In today’s retirement landscape, where traditional bonds may not offer enough income, many investors in their 50s are turning to high-yield ETFs promising eye-popping returns. Names like JEPI, SCHD, and YieldMax are now on the radar of many income-hungry retirees—but are they too good to be true?

Let’s unpack what these ETFs really offer, and more importantly, the risks you need to know before you buy.

The Basics: What Are These ETFs?

Dividend-focused ETFs like SCHD aim to generate income by investing in companies with a strong history of paying dividends. These funds offer equity exposure with added yield—great for retirees who want income without actively picking individual stocks.

Then you have covered call ETFs like JEPI and JEPQ, which add another layer. These funds sell options on their holdings to generate additional income. The idea is to capture premium income while giving up some upside potential. Managed by firms like JP Morgan, they aim to balance yield and risk more conservatively.

And then there’s YieldMax—a newer breed of ETFs that promise yields upwards of 50% or even 100% annually. These ETFs use aggressive options strategies that trade off safety for massive income potential. They often rely on high volatility stocks like Tesla or Nvidia, betting on market movements that may or may not go your way.

Risk vs. Reward: What You Must Understand

Let’s be clear: yes, you can earn 20% or more in income from these strategies. But that income doesn’t come without a cost. For example, many of these ETFs do not protect your principal. In volatile markets, they can lose 50%, 70%, even 80% in value. And unlike traditional investments, recovering from such losses requires enormous gains.

Another risk? Sustainability. Just because an ETF is paying a high yield today doesn’t mean it can maintain that distribution in the future. These ETFs are heavily dependent on market volatility and options pricing. As they grow in popularity, the very factors that made them profitable could evaporate.

Should You Avoid Them Altogether?

Not necessarily. In fact, I do use ETFs like JEPI and JEPQ in my clients’ portfolios—but with caution and as part of a diversified income strategy. These ETFs represent a new asset class that can be beneficial in moderation.

The key is allocation and expectation. Putting 2–3% of your portfolio into a high-risk, high-reward ETF could make sense for some retirees, especially if you’re comfortable with the possibility of losing that money entirely. But using these vehicles as the foundation of your retirement income plan? That’s a recipe for disaster.

Final Thoughts

High-yield ETFs can look tempting, especially when you're planning for retirement and seeking stable income. But bigger yields often come with bigger risks—and those risks aren't always obvious until it's too late.

Before you chase the next big yield, take a step back. Ask yourself: is this sustainable? Am I protecting my principal? And what role does this really play in my overall retirement strategy?

If you're unsure how these tools fit into your portfolio, or whether they even should, now’s the perfect time to talk to a professional.

Schedule a no-cost retirement consultation today at https://www.yields4u.com/pages/book