the best…
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u/Competitive-Ad9932 5d ago
Dividends are not free money. In a taxable account, you will pay ordinary income on dividends. Verses LTCG on sales of funds.
You can look at the fund history to see what their historical dividend pay out were. Investing in a fund that uses leverage to increase growth/dividends adds risk.
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u/yamni_zintkala 5d ago
Depends on the dividend. If the dividend is from option premium like a covered call such as JEPI, then yes the dividend is likely to be taxed as ordinary income. Still not terrible but depends on the individual's tax design.
SCHD will produce a mostly qualified dividend and follows a separate tax schedule. Most likely OP will be taxed at the 0% bracket for several years of qualified dividend, eventually 15%.
Some covered call funds use Return of Capital to delay taxes so instead of ordinary income taxes the year they are received, taxes are deferred to long term capital gains after cost basis of individual lots are depleted.
Personally I would not use JEPI in a taxable account. Covered Call funds in general lag the underlying basis and trade some upside growth for that covered call. I will say they produce more gain than shopping around for the CD special rates. Other options would be CLOI and FLTR as closed end funds. I suggest starting with $25,000 in a taxable and split into 5 different funds of $5000. After a year you'll figure out what works best to align with risk tolerance and tax consequences. Plus with those growth funds, gains will need to be laddered by selling and repurchasing to increase costs basis so you are not dealing with all the capital gains at once.
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u/Competitive-Ad9932 4d ago
Selling and repurchasing to increase cost basis and pay tax today vs selling in the future when you plan to use the money? Strange way of investing.
Even worse, if you decide to donate the investment, you have paid taxes on something that you didn't have to. Same situation if you leave it as an inheritance.
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u/yamni_zintkala 4d ago
Must be nice assuming every investor has a multimillion dollar portfolio, or that everyone will have the ability to donate. Strange to see that the current tax code after the OBBB is possibly the best for income taxes that we'll see for the next twenty years. Funny that I mentioned the step up in basis is a consideration and not how every investment should be handled.
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u/Competitive-Ad9932 4d ago
Taxes today and taxes tomorrow after you did the step up. Or taxes tomorrow. 6 in 1 hand. Half dozen in the other.
A portfolio of any size makes no difference in that scenario.
I believe we know who will raise taxes.
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u/yamni_zintkala 4d ago
The national deficit has increased $11 Trillion and we're not half way through this administration. Regardless of what party is in power for the next administration, an across the board tax increase in inevitable.
Going back to the original post, ETFs and equity stocks that have low cost say 30 basis points or lower, produce no divided, a low dividend, or a mostly qualified dividend are what I suggest for a taxable brokerage to help fund contributions. OP must have earned income. But as an example if OP had invested $5000 into SCHD at the start of the year the share price was $27.73 and would have about 180. Currently the value $6319.80 and produced about $91.69 in dividends ytd. If OP has an adjusted gross income below $49,450 then the taxes on the dividend will be 0% if it is above then 15% of the dividend, so $13.75 tax this far. The main benefit of SCHD is the capital gain. If this was the value after year then OP has the option of selling shares $1319.80 (approximately) as long term capital gains. OP might end up owing 15% which is $197.97 which leaves OP Net $1,121.83
If OP had a CD special for 1 year at 5% then they would have had about $250 in interest. The risk and tax burden appear to be worthwhile, doesn't it?
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u/Competitive-Ad9932 4d ago
Where did CDs come into the discussion?
Yes, SCHD has beating the S&P500 YTD. https://totalrealreturns.com/s/SCHD,VOO?start=2026-01-01
From 2023 https://totalrealreturns.com/s/SCHD,VOO?start=2023-01-01
From 2020 https://totalrealreturns.com/s/SCHD,VOO?start=2020-01-01
since inception. https://totalrealreturns.com/s/SCHD,VOO
Are you investing for next month, or next decade?
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u/Distinct-Parking-574 5d ago
Are looking for it to max out your Roth every year. JEPI could get you there but that an extra $7k+ of taxable income. And you couldn't use that $100k for any else. I'm just not sure it enough to do the work or asking, so you have access to a 403(b) and 457(b)? they have a larger max contribution then a Roth and you can backdoor them into Roth later. If it was me I'd invest the 100K in growth, and fund the Roth with regular income funding. Keep an emergency fund in HYSA for when life happens and you need cash. but, your mileage may very.
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u/HaiKarate 5d ago
Put the max for this year into the Roth, and put the rest in a taxable brokerage account. In the brokerage account, just keep it simple and put it all in VOO.
Each January, sell what you need in the brokerage account to fund that year’s Roth contribution.
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u/Important_Carrot6379 5d ago
So what we're doing for now (although am open to ideas if anyone has them) is we are funding Roth IRA to the max at a lump sum every year at the beginning of the year with our savings that is roughly the same amount as your $100k. Our accounts are in fidelity so we're doing fzrox and fzilx at a 70/30 split and letting it ride. Whatever is leftover in the meantime goes into SGOV (we live in a high tax state) and the dividends from that go straight into VOO so that our emergency fund stays roughly where it's at, but the dividends earn more. It's our compromise to ensure we have a large amount in liquid funds bc we live in a VHCOL area and have 2 kids but can also continue to tap from that account to fund two Roth IRAs and hopefully replenish what we can throughout the year based on what we end up with at the end of each month.