Haha, it is a bit scary out here on UA-cam. But there is some good information out there for a careful viewer (: Thanks for taking the time to watch the video.
Amen! And I love the methodology the index uses to make sure it is not buying dying companies over time. The debt, cash flow, and dividend stats have to be at least solid to make the 100 holdings.
This really does mean a lot! It is my goal. I appreciate the positive feedback. I can't wait to help more and more people with this stuff over the years!
I appreciate the insight Jeff! I think this is good advice--Having both SCHD and JEPQ/JEPI balances out bringing sustainable cash flow and dividend growth
Great ending... LOL..... Love the spreadsheet you developed... Was working on it last night... Very interesting to see how inflation eats at your income.... Thank you for letting us use it. I have held JEPI & JEPQ for their dividends which in turn use to buy quality dividend stocks. I currently only hold JEPQ as I like that one better than JEPI but I may pick JEPI up later - we will seen. JEPQ is 3% of my portfolio and SCHD is 11% and climbing. My current dividends that are not dripping - I add to my RTF holdings like SCHD, VGT, QQQM, VTI etc. I DRIP O, MAIN, DIVO, and other ETF's like SCHD-VGT-SMH.... I am looking forward to your REIT (hold VICI, O, ADC) video and the "HODL" video.... Keep them coming Jeff.... Truly enjoy your videos and appreciate your hard work and efforts each week. Enjoy the day.
Thank you for watching and for the feedback. I really appreciate it! I try to talk about things that will 'make a difference' to the majority of investors. I know I'm not the most exciting person in the world, but hopefully I can help as many as possible along the way.
I had to watch this video multiple times to really understand it. Thank you for such excellent content. Looking forward to playing with the spreadsheet.
Thank you for the positive feedback May. I'm glad you are enjoying the content. I'm planning on dropping my video tutorials for the spreadsheets on Wednesday. They will be in the same shared folder as the spreadsheets.
You just popped up on my feed. Sorry I didn't find you sooner! Your explanations are so clear and helpful. You really helped me to understand qualified dividends and their benefits. Can't believe you don't have more subscribers, one more here for sure!
Hey Taylor. Thanks for the kind words. I think your mix is awesome. I love the idea of having some S&P 500 mixed into a dividend portfolio. We can never go wrong with the market. You can use the high yield of the JEPs to feed more into SCHD over time. Killer combo.
Thank you! I'm glad you find it valuable. I like to keep the tools a little 'higher level' instead of getting crazy into the weeds. Inputs and assumptions are ever changing, this this gives a nice estimate for a specific scenario.
Thank you for the question and kind words. This would be a toss up. It would depend on how the total returns shake out. All gains are treated equally in a Roth (no taxes at all). I would probably bet on JEPQ to have the total return advantage, because I love the Nasdaq-100 index. However, QQQM will smoke them both when we zoom out over multiple decades. All these holdings have pros and cons. The main pro of SCHD is that you smash inflation. With a dividend growth rate outpacing inflation, whatever you make now will dominate inflation long-term. Yield on cost is all that matters long-term. Funny, because it is a meaningless metric to compare today (for current decisions). But it is ALL that matters when looking way back and looking way forward. SCHD will have about a 29% yield if you bought it 20 years ago, for example (using current figures extrapolated out). SCHD has about a 10% yield right now for shares purchased 10 years ago (using no assumptions, this is what actually happened). So the '3.5% yield' is very deceptive. JEPQ will forever be 6-11% (based on market volatility).
Thank you for the comment. For sure, it's been slow lately. I'll touch on that in my video this week. Plan on taking a look at the dividend information in depth, along with my thoughts on the reconstitution.
Hey Waen. Thanks for watching and for the question. I depends on your situation. In general, I think a 50/50 mix is a nice balance of cash-flow now (JEPQ) and cash-flow growth for the future (SCHD). If you're younger and don't need the extra cash-flow now, I would tilt it more to SCHD. If you need more cash now to pay the bills, I would lean to JEPQ. If you're somewhere in the middle and just want a solid mix, 50/50 is solid.
Hey Jeff: As a recent retiree on Sep 1 I'm revisiting some of your earlier videos which are very helpful and informative. So thank you for that! Question: at the video 7:00 mark you give an example of the $150,000 in dividends. You mention that these dividends will not affect your ordinary income tax rate [of $65,000]. But then you go on to show that the breakdown for taxable income brackets of $58,000 [0%] and $92,000 [12%] because of the impact of dividends. I understand that If the dividends are qualified, they should not move you to a different tax bracket. What am I missing?
Hey Tommy. Congratulations on the retirement! That is exciting! I was using that example to show that qualified dividends & long-term capital gains will *NEVER* change a persons marginal tax rate (from the Federal tax tables). The tax table is completely different and separate. The easiest way to look at your ordinary income and qualified dividends is to separate them entirely. Ordinary income always comes first and creates your 'marginal tax rate' (12%, 22%, 24%, 32%, 35%, 37%). Account for your job income, social security, pension payments, interest from HYSA, non-qualified dividends here. Anything that has 'normal' taxes as 'ordinary' income. Simple rule of thumb is anything that is *not* long-term capital gains or qualified dividends. After that is calculated and done, you can account for qualified dividends (they are tacked on at the end after everything is done). *but* the amount of taxable income you had from ordinary income *does* count to where you start on the special tax table for the qualified dividends and long-term capital gains. If my wife and I had $80k of taxable income from all ordinary sources, we would be in the 12% tax bracket (married filing jointly). If we *also* had $30k of qualified dividends, we wouldn't get 0% taxes on all of them. We would get 0% taxes on $14k worth. At that point, we hit the $94k of ordinary income + qualified dividends, and 'the rest' of the qualified dividends, $16k, would be taxed at 15% (instead of 22% for the 'same level' of ordinary income). Ordinary income first as if you don't have any LTCG or qualified dividends. Then you account for the LTCG and qualified dividends. The tax rate will always be lower than *if* you had more ordinary income instead. They do not use the federal tax tables at all. Only the special tax table.
Hey Nelson, no problem! I try to do my best to shape the videos around the requests and feedback I receive. I'll never hit them all, but I can at least touch on the highlights as much as possible.
Jeff, I am an old guy or at least starting to feel like one, hahaha, so not too savvy in this world, but is there a way to talk to you in private?@@JeffTeeples
I don't have a way for this yet. I've been thinking about starting up a discord (or something with separate DM capability) on the channel. Maybe in the memberships somehow. I do have linkedin as my main, and really only, social media at them moment. I guess I'm an old guy too lol.
Always looking forward to your motivating and educational video. You have helped me to make better decisions about investing for retirement. Keep on producing excellent videos and your subscription will grow a thousand fold shortly.
One of your best Jeff! Very apt for folks like me, great strategies! Just looking at that numerical magic in spread sheet gave me an urge to retire asap ;-)
Thanks for watching & for the question. I don't have a specific video. The costs like expense ratios will take care of themselves over time within E*Trade. Nothing I need to cover directly. Then taxes on dividends or long-term capital gains will be covered when I file taxes. Historically, all costs (for portfolio and life) were covered by the salaries from our jobs (wife and I both worked). I quit my job, which was well over half of our income (I had higher salary, she has WAY better benefits), so now I will need to get more creative. More to come in the future. But 'up to this point', it has just been covering costs with regular income. And the costs are extremely low when I make sure I'm in low-cost, passively managed ETFs that pay qualified dividends (: Although I do have the chunk of JEPQ right now (to help us pay the bills). It is wife's job + JEPQ dividends + money mark interest getting us by right now. This channel (hopefully) will make a little extra money for me to chip in again long-term.
Jeff, this is definitely interesting material to consider. I feel like it emphasizes the importance of saving and building up the overall portfolio value in the early/mid years of one's career. I am currently wrestling with a decision to buy a more expensive house (my parents place they are going to put on the market if we do not buy it) or stay in our smaller, cheaper home to keep a higher savings rate. It's so tough since I am happy to stay saving, but at the same time do not want to keep our family in too small of a house forever and miss this only opportunity. Anyway, long story, but as a family man yourself I figured you could relate. Cheers and great video.
Thanks for sharing your house situation. I can totally relate. We are one kid away from having to move. Thankfully, we are done having kids! (at least I'm 99% sure, lol). My wife is a bit younger, but our window is quickly closing. Two of these things is more than enough for me! Make sure you don't buy toooooo much house. That is a costly mistake many make. However, I completely understanding needing more space as well. It's a fine balance.
Newbie in retirement.....If we compare interest growth in my money market fund to the growth of VOO for instance with its qualified dividends.... Seems like VOO DGRO or VTI would have tax advantages in addition to better growth rate? Opinions welcome! 😁
Thank you for watching and for leaving the question. You are definitely on to something here. VOO and VTI will 'likely' outperform SCHD in retirement by using the 4% rule (selling the amount you need to live on as you need it instead of relying on dividends). SCHD is more likely to never run out by living on dividends, but it has lower growth potential. VOO and VTI will usually have a higher balance at the end of it all. Both approaches work well with a solid system and staying the course.
Hello Jeff! Thank you for your efforts on creating these podcasts! It would be interesting to hear your opininon on the following question, what do you think about diversifying JEPQ with SPYI, and to use them in tandem, and avoid relying on the only high yield asset in portfolio?
Thank you for watching and for the question. I don't think that is a bad move to mix in an S&P 500 based ETF like SPYI. I'm not a fan of the 0.68% expense ratio, personally, so I would rather mix in JEPI with JEPQ. I don't think the underlying index diversity is a bad idea at all though.
Hey Dustin. I love VIG, I think it is one of the better growth dividend ETFs. It will be involved in my video that drops tomorrow (comparing SCHD to it). I have a video here about VIG if you're interested. It may be a little dated, but nothing has really changed as far as my overarching thoughts. ua-cam.com/video/GsylbIDCw3Q/v-deo.htmlsi=QicTYAJq6qYGGxWQ
Good stuff/info!! I now understand how qualified vs. non-qualified dividends are taxed. On a slightly different topic, have you looked at GPIX & GPIQ? They state "...consistent monthly income;" JEPI & JEPQ dividends are NOT consistent, monthly.
Interesting! I had not seen those yet. Looks like they are new as of Oct 2023. Low yield, but looks like it is well controlled so far. I wonder what % of those dividends are qualified. Likely more than JEPI and JEPQ because it looks like the base holdings make up a greater %. Will be fun to watch!
Thanks for the feedback. I will check these ones out! I know most of the income producing ETFs by ticker, however, need a deep dive on some of them to better educate myself.
Just found your channel and it's very exciting finding someone who's willing to teach your own personal proven strategy. As well as sharing your automated spreadsheets which are excellent btw. I'm canadian, looking to do this style of dividen portfolio growth. Would your speadsheets work with the tsx? Maybe you could do a video on canadian dividen stocks? Thanks! Keep up the excellent work!
I appreciate the kind words about the channel and the spreadsheets. I do not have a great understanding of investing outside of the US. I don't want to guess at answers and be potentially misleading. Sorry about that.
Understandable, I appreciate the response. Latest video on portfolios by age was super help full and exactly what I was looking for. Just finished building a portfolio spreadsheet to keep track of everything. Super excited to watch the growth. Thanks again for your effort in helping to teach the masses!@@JeffTeeples
Thanks for watching. Of course, here is the link: (FREE) Excel Spreadsheets 1drv.ms/f/s!Anqr9n0OrsO-g40undVnMj-D9hWfaQ?e=nXlBW0 (FREE) Google Sheets drive.google.com/drive/folders/1qJHsMfsplDqWUIjvEk6BlkjjTRiY_Eg9?us
Hey Rigo. Thanks for the comment. I have heard a lot about those two ETFs. They don’t meet my minimum requirement of an expense ratio of 50 basis points or less. I’ll continue to watch them, and maybe review them eventually. But I do like to keep the channel on brand with only ETFs I would invest in.
Jeff, great video and I look forward to future installments. I placed my SCHD holding in a tax advantaged account, what are the possible tax implications of holding it in a brokerage? I am a modified Boglehead, using VTI in the brokerage and VOO in all other accounts with a smattering of other ETFs, no bonds or international currently.
Hey Shemp, I'm a long-time 'modified Boglehead' myself. Jack Bogle has had more influence on my than any other person when it comes to investing. I think the Bogleheads' mostly get it right, but are close-minded to a fault (generalizing a community of course, there are plenty that can think outside the box). I love your strategy of holding VTI and VOO everywhere. SCHD will treat dividends the same as VOO and VTI (for the most part, SCHD is actually 100% qualified, so technically a touch better). So when you hold SCHD in a taxable account, you'll get the 'long-term capital gains' tax treatment (best possible).
Keep up the great work! I like the way you explain the tax part. What determines if a stock is qualified or non-qualified dividend? Do some dividend ETF's have both?
Thank you for the kind words. Some do have both, and it is a little difficult to find out exactly what % is qualified compared to non-qualified in those cases (I don't have a go-to site that I trust). In general, US companies that you hold will pay qualified dividends (as long as you hold for at least 60 days). Those are the best rules of thumb I've found. SCHD pays 100% qualified dividends (I check my tax returns). This makes sense because it is 100 US companies that pay dividends, and it excludes REITS. REITS, unfortunately, pay non-qualified dividends.
Hi, I’m new here. What’s it called when you buy a stock and it falls 90% and when you dump it, they increase about 400%??? That’s what I do. Not gonna brag but I’m pretty good. It’s kinda funny, not really though. More psychological degrading. 😅
We live in a high tax state so we would have to be pretty desperate to hold one of the JEPs in our Taxable account. I'm extremely happy to have JEPQ at 10% and JEPI at 3 in my Roth IRA. That monthly tax free cash income is just the thing for a growing Roth. The price appreciation hasn't been anything to shake a stick at either
Very nice Billy. Keep piling them up as everyone else screams that SCHD is dying. The methodology will very likely be timeless and when we zoom out SCHD holders will have a lot of reasons to smile.
Great brake down! Always look forward to your new drops. As we get to our retirement we will be shifting to more of that passive income. As we are driving hard to early retirement we are all about growth (for now). We aren’t bond fans, so dividend ETFs could be a decent portion of our bucket 2.
Thanks for the comment. I love that you're focused on growth pre-retirement. That is the best way to grow massive wealth (imo) as long as you never 'sell low' when a crash happens. Panic selling derails years worth of wealth. I'm a fellow 'bond hater' as well. I say that with a smirk (I always get crap for my viewpoint on this one). The numbers of bonds have never, ever, made sense in over 100 years worth of data of 'long-term investing'. Again, this is assuming DCA in during all of the many crashes over the years, and 'not caring' about portfolio values along the way (all about building for the future). People lose hundreds of thousands of dollars of *purchasing power* because they hold bonds. And it is mathematically a (virtually) guaranteed long-term loss of purchasing power no matter how you slice it. It's just the nature of the system.
@@JeffTeeples Amen. I don’t think we will ever own bonds. Our government keeps writing bad checks that people are still covering with bonds. We don’t find them to be a safe asset for cash preservation at bare minimum.
Thank you for the kind words. I sure will make a COWZ video in the future. In fact, I think it could be coming in the next few weeks. It barely met my hard rule of an expense ratio of under 0.50%!
Hi Jeff - I really enjoy the way you segment and weave together topics in your videos! They are packed with so much important information. I consistently have learned so much from each and every one of them! You mentioned in a reply to one of the comments that you prefer high growth ETFs in retirement accounts. Are you referring to Roth IRAs or other types of retirement accounts? Which high growth ETFs do you prefer for these accounts?
Hey Bruce, thanks for the feedback and the question. I like VGT or QQQM as my high growth. I think they are good in taxable accounts, Roth IRAs, traditional IRAs, basically any type of account. My main point to the reply is that a lot of people think dividend payers like SCHD are BAD in a taxable account. The reality is, ironically (I say this because retirement accounts are made for 'tax advantages', in many cases SCHD is objectively better than growth ETFs (or other types of investments) in taxable accounts. Really, growth, cornerstone, and dividend ETFs, assuming qualified dividends are being paid, are 'about the same' in any type of account, long-term. But SCHD dividends in a taxable will NEVER be taxed more than 15% (unless you make a ton of money, then it still has much lower taxes than your 37% marginal tax rate), and in many cases, it will forever be zero. And when we die someday, and our kids take over, they don't even owe taxes on the capital gains either in a taxable account (step up cost basis). I like to emphasize this because many people point out (over the years) that I have SCHD in taxable and VOO and VGT in retirement accounts, and they explain how dividends work (: When SCHD pays a dividend, remember, it is identical to long-term capital growth. If I get $100 of dividends, and reinvest it, then there is a taxable event at 0% or 15%. However, that $100 is taken care of forever. Because I got 'a free $100 of SCHD' with the dividends that will never be taxed as capital gains. My 'value' increased $100, and my 'cost basis' increased $100. That is zero dollars of gains for $100 of value. A lot of people think dividends are 'doubled taxed' in a way, the dividends and the gains. It is not how it works.
Have you done a show or do one comparing the different types of ETF’s in different types of accounts like: IRA ROTH, Tax deferred (401k/403b) & taxable brokerage? What would have the better long term tax advantages? You do an excellent job explaining with actual data! Thanks!
I understand that SCHD is an excellent ETF for generating qualified dividends and it would be the choice in a taxable brokerage account or tax deferred account…What ETF’s would be best in a ROTH account that the gains wouldn’t be subject to any taxes. Thanks again for replying to all of your comments!! I have told others about your channel
Thanks for the question. I try to explain some tax implications in many of my videos. I will say that for the most part taxes are overrated. This is coming from an accountant that is a tax nerd that likes to min/max everything. But what I mean is, as long as the dividends are qualified (explained in this video), it doesn't 'really' matter long-term where you hold DGRO, SCHD, VYM, VOO, VTI, QQQM, US stocks, VGT, etc. There are minor pros and cons (much like I explained SCHD is weirdly underrated in a taxable account)... But they 'mostly' apply to all and 'mostly' don't move the needle. The things that REALLY matter are that we buy and hold great investments. We don't sell gains within a year of holding a stock or ETF (short-term capital gains are bad because they add to your 'ordinary income'). And we stick to our target allocations. Staying the course and chilling for many years is more valuable than any tax tricks. But REALLY REALLY what matters is investing as much money as possible at each stage of life. The compound effect is great, but it needs a base amount to mean anything.
I appreciate you spreading the channel to the world! I want to help the masses. I answered this quite a bit in my last comment, but for a Roth specifically, it is GREAT for: 1) REITs if you have them 2) Non-qualified dividends if you have them (like covered call ETFs that produce high income) The reason it is great for those is because the taxable brokerage accounts are bad (they add to ordinary income for the current year). Roth treats everything the same (no taxes ever again). So hiding the 'bad taxes' in there is great. But again, the BEST investments in a Roth are simply the ones with the highest returns. Dividends, interest, short-term gains, long-term gains, anything else I'm missing... They are all identical (no tax). So regardless of where the gains come from, the 'best' is the one that goes up the most all things considered. Tax free on everything. This is why I argue, ironically (it is backwards from what most people think by default, they want to hide all dividends in Roth IRAs), the low dividend growth ETFs like VGT or QQQM are technically the best in a Roth. No taxes again on 500% gains (when we zoom out) compared to 200% gains of dividend paying things. Remember, all gains are taxed the same (0%). Of course, they don't always win. But when we zoom out 20+ years, they 'basically' always win with dollar cost averaging in.
Great question. I don't know EXACTLY how it works with international dividends, but many are qualified. It looks like VYMI has the qualified dividend amount at about 67% over the past two quarters of payments. However, I am unable to officially confirm that. I will say, that is pretty slick as I have been thinking about adding internationally for a while now. Not ready to pull the trigger (will likely be a bit late to the game), but a good bit of information for when I do! Thanks for the question.
Hi Jeff, thank you for the video, I finally have a clear understanding on how qualified dividend and long term gain is taxed. With this, I would to get your advice. My son is 26 year old. He currently contributes to the company 401K plan. In addition max out on the company match, he also makes additional 401K contribution to lower his taxable income. He also contributes max to Roth each year. His current tax rate is 22%. After watching this video, I am just wondering if it will be better that his additional 401K contributions (after max out company match) should go to his brokerage account, so any LT gains/qualified dividends will be taxes at 15%, rather than the likely 22% in the future when he retires that he has to convert from 401K to Roth or brokerage. I believe he will have a nice accumulation when he retires with his 401K contribution/company match and HSA accounts. I would like to get your input on this. Thanks! Cindy
Hey Cindy, this is a great question. It depends on the 401k plan. For mine, I had a low-cost S&P 500 fund available (FXAIX). So I worked on maxing out the 401k before worrying about investing on the side. This saves 22% on taxes now, and in retirement, he can very likely take 'most' out at 12% (or whatever the lowest bracket is then) incrementally over time (to invest it in a taxable account or to live on it). I would suggest he puts a decent amount into the 401k (even beyond the company match amount) if he has a good low-cost S&P 500 investment available. However, on the outside, he may consider opening and funding a Roth IRA each year ($7,000 is the limit this year). It will not save him the 22%, but it does hedge against future tax changes by keeping some of his portfolio tax free forever. He can only fund a Roth if he makes under 161k. If he makes more money than that, I would highly recommend maxing the 401k if possible (assuming good investments), then working on a taxable account (using qualified dividend paying ETFs there). Lastly, if he makes over 161k, but does not currently carry a balance in a traditional IRA, he can consider making backdoor Roth IRA contributions. That is one he'll need to look into the details on. I have a video on it as well (one of my older videos, but should still give a starting point for research).
So I understand this demo correctly- mixing jepq/jepi was just to bridge the gap of a hypothetical person who wanted to retire but was not able to collect SS yet? If you were retired and collecting social security would you still play with jepq or just go all in on schd?
Hey Kevin. I think personally preference will come into it for a lot of people that want higher yield. But I would answer your question as YES from my perspective. If you have the cash-flow to get by with SCHD in the current year, it is a better option. It will have a higher floor and more importantly, it will grow your dividends to outpace inflation in the future. In fact, if someone has enough and then some, I think it is important to keep a balance (throwing VOO, VGT, and QQQM in the mix as well, long-term). I know most people will not have a portfolio value that supports this in retirement.
Great info 😊😊. Just so I understand, if you have traditional Ira and you take the dividends to use once retired to meet your monthly expenses, on your tax form, it is taxed as ordinary income, or taxed as something else .? Just want to be certain, your videos are the best 👍
Thank you for the kind words, Carl. That is correct, when you take the dividend gains out of the traditional IRA in retirement, it is taxed as ordinary income. Which normally isn't too bad. For most people, this is 12% in retirement. If it is more than 12% then you are likely looking very good in retirement (:
Do you have any research on non-US dividend ETF's like VEU, VWO? I think their dividend is partially qualified. At this point US markets are in bubble levels and EU, Asia markets are much more reasonably priced
Hey Sumi. That is a great question, and I agree there will always be a reversion to the mean over time. I currently only research US based ETFs unfortunately, outside of the real broad ETFs like VXUS and VT (I watch these to make sure my strategy still makes sense each year). I need to educate myself more on the topic before having a lot to say.
Thank you for watching and commenting, Johan. I don't have a detailed understanding of tax implications outside of the US. I don't like to share answers when I don't know what I'm talking about. Last thing I want to do is accidentally spread misinformation. Sorry about that.
It’s almost like we either buy both, or we focus mainly on JEPI/JEPQ then swap to SCHD when we are closer to retirement? But this we may loose out on the lower cost of SCHD…
Yeah, the dividend growth aspect of things like SCHD are fairly well known, but sometimes people forget the price appreciation component mattering as well. The 'yield on cost' is amazing with SCHD when we zoom out. JEPQ is great, and I think the price will do just fine because it is based on a great index (Nasdaq-100). However, the yield is higher, but a bit more 'random' and less impressive when we zoom out and see it all over the map. I really do love both, but SCHD is great for 'the future me'.
Hello Jeff. I just subscribed. I’m doing a research and found your channel. Your videos are very informative. Thank you for sharing your experience and knowledge. My husband is currently 60 and I’m 57. My husband plan to take Social Security at 62 and I will in 5 years. We will need monthly income from dividends like SCHD and JEPQ to supplement our savings to pay expenses until I reach 62. All our retirement savings are in before tax 401k. We plan to rollover 401k into IRA account and convert some into Roth IRA. Do we do lump sum or DCA when time to buy SCHD and PEPQ?
Hello Jeff. I just subscribed. I’m doing a research and found your channel. Your videos are very informative. Thank you for sharing your experience and knowledge. My husband is currently 60 and I’m 57. My husband plan to take Social Security at 62 and I will in 5 years. We will need monthly income from dividends like SCHD and JEPQ to supplement our savings to pay expenses until I reach 62. All our retirement savings are in before tax 401k. We plan to rollover 401k into IRA account and convert some into Roth IRA. Do we do lump sum or DCA when time to buy SCHD and PEPQ?
Thanks for the idea and the feedback. Don't worry about feeling nerdy, I'm king nerd, lol. I have a few tutorial videos out there for the channel members (they get access to a excel spreadsheet and google sheet of what is shown in the videos). I've been thinking about putting it in the channel videos, but I also worry most people wouldn't care about it. I'll figure it out in the future.
Let me make sure I understand one thing you said. If all my money is in traditional IRAs, does it matter what kind of dividends are being generated? I think you said that any money coming out of IRAs is treated as income, right?
Hey Craig, thanks for the question. You are spot on. The traditional IRA will treat all gains the same. Qualified dividends do not matter. It is treated as income in the year that you take it out. Still a great deal, because in retirement we can likely keep ourselves in the 12% tax bracket. Still, we miss out on the 0% potential of qualified dividends in a taxable account.
Jeff, I am still thinking about this video. So much good information! I am curious: As a married couple filing jointly, let's say my husband and I max out our 401ks so that our combined income is $94,000 or lower, BUT we have managed to grow a hefty taxable investment account (maybe loaded up with SCHD) that pays us some crazy amount like $100,000 in annual dividends, would we still be paying zero taxes on the dividends? I guess I am wondering if there are different levels of dividend payouts that get taxed even if a couple is at the 0% tax rate for dividends? Thank you.
That is a great question. The dividends from SCHD will be considered entirely AFTER all of your taxable income (from regular jobs, social security, interest on savings, non-qualified dividends, pension, and things like that) is accounted for and you find where you fall in the tax brackets. That's the easiest way I've found to explain it. Do everything else, and then at the very end, think about qualified dividends. They don't change anything at all about your taxes. *Going to use easy round numbers below* So, let's say your income combines for $100,000. Take away the standard deduction of about $29,000, and you'll be left with $71,000 of taxable income. You fall in the 12% tax bracket in 2024, and will pay your taxes accordingly (all within your tax return). Now, after that, you have a buffer of 94,000 - 71,000 = 23,000. Your first $23,000 of SCHD dividends will be taxed at 0%. This now gets you to the $94,000 level. Remember, this has nothing to do with the federal tax tables anymore. The special long-term capital gains table says that the first 94k is taxed at 0%. Then it moves to 15% when your regular income + long-term capital gains + qualified dividends reach 94k total. So your next $73k of dividends from SCHD would be taxed at 15% (instead of the much higher federal tax table rates that more ordinary income would be taxed at).
None that I track, personally. There are a lot of them. My favorite 'high yielding' ETFs are JEPI and JEPQ. They aren't the highest yield, but they are based on great indexes and will have a solid total return in addition to the 7% to 10% yield. The expense ratio is 0.35%, which is pretty good for an actively managed fund.
When you look at total returns, it’s hard for me to not look at JEPQ and think that it’s not a top Growth ETF when you reinvest the dividends It replicates the upside of the Nasdaq despite it being capped and it performs better in a down market than the Nasdaq I don’t care if it’s not as tax efficient
For sure, JEPQ is a great holding. I have it right now in my portfolio. Just to be clear though, it actually reduces the upside of the Nasdaq-100. It doesn't replicate it (but I know what you mean in general, it uses the same index). Just don't want to mislead anyone on accident here. It lowers the ceiling (commonly referred to as upside) and raises the floor of the Nasdaq-100 index. Over many decades, QQQM will very likely have greater total returns (more ceiling raises over time, ignoring short term) and JEPQ will have WAY more cash flow. It is my favorite high yielding ETF, so I'm a massive supporter of JEPQ. But it is objectively better to hold the Nasdaq-100 for 10+ years IF: 1) You don't need cash flow 2) You DCA in at all times
@@JeffTeeples I agree, and yes that’s what I meant when I said capped upside. I think what I prefer about JEPQ over QQQM as a long term investment is that it’s safer. I’m ok with the capped upside and tax inefficiency of it because it(like the Nasdaq) will more than likely consistently outperform the S&P 500 for decades to come, especially with Tech getting more and more advanced What I’ve started to notice is that as time goes on, JEPQs total returns are slowly starting to catch up to QQQ since it’s much better in a bear market. It’s a small sample size of course but I think it’s still worth noting
Since ETFs like FEPI and the Yieldmax ones qualify their distributions as ROC, what would happen if my cost basis reaches zero? I thought I heard somewhere that the distributions would then be considered capital gains?
Wow, that is interesting. I didn't know about FEPI, but just read up a little bit. It sounds like what you are saying is correct. It breaks my hard rule of being under a 0.50% expense ratio for me to consider (it is at 0.65%) investing in, but I still want to watch how it performs. Thank you for the question (that I didn't have a great answer for).
Hey Todd. Thank you for the question. I will never hold a bond, personally, outside of the 10% MM. I also don't plan to have JEPQ, either. I should mention, I'm not implying that bonds are bad. My goal is to have dividend producers like SCHD and DGRO that grow the dividends every year. Now, I'll need quite the portfolio size, which is what I'm working on with consistent dollar cost averaging over the years. I don't plan to sell shares, and therefore will never care about my portfolio value at any one point in time (in retirement). But there are many great ways to go about it. I don't like bonds because they guarantee my purchasing power stays flat. This is based on 100+ years of data, to be clear. Many assume I don't like bonds because of the recent underperformance. That has zero to do with it for me.
Thank you for the positive feedback Kumar. JEPI and JEPQ are great in a Roth IRA because there is zero taxes. It only matters in a taxable brokerage account.
@jeffTeeples, if I have a 401k and decide to use JEPQ in addition to SCHD… will I need to do anything with the income earned from JEPQ every year prior to retirement? Or will all of this be taxed once withdrawal of assets takes place after age 60?
Hey Norb. There will be zero tax implications or action items until you begin to withdraw the funds in retirement. You may need to log in after dividends are paid each month (for JEPQ) and each quarter (SCHD) if you do not have DRIP turned on (dividend reinvestment plan). Otherwise the dividends will sit as cash and not continue working for you. It's best to reinvest them and get more JEPQ or SCHD over the years.
Good stuff Jeff. I like how you try to keep things simple, unlike Average Joe Investor, whose channel is not reflective of how an average Joe invests because it’s full of covered call videos.
Great call! (: I do not have a CPA. However, I was getting over 90% on every practice test after getting my master's degree in accounting (the ones that use real past questions). I never did sit to become a CPA after starting at Boeing. I'm not talking down education at all, but I'm not overly enamored with initials after my name. I like reading, learning, and staying open-minded. I have nothing against it, of course, and I think it's impressive people go for it. Just not for me I guess.
I know it’s not a good idea to try to time the markets. However, I have this feeling that the US market is way overpriced right now. I do consider that overseas markets are better buys. Is there some way to benefit from investing in more reasonably priced overseas markets but also get the tax benefits of qualified dividends for retirement investing.
Thank you for watching and for the question. I can't speak to the details of the non-US taxes. I don't want to misinform on accident as I'm not overly educated on that topic. As far as them being overpriced, I feel you there. What I would do is make target allocations that take away your 'feelings' of the markets. Auto-buying the dip is very important over time, and you can literally never be wrong with target buying. Feelings and timing the market are difficult to manage for us humans. But putting it on a system that is right 100% of the time is possible. The way to set this up is as follows. Keep in mind, I'm totally making up the %'s for this example, just to put numbers to it. Say you want 75% of your portfolio in US, and 25% overseas. We'll use VTI for US, and VXUS for International. If you have $10,000 to invest, you would put in $7,500 into VTI and $2,500 into VXUS. Regardless of the price. Now you have a base portfolio. If you dollar cost average into your mix, you will buy whatever one has fallen below its allocation each week (or month) when you add new money to the portfolio. This will buy the 'better value' at all times based on what is ACTUALLY cheaper at the time. Not based on our gut feelings or the news. If the US market is running up (like it has been), you will automatically buy more VXUS to get it 'back to 25%'. If that big crash comes to the US, you will be buying VTI to get it 'back to 75%' of your portfolio. I've been doing it for years and it is virtually impossible not to buy the comparative dip.
Hi Jeff Great video by the way. This example of retirement portfolio is perfect for my situation and goals in a very near future. I am from Canada, so can you tell me if these same ETF’S will also be qualified here ?! I understand that the tax bracket and % may vary, but if they are also qualified inCanada, that would be great.
Thank you for watching and for the feedback. I'll be honest here, I'm not sure about the answer to this question. My investing research / knowledge has been entirely based on being a US holder. I don't want to make up an answer that can be misleading.
Great video. So let’s say we follow the modern 3 fund portfolio in a Roth. We would just sell our shares of let’s say vgt, and voo and buy jepq and jepi when we are about to retire?
Absolutely. If you are in a Roth or a Traditional IRA (or any retirement account), you will be able to sell VGT and VOO with zero tax implications. In a Roth, you'll never be taxed of course. In a traditional, you will only be taxed when you withdrawal the money in the future. Even taxable accounts aren't too bad for converting what you need. As long as you are selling long-term capital gains (to convert to JEPQ and JEPI) you will likely pay 0% or 15% taxes. 0% if you do it incrementally over a few years (assuming you don't have over 123k of regular income in retirement).
@@JeffTeeples Just want to get this right: if I put my JEPQ in my Roth account (and pass the five-year rules), the dividends that spin off are tax free, correct? Thanks in advance...great stuff here!!
I wouldn't add something with an expense ratio of 116 basis points (my limit is 50 bps because expense ratios take 6 or 7 figures long-term) personally, but it can be added to the dividend mix.
That is a great question. The tax implications do not matter within an IRA. All gains are treated equally and will be taxed as ordinary income in the year that you withdraw the money. Long-term vs short term gains, ordinary vs qualified dividends vs interest... None of it matters. In a Roth it will never be taxed, and in a traditional the gains will be taxed the same. Thank you for your extra support of the channel by being a member. Means a lot.
Thank you for the kind words and the question. I think reinvesting dividends is essential in building wealth. My videos will (generally) assume 100% dividend reinvestments. However, for retirement scenarios specifically, I will often turn off dividend reinvestments because this is the point where people lose income and need money to pay the bills (generally speaking). It is a *huge* bonus if you are still able to reinvest dividends in retirement! In that case, you are definitely clear (:
Hi Jeff: For dividend yield, do you generally agree that JEPI and JEPQ are better to hold in Retirement/Non-taxable accounts without needing SCHD? Thanks much.
Hey Tommy, thanks for the question. Thank you as well for being a member, it means a lot, and I see that shiny badge of yours by your name (: JEPI and JEPQ are fantastic holdings in a tax-advantaged account. I agree 100% that holding them there is the best way to roll, long-term. I still think mixing in some dividend growers, like DGRO and SCHD, is a great idea as well IF the entire yield of JEPI and JEPQ isn't *needed* to pay the bills. It's nice to have a mix of dividend yield and dividend growth. Our future selves will thank us.
I heard SCHD recently restructured everything do you think it'll still be as good growth wise in the future? If you are looking long term it is prob still the play as oppose to JEPQ as long as you can bridge the gap short term?
Great question! I'm going to cover the reconstitution and quarter one dividend payment in a week from today! It will be the video I work on this week and release Sunday.
The traditional IRA and Roth IRA will treat all income the same. Roth never gets taxed again, and traditional is taxed as ordinary income in the year you withdraw it. For that reason, I generally like keeping assets I think will GROW the most total returns, long-term, in my Roth. For me it is VGT and QQQM mostly. JEPQ and SCHD are fine as well. All gains are tax free forever. In the traditional 401k or IRA, it is great to have things like JEPQ to control WHEN the ordinary dividends are taxed. JEPQ is rough in a taxable account because it increases your taxable income that year (as if you earned more money). SCHD is great in a taxable account because of the qualified dividends. Same with VOO, QQQM, VGT, or anything else that pays qualified dividends. Short answer: Roth vs traditional don't 'really' matter for SCHD vs JEPQ. A nice mix in both could be valuable. The only thing that 'directly hurts' is having JEPQ in a taxable brokerage account. Qualified dividend payers are 'about the same everywhere'.
Got a mix of schd & schg! I'm 21 years old and I wonder if I should focus towards more growth stocks or dividend ETFs like schd and do dividend reinvestment?
Thanks for the question. First of all, great work investing at 21! I'm more jealous than you know (: I would likely focus more on growth (SCHG) for at least the next 20 years. If you dollar cost average in consistently, and NEVER panic sell when the market crashes (that's when you buy more and build massive wealth long-term), you will come out ahead through all the bumps. A combination is great, but SCHG will 'very likely' increase your wealth more over the next 20 years. Don't sweat the inevitable crashes along the way. Also, don't react to the 'news' of investing. You will hear a lot of predictions (: It is all coin flips. Stay the course, zoom out, and watch your wealth appreciate.
Who needs a financial advisor when we have great investors in UA-cam! Thanks for the video
Haha, it is a bit scary out here on UA-cam. But there is some good information out there for a careful viewer (:
Thanks for taking the time to watch the video.
Someone said it here already, but your knowledge of taxes is a huge plus and also makes you stand out from other financial UA-camrs.
Thank you May! I always did like taxes when I was taking my accounting classes (not sure what's wrong with me lol).
Team SCHD all the way. Passively managed funds are the best for their low fees and less volatility
Amen! And I love the methodology the index uses to make sure it is not buying dying companies over time. The debt, cash flow, and dividend stats have to be at least solid to make the 100 holdings.
Umm less volatility, down almost 3% this past week. Might as well be in growth like XLK, down only .78% or QQQ down 1%
@@chaynes89 I’m in both
@@chaynes89 Already do that
Divo looks good
Jeff, you are the best on UA-cam on how you explain everything so simply. It helps immensely!
This really does mean a lot! It is my goal. I appreciate the positive feedback. I can't wait to help more and more people with this stuff over the years!
I agree with him, u make it very simple to understand, keep up da good work.
I Agree 1000 percent ❤❤❤
Retired with equal parts JEPI, JEPQ, VOO, QQQM.
That mix will get the job done forever. Thank you for sharing.
I plan on using the same in my portfolio. How much did you start off with ?
I'm equal parts JEPQ, SVOL, VGT, VOO. Similar, but I think SVOL is better during down markets.
@@eliechidiac9427 Love the mix Elie. That should have some nice performance over many years! Stay the course.
I appreciate the insight Jeff! I think this is good advice--Having both SCHD and JEPQ/JEPI balances out bringing sustainable cash flow and dividend growth
Thank you for watching and for the feedback. I'm with you, realistically, a nice balance is the best way to go.
Totally agree! I love SCHD but, I’m so addicted to that monthly payout from JEPI/JEPQ❤
Love the structure of your videos, you are a great teacher!
I appreciate the feedback Oldrin! Thanks for watching.
Very good and detailed explanation and subbed 😊
Thank you for watching and for the subscription! I appreciate it.
Great ending... LOL..... Love the spreadsheet you developed... Was working on it last night... Very interesting to see how inflation eats at your income.... Thank you for letting us use it. I have held JEPI & JEPQ for their dividends which in turn use to buy quality dividend stocks. I currently only hold JEPQ as I like that one better than JEPI but I may pick JEPI up later - we will seen. JEPQ is 3% of my portfolio and SCHD is 11% and climbing. My current dividends that are not dripping - I add to my RTF holdings like SCHD, VGT, QQQM, VTI etc. I DRIP O, MAIN, DIVO, and other ETF's like SCHD-VGT-SMH.... I am looking forward to your REIT (hold VICI, O, ADC) video and the "HODL" video.... Keep them coming Jeff.... Truly enjoy your videos and appreciate your hard work and efforts each week. Enjoy the day.
Thanks Lance! Glad to hear you're enjoying the spreadsheets! I plan to make a video guide for them this week to explain how I use and update them.
Excellent video. Great detail on the tax implications of qualified dividends. Thank you.
Thank you for the feedback. Qualified dividends definitely add up to make a big difference over time.
I like how you stick to the most important topics. Your information is super helpful. Thank you!
Thank you for watching and for the feedback. I really appreciate it! I try to talk about things that will 'make a difference' to the majority of investors. I know I'm not the most exciting person in the world, but hopefully I can help as many as possible along the way.
Thanks so much! Great refresher on taxes in retirement and the huge benefits of qualified dividends!
Thank you for watching & for the feedback. Much appreciated.
I had to watch this video multiple times to really understand it. Thank you for such excellent content. Looking forward to playing with the spreadsheet.
Thank you for the positive feedback May. I'm glad you are enjoying the content. I'm planning on dropping my video tutorials for the spreadsheets on Wednesday. They will be in the same shared folder as the spreadsheets.
You just popped up on my feed. Sorry I didn't find you sooner! Your explanations are so clear and helpful. You really helped me to understand qualified dividends and their benefits. Can't believe you don't have more subscribers, one more here for sure!
I appreciate you taking the time to watch the video and for the dropping the kind words. It's great to have you here in the community.
JEPI , JEPQ , and JeffT
Hey Veo, I love that mix (:
Another FIRE video, Jeff, keep em coming as you inspire the masses!
Thank you Ari! I appreciate the positive feedback.
Also, it’s been fun watching your channel grow lately! Great work.
Good video. I like the idea of having 20% S&P500, 50% SCHD, 15% JEPI, 15% JEPQ!
Hey Taylor. Thanks for the kind words. I think your mix is awesome. I love the idea of having some S&P 500 mixed into a dividend portfolio. We can never go wrong with the market. You can use the high yield of the JEPs to feed more into SCHD over time. Killer combo.
LOVE the calculator. Great tool to test out various scenarios.
Thank you! I'm glad you find it valuable. I like to keep the tools a little 'higher level' instead of getting crazy into the weeds. Inputs and assumptions are ever changing, this this gives a nice estimate for a specific scenario.
keep pumping out those financial informational videos Jeff!!!!
Will do! Thanks Kevin.
Jeff, great channel! Hypothetically if you held JEPQ in a Roth IRA, and just let it grow, wouldn't you do better than holding SCHD?
Thank you for the question and kind words. This would be a toss up. It would depend on how the total returns shake out. All gains are treated equally in a Roth (no taxes at all). I would probably bet on JEPQ to have the total return advantage, because I love the Nasdaq-100 index. However, QQQM will smoke them both when we zoom out over multiple decades.
All these holdings have pros and cons. The main pro of SCHD is that you smash inflation. With a dividend growth rate outpacing inflation, whatever you make now will dominate inflation long-term. Yield on cost is all that matters long-term. Funny, because it is a meaningless metric to compare today (for current decisions). But it is ALL that matters when looking way back and looking way forward.
SCHD will have about a 29% yield if you bought it 20 years ago, for example (using current figures extrapolated out). SCHD has about a 10% yield right now for shares purchased 10 years ago (using no assumptions, this is what actually happened). So the '3.5% yield' is very deceptive. JEPQ will forever be 6-11% (based on market volatility).
One of your best videos! And on top of your quality content, you put in effort to provide detailed answers to questions in comments!
Thank you George. I appreciate the positive feedback. I do my best to answer all comments.
Great video, Jeff! One thing you need to take in account is that SCHD 1 year CGAR is around 1% so the is a significant slowdown
Thank you for the comment. For sure, it's been slow lately. I'll touch on that in my video this week. Plan on taking a look at the dividend information in depth, along with my thoughts on the reconstitution.
I am very excited for the upcoming REIT video as I also know nothing about those!
Thanks Oldrin, stay tuned!
I need your advise, rn I'm holding both SCHD and JEPQ with portion of 50/50 of my portfolio, should I change the portion?
Hey Waen. Thanks for watching and for the question. I depends on your situation. In general, I think a 50/50 mix is a nice balance of cash-flow now (JEPQ) and cash-flow growth for the future (SCHD).
If you're younger and don't need the extra cash-flow now, I would tilt it more to SCHD. If you need more cash now to pay the bills, I would lean to JEPQ. If you're somewhere in the middle and just want a solid mix, 50/50 is solid.
SCHD, JEPI, DGRO, QQQM
That is an awesome mix! Thank you for sharing.
Wish I could funnel the divs from JEPQ into SCHD
Love that strategy. M1 Finance makes it extremely easy to execute. High yield feeding high growth is a great combo.
Hey Jeff: As a recent retiree on Sep 1 I'm revisiting some of your earlier videos which are very helpful and informative. So thank you for that!
Question: at the video 7:00 mark you give an example of the $150,000 in dividends. You mention that these dividends will not affect your ordinary income tax rate [of $65,000]. But then you go on to show that the breakdown for taxable income brackets of $58,000 [0%] and $92,000 [12%] because of the impact of dividends. I understand that If the dividends are qualified, they should not move you to a different tax bracket. What am I missing?
Hey Tommy. Congratulations on the retirement! That is exciting!
I was using that example to show that qualified dividends & long-term capital gains will *NEVER* change a persons marginal tax rate (from the Federal tax tables). The tax table is completely different and separate.
The easiest way to look at your ordinary income and qualified dividends is to separate them entirely.
Ordinary income always comes first and creates your 'marginal tax rate' (12%, 22%, 24%, 32%, 35%, 37%). Account for your job income, social security, pension payments, interest from HYSA, non-qualified dividends here. Anything that has 'normal' taxes as 'ordinary' income. Simple rule of thumb is anything that is *not* long-term capital gains or qualified dividends.
After that is calculated and done, you can account for qualified dividends (they are tacked on at the end after everything is done). *but* the amount of taxable income you had from ordinary income *does* count to where you start on the special tax table for the qualified dividends and long-term capital gains.
If my wife and I had $80k of taxable income from all ordinary sources, we would be in the 12% tax bracket (married filing jointly).
If we *also* had $30k of qualified dividends, we wouldn't get 0% taxes on all of them. We would get 0% taxes on $14k worth. At that point, we hit the $94k of ordinary income + qualified dividends, and 'the rest' of the qualified dividends, $16k, would be taxed at 15% (instead of 22% for the 'same level' of ordinary income).
Ordinary income first as if you don't have any LTCG or qualified dividends.
Then you account for the LTCG and qualified dividends. The tax rate will always be lower than *if* you had more ordinary income instead. They do not use the federal tax tables at all. Only the special tax table.
@@JeffTeeples Hi Jeff: Thanks very much for taking the time for your detailed response!
One of the VERY more informative videos on the stock market out there. Subscribed 👍
Thanks Joey. I appreciate the kind words and I'm glad to have you as a subscriber.
Nice work! Easy to understand and to the point! Loved the examples you plugged into the chart at the end of the video especially.
Thank you for the positive feedback. I appreciate it!
Jeff, Thank you for keeping your word and making this video!
Hey Nelson, no problem! I try to do my best to shape the videos around the requests and feedback I receive. I'll never hit them all, but I can at least touch on the highlights as much as possible.
Jeff, I am an old guy or at least starting to feel like one, hahaha, so not too savvy in this world, but is there a way to talk to you in private?@@JeffTeeples
I don't have a way for this yet. I've been thinking about starting up a discord (or something with separate DM capability) on the channel. Maybe in the memberships somehow.
I do have linkedin as my main, and really only, social media at them moment. I guess I'm an old guy too lol.
lol, I'm not alone then
Always looking forward to your motivating and educational video. You have helped me to make better decisions about investing for retirement. Keep on producing excellent videos and your subscription will grow a thousand fold shortly.
That is much appreciated feedback Gurudatt. Thank you for watching and for your continued support!
One of your best Jeff! Very apt for folks like me, great strategies! Just looking at that numerical magic in spread sheet gave me an urge to retire asap ;-)
I love it! Thanks for sharing this feedback. Glad you liked it.
Hi Jeff, thanks for the video. Do you already have a video covering your cost and how you pay for it from your portfolio?
Thanks for watching & for the question. I don't have a specific video.
The costs like expense ratios will take care of themselves over time within E*Trade. Nothing I need to cover directly.
Then taxes on dividends or long-term capital gains will be covered when I file taxes. Historically, all costs (for portfolio and life) were covered by the salaries from our jobs (wife and I both worked). I quit my job, which was well over half of our income (I had higher salary, she has WAY better benefits), so now I will need to get more creative.
More to come in the future. But 'up to this point', it has just been covering costs with regular income. And the costs are extremely low when I make sure I'm in low-cost, passively managed ETFs that pay qualified dividends (: Although I do have the chunk of JEPQ right now (to help us pay the bills).
It is wife's job + JEPQ dividends + money mark interest getting us by right now. This channel (hopefully) will make a little extra money for me to chip in again long-term.
Jeff, this is definitely interesting material to consider. I feel like it emphasizes the importance of saving and building up the overall portfolio value in the early/mid years of one's career. I am currently wrestling with a decision to buy a more expensive house (my parents place they are going to put on the market if we do not buy it) or stay in our smaller, cheaper home to keep a higher savings rate. It's so tough since I am happy to stay saving, but at the same time do not want to keep our family in too small of a house forever and miss this only opportunity. Anyway, long story, but as a family man yourself I figured you could relate. Cheers and great video.
Thanks for sharing your house situation. I can totally relate. We are one kid away from having to move. Thankfully, we are done having kids! (at least I'm 99% sure, lol). My wife is a bit younger, but our window is quickly closing. Two of these things is more than enough for me!
Make sure you don't buy toooooo much house. That is a costly mistake many make. However, I completely understanding needing more space as well. It's a fine balance.
Wow! I'm glad I found you. Thanks for an excellent explanation. I subscribed, and will be looking at your other videos.
Thanks Rob. I appreciate the positive feedback. I look forward to releasing more videos.
Newbie in retirement.....If we compare interest growth in my money market fund to the growth of VOO for instance with its qualified dividends.... Seems like VOO DGRO or VTI would have tax advantages in addition to better growth rate? Opinions welcome! 😁
Thank you for watching and for leaving the question.
You are definitely on to something here. VOO and VTI will 'likely' outperform SCHD in retirement by using the 4% rule (selling the amount you need to live on as you need it instead of relying on dividends).
SCHD is more likely to never run out by living on dividends, but it has lower growth potential. VOO and VTI will usually have a higher balance at the end of it all. Both approaches work well with a solid system and staying the course.
Oh yeah!!! Early but still beat here by others
Thank you Jeff, i hold schd and schg ,your content is essential to me. Much Appreciated
I appreciate the kind words Rufina. Thank you for watching.
Hello Jeff! Thank you for your efforts on creating these podcasts!
It would be interesting to hear your opininon on the following question, what do you think about diversifying JEPQ with SPYI, and to use them in tandem, and avoid relying on the only high yield asset in portfolio?
Thank you for watching and for the question. I don't think that is a bad move to mix in an S&P 500 based ETF like SPYI. I'm not a fan of the 0.68% expense ratio, personally, so I would rather mix in JEPI with JEPQ. I don't think the underlying index diversity is a bad idea at all though.
Fantastic presentation ❤❤❤❤I love the way that you explain things so the Average person can really understand.
Thank you
Thank you for the kind words, David. I appreciate you taking the time to watch the video.
What are your thoughts on VIG I would love to see a video about that.
Hey Dustin. I love VIG, I think it is one of the better growth dividend ETFs. It will be involved in my video that drops tomorrow (comparing SCHD to it).
I have a video here about VIG if you're interested. It may be a little dated, but nothing has really changed as far as my overarching thoughts.
ua-cam.com/video/GsylbIDCw3Q/v-deo.htmlsi=QicTYAJq6qYGGxWQ
Great i will look forward to watching it thank you
Good stuff/info!! I now understand how qualified vs. non-qualified dividends are taxed. On a slightly different topic, have you looked at GPIX & GPIQ? They state "...consistent monthly income;" JEPI & JEPQ dividends are NOT consistent, monthly.
Interesting! I had not seen those yet. Looks like they are new as of Oct 2023. Low yield, but looks like it is well controlled so far. I wonder what % of those dividends are qualified. Likely more than JEPI and JEPQ because it looks like the base holdings make up a greater %. Will be fun to watch!
I see your jepq and jepi and raise you HIGH, WZRD, and hopefully PSUS when it launches
Thanks for the feedback. I will check these ones out! I know most of the income producing ETFs by ticker, however, need a deep dive on some of them to better educate myself.
Excellent explanation. Learned something new and glad I have all qualified dividends 😊
Of course, you're welcome. Let those things grow and you'll forever beat inflation while avoiding those pesky taxes.
Thank you for this awesome video. I do think it would be better if the background music were more relaxing.
Definitely. This was not my best choice. Thank you for watching and for the feedback.
Just found your channel and it's very exciting finding someone who's willing to teach your own personal proven strategy. As well as sharing your automated spreadsheets which are excellent btw.
I'm canadian, looking to do this style of dividen portfolio growth.
Would your speadsheets work with the tsx?
Maybe you could do a video on canadian dividen stocks?
Thanks! Keep up the excellent work!
I appreciate the kind words about the channel and the spreadsheets. I do not have a great understanding of investing outside of the US. I don't want to guess at answers and be potentially misleading. Sorry about that.
Understandable, I appreciate the response. Latest video on portfolios by age was super help full and exactly what I was looking for. Just finished building a portfolio spreadsheet to keep track of everything. Super excited to watch the growth.
Thanks again for your effort in helping to teach the masses!@@JeffTeeples
I own SCHD. I also own individual stocks that I collect dividends and sell covered calls on
Love it! I bet you have yourself an income producing machine that also grows over time. Very cool system, thanks for sharing.
Working on it 😊
Great video! Would mind sharing this spreadsheet?
Thanks for watching. Of course, here is the link:
(FREE) Excel Spreadsheets
1drv.ms/f/s!Anqr9n0OrsO-g40undVnMj-D9hWfaQ?e=nXlBW0
(FREE) Google Sheets
drive.google.com/drive/folders/1qJHsMfsplDqWUIjvEk6BlkjjTRiY_Eg9?us
Thank you. Consider reviewing QQQI and SPYI please. 🙏🏼
Hey Rigo. Thanks for the comment. I have heard a lot about those two ETFs. They don’t meet my minimum requirement of an expense ratio of 50 basis points or less. I’ll continue to watch them, and maybe review them eventually. But I do like to keep the channel on brand with only ETFs I would invest in.
@@JeffTeeples Ok, love your integrity.
Jeff, great video and I look forward to future installments. I placed my SCHD holding in a tax advantaged account, what are the possible tax implications of holding it in a brokerage? I am a modified Boglehead, using VTI in the brokerage and VOO in all other accounts with a smattering of other ETFs, no bonds or international currently.
Hey Shemp, I'm a long-time 'modified Boglehead' myself. Jack Bogle has had more influence on my than any other person when it comes to investing. I think the Bogleheads' mostly get it right, but are close-minded to a fault (generalizing a community of course, there are plenty that can think outside the box).
I love your strategy of holding VTI and VOO everywhere. SCHD will treat dividends the same as VOO and VTI (for the most part, SCHD is actually 100% qualified, so technically a touch better). So when you hold SCHD in a taxable account, you'll get the 'long-term capital gains' tax treatment (best possible).
Keep up the great work! I like the way you explain the tax part. What determines if a stock is qualified or non-qualified dividend? Do some dividend ETF's have both?
Thank you for the kind words. Some do have both, and it is a little difficult to find out exactly what % is qualified compared to non-qualified in those cases (I don't have a go-to site that I trust).
In general, US companies that you hold will pay qualified dividends (as long as you hold for at least 60 days). Those are the best rules of thumb I've found.
SCHD pays 100% qualified dividends (I check my tax returns). This makes sense because it is 100 US companies that pay dividends, and it excludes REITS. REITS, unfortunately, pay non-qualified dividends.
Hi, I’m new here. What’s it called when you buy a stock and it falls 90% and when you dump it, they increase about 400%??? That’s what I do. Not gonna brag but I’m pretty good. It’s kinda funny, not really though. More psychological degrading. 😅
Haha, I love it. Welcome! Brace yourself, I am a fairly boring investor (: Not a lot of moves being made here.
Great video! I’ll stick with the solid SCHD long term strategy!
Thanks for watching! Not a bad move at all!
We live in a high tax state so we would have to be pretty desperate to hold one of the JEPs in our Taxable account.
I'm extremely happy to have JEPQ at 10% and JEPI at 3 in my Roth IRA. That monthly tax free cash income is just the thing for a growing Roth. The price appreciation hasn't been anything to shake a stick at either
No doubt. I love the strategy. I think it makes a lot of sense to limit JEPQ and JEPI to a retirement account.
My biggest position SCHD
Very nice Billy. Keep piling them up as everyone else screams that SCHD is dying. The methodology will very likely be timeless and when we zoom out SCHD holders will have a lot of reasons to smile.
How's that POS looking now, down 3% in a few days.
Great brake down! Always look forward to your new drops. As we get to our retirement we will be shifting to more of that passive income. As we are driving hard to early retirement we are all about growth (for now). We aren’t bond fans, so dividend ETFs could be a decent portion of our bucket 2.
Thanks for the comment. I love that you're focused on growth pre-retirement. That is the best way to grow massive wealth (imo) as long as you never 'sell low' when a crash happens. Panic selling derails years worth of wealth.
I'm a fellow 'bond hater' as well. I say that with a smirk (I always get crap for my viewpoint on this one). The numbers of bonds have never, ever, made sense in over 100 years worth of data of 'long-term investing'. Again, this is assuming DCA in during all of the many crashes over the years, and 'not caring' about portfolio values along the way (all about building for the future).
People lose hundreds of thousands of dollars of *purchasing power* because they hold bonds. And it is mathematically a (virtually) guaranteed long-term loss of purchasing power no matter how you slice it. It's just the nature of the system.
@@JeffTeeples Amen. I don’t think we will ever own bonds. Our government keeps writing bad checks that people are still covering with bonds. We don’t find them to be a safe asset for cash preservation at bare minimum.
Great comparison, thank you Jeff! Do you think you could also do a comparison SCHD vs COWZ?
Thank you for the kind words. I sure will make a COWZ video in the future. In fact, I think it could be coming in the next few weeks. It barely met my hard rule of an expense ratio of under 0.50%!
Yep, the expense ratio hurts but otherwise...
Hi Jeff - I really enjoy the way you segment and weave together topics in your videos! They are packed with so much important information. I consistently have learned so much from each and every one of them!
You mentioned in a reply to one of the comments that you prefer high growth ETFs in retirement accounts. Are you referring to Roth IRAs or other types of retirement accounts? Which high growth ETFs do you prefer for these accounts?
Hey Bruce, thanks for the feedback and the question.
I like VGT or QQQM as my high growth. I think they are good in taxable accounts, Roth IRAs, traditional IRAs, basically any type of account.
My main point to the reply is that a lot of people think dividend payers like SCHD are BAD in a taxable account. The reality is, ironically (I say this because retirement accounts are made for 'tax advantages', in many cases SCHD is objectively better than growth ETFs (or other types of investments) in taxable accounts.
Really, growth, cornerstone, and dividend ETFs, assuming qualified dividends are being paid, are 'about the same' in any type of account, long-term.
But SCHD dividends in a taxable will NEVER be taxed more than 15% (unless you make a ton of money, then it still has much lower taxes than your 37% marginal tax rate), and in many cases, it will forever be zero. And when we die someday, and our kids take over, they don't even owe taxes on the capital gains either in a taxable account (step up cost basis).
I like to emphasize this because many people point out (over the years) that I have SCHD in taxable and VOO and VGT in retirement accounts, and they explain how dividends work (:
When SCHD pays a dividend, remember, it is identical to long-term capital growth. If I get $100 of dividends, and reinvest it, then there is a taxable event at 0% or 15%. However, that $100 is taken care of forever. Because I got 'a free $100 of SCHD' with the dividends that will never be taxed as capital gains. My 'value' increased $100, and my 'cost basis' increased $100. That is zero dollars of gains for $100 of value. A lot of people think dividends are 'doubled taxed' in a way, the dividends and the gains. It is not how it works.
Have you done a show or do one comparing the different types of ETF’s in different types of accounts like: IRA ROTH, Tax deferred (401k/403b) & taxable brokerage? What would have the better long term tax advantages? You do an excellent job explaining with actual data! Thanks!
I understand that SCHD is an excellent ETF for generating qualified dividends and it would be the choice in a taxable brokerage account or tax deferred account…What ETF’s would be best in a ROTH account that the gains wouldn’t be subject to any taxes. Thanks again for replying to all of your comments!! I have told others about your channel
Thanks for the question. I try to explain some tax implications in many of my videos. I will say that for the most part taxes are overrated. This is coming from an accountant that is a tax nerd that likes to min/max everything.
But what I mean is, as long as the dividends are qualified (explained in this video), it doesn't 'really' matter long-term where you hold DGRO, SCHD, VYM, VOO, VTI, QQQM, US stocks, VGT, etc. There are minor pros and cons (much like I explained SCHD is weirdly underrated in a taxable account)... But they 'mostly' apply to all and 'mostly' don't move the needle.
The things that REALLY matter are that we buy and hold great investments. We don't sell gains within a year of holding a stock or ETF (short-term capital gains are bad because they add to your 'ordinary income'). And we stick to our target allocations. Staying the course and chilling for many years is more valuable than any tax tricks.
But REALLY REALLY what matters is investing as much money as possible at each stage of life. The compound effect is great, but it needs a base amount to mean anything.
I appreciate you spreading the channel to the world! I want to help the masses.
I answered this quite a bit in my last comment, but for a Roth specifically, it is GREAT for:
1) REITs if you have them
2) Non-qualified dividends if you have them (like covered call ETFs that produce high income)
The reason it is great for those is because the taxable brokerage accounts are bad (they add to ordinary income for the current year). Roth treats everything the same (no taxes ever again). So hiding the 'bad taxes' in there is great.
But again, the BEST investments in a Roth are simply the ones with the highest returns. Dividends, interest, short-term gains, long-term gains, anything else I'm missing... They are all identical (no tax). So regardless of where the gains come from, the 'best' is the one that goes up the most all things considered. Tax free on everything.
This is why I argue, ironically (it is backwards from what most people think by default, they want to hide all dividends in Roth IRAs), the low dividend growth ETFs like VGT or QQQM are technically the best in a Roth. No taxes again on 500% gains (when we zoom out) compared to 200% gains of dividend paying things. Remember, all gains are taxed the same (0%). Of course, they don't always win. But when we zoom out 20+ years, they 'basically' always win with dollar cost averaging in.
@@JeffTeeples Thanks again for your great explanation! Hope others read what you shared!
Great video Jeff, thank you! I'm looking forward to SCHD payday!
Absolutely! I will be dropping a video to cover the reconstitution and the dividend payment this week!
One question though you mentioned qualified dividends for us corporations where does it leave VYMI ?
Great question. I don't know EXACTLY how it works with international dividends, but many are qualified.
It looks like VYMI has the qualified dividend amount at about 67% over the past two quarters of payments. However, I am unable to officially confirm that.
I will say, that is pretty slick as I have been thinking about adding internationally for a while now. Not ready to pull the trigger (will likely be a bit late to the game), but a good bit of information for when I do! Thanks for the question.
Hi Jeff, thank you for the video, I finally have a clear understanding on how qualified dividend and long term gain is taxed. With this, I would to get your advice. My son is 26 year old. He currently contributes to the company 401K plan. In addition max out on the company match, he also makes additional 401K contribution to lower his taxable income. He also contributes max to Roth each year. His current tax rate is 22%. After watching this video, I am just wondering if it will be better that his additional 401K contributions (after max out company match) should go to his brokerage account, so any LT gains/qualified dividends will be taxes at 15%, rather than the likely 22% in the future when he retires that he has to convert from 401K to Roth or brokerage. I believe he will have a nice accumulation when he retires with his 401K contribution/company match and HSA accounts. I would like to get your input on this.
Thanks! Cindy
Hey Cindy, this is a great question. It depends on the 401k plan. For mine, I had a low-cost S&P 500 fund available (FXAIX). So I worked on maxing out the 401k before worrying about investing on the side.
This saves 22% on taxes now, and in retirement, he can very likely take 'most' out at 12% (or whatever the lowest bracket is then) incrementally over time (to invest it in a taxable account or to live on it).
I would suggest he puts a decent amount into the 401k (even beyond the company match amount) if he has a good low-cost S&P 500 investment available.
However, on the outside, he may consider opening and funding a Roth IRA each year ($7,000 is the limit this year). It will not save him the 22%, but it does hedge against future tax changes by keeping some of his portfolio tax free forever.
He can only fund a Roth if he makes under 161k. If he makes more money than that, I would highly recommend maxing the 401k if possible (assuming good investments), then working on a taxable account (using qualified dividend paying ETFs there).
Lastly, if he makes over 161k, but does not currently carry a balance in a traditional IRA, he can consider making backdoor Roth IRA contributions. That is one he'll need to look into the details on. I have a video on it as well (one of my older videos, but should still give a starting point for research).
So I understand this demo correctly- mixing jepq/jepi was just to bridge the gap of a hypothetical person who wanted to retire but was not able to collect SS yet? If you were retired and collecting social security would you still play with jepq or just go all in on schd?
Hey Kevin. I think personally preference will come into it for a lot of people that want higher yield. But I would answer your question as YES from my perspective. If you have the cash-flow to get by with SCHD in the current year, it is a better option. It will have a higher floor and more importantly, it will grow your dividends to outpace inflation in the future.
In fact, if someone has enough and then some, I think it is important to keep a balance (throwing VOO, VGT, and QQQM in the mix as well, long-term). I know most people will not have a portfolio value that supports this in retirement.
Great info 😊😊. Just so I understand, if you have traditional Ira and you take the dividends to use once retired to meet your monthly expenses, on your tax form, it is taxed as ordinary income, or taxed as something else .? Just want to be certain, your videos are the best 👍
Thank you for the kind words, Carl. That is correct, when you take the dividend gains out of the traditional IRA in retirement, it is taxed as ordinary income. Which normally isn't too bad. For most people, this is 12% in retirement. If it is more than 12% then you are likely looking very good in retirement (:
Do you have any research on non-US dividend ETF's like VEU, VWO? I think their dividend is partially qualified. At this point US markets are in bubble levels and EU, Asia markets are much more reasonably priced
Hey Sumi. That is a great question, and I agree there will always be a reversion to the mean over time. I currently only research US based ETFs unfortunately, outside of the real broad ETFs like VXUS and VT (I watch these to make sure my strategy still makes sense each year). I need to educate myself more on the topic before having a lot to say.
The "But Yolo" was too funny. lol
😆
Haha, thanks. Sometimes I gotta throw in some stuff to keep it light. Thanks for watching and commenting (:
@@JeffTeeples Love, always look forward to the very end when you say peace in a funny way. Also when you say lets grow haha
Thanks for the información. I would like to know how much affects taxes in LATAM for ETFs of dividends
Thank you for watching and commenting, Johan. I don't have a detailed understanding of tax implications outside of the US. I don't like to share answers when I don't know what I'm talking about. Last thing I want to do is accidentally spread misinformation. Sorry about that.
It’s almost like we either buy both, or we focus mainly on JEPI/JEPQ then swap to SCHD when we are closer to retirement? But this we may loose out on the lower cost of SCHD…
Yeah, the dividend growth aspect of things like SCHD are fairly well known, but sometimes people forget the price appreciation component mattering as well. The 'yield on cost' is amazing with SCHD when we zoom out. JEPQ is great, and I think the price will do just fine because it is based on a great index (Nasdaq-100). However, the yield is higher, but a bit more 'random' and less impressive when we zoom out and see it all over the map.
I really do love both, but SCHD is great for 'the future me'.
Hello Jeff. I just subscribed. I’m doing a research and found your channel. Your videos are very informative. Thank you for sharing your experience and knowledge.
My husband is currently 60 and I’m 57. My husband plan to take Social Security at 62 and I will in 5 years. We will need monthly income from dividends like SCHD and JEPQ to supplement our savings to pay expenses until I reach 62. All our retirement savings are in before tax 401k. We plan to rollover 401k into IRA account and convert some into Roth IRA. Do we do lump sum or DCA when time to buy SCHD and PEPQ?
Hello Jeff. I just subscribed. I’m doing a research and found your channel. Your videos are very informative. Thank you for sharing your experience and knowledge.
My husband is currently 60 and I’m 57. My husband plan to take Social Security at 62 and I will in 5 years. We will need monthly income from dividends like SCHD and JEPQ to supplement our savings to pay expenses until I reach 62. All our retirement savings are in before tax 401k. We plan to rollover 401k into IRA account and convert some into Roth IRA. Do we do lump sum or DCA when time to buy SCHD and PEPQ?
I know this sounds nerdy, but can you make a video about how you track, make and use your spread-sheets?
Thanks for the idea and the feedback. Don't worry about feeling nerdy, I'm king nerd, lol. I have a few tutorial videos out there for the channel members (they get access to a excel spreadsheet and google sheet of what is shown in the videos). I've been thinking about putting it in the channel videos, but I also worry most people wouldn't care about it. I'll figure it out in the future.
This is so incredibly helpful!
Hey Oldrin. Thank you for the feedback. I appreciate your support on the channel, and I'm glad it is helpful information.
Great information, I subscribed.
I appreciate the kind words & thank you for subscribing!
Let me make sure I understand one thing you said. If all my money is in traditional IRAs, does it matter what kind of dividends are being generated? I think you said that any money coming out of IRAs is treated as income, right?
Hey Craig, thanks for the question. You are spot on. The traditional IRA will treat all gains the same. Qualified dividends do not matter. It is treated as income in the year that you take it out. Still a great deal, because in retirement we can likely keep ourselves in the 12% tax bracket. Still, we miss out on the 0% potential of qualified dividends in a taxable account.
Jeff, I am still thinking about this video. So much good information! I am curious: As a married couple filing jointly, let's say my husband and I max out our 401ks so that our combined income is $94,000 or lower, BUT we have managed to grow a hefty taxable investment account (maybe loaded up with SCHD) that pays us some crazy amount like $100,000 in annual dividends, would we still be paying zero taxes on the dividends? I guess I am wondering if there are different levels of dividend payouts that get taxed even if a couple is at the 0% tax rate for dividends? Thank you.
That is a great question. The dividends from SCHD will be considered entirely AFTER all of your taxable income (from regular jobs, social security, interest on savings, non-qualified dividends, pension, and things like that) is accounted for and you find where you fall in the tax brackets.
That's the easiest way I've found to explain it. Do everything else, and then at the very end, think about qualified dividends. They don't change anything at all about your taxes.
*Going to use easy round numbers below*
So, let's say your income combines for $100,000. Take away the standard deduction of about $29,000, and you'll be left with $71,000 of taxable income.
You fall in the 12% tax bracket in 2024, and will pay your taxes accordingly (all within your tax return).
Now, after that, you have a buffer of 94,000 - 71,000 = 23,000.
Your first $23,000 of SCHD dividends will be taxed at 0%.
This now gets you to the $94,000 level. Remember, this has nothing to do with the federal tax tables anymore. The special long-term capital gains table says that the first 94k is taxed at 0%. Then it moves to 15% when your regular income + long-term capital gains + qualified dividends reach 94k total.
So your next $73k of dividends from SCHD would be taxed at 15% (instead of the much higher federal tax table rates that more ordinary income would be taxed at).
You are very generous with your knowledge and time. I appreciate this very detailed and long response.
Luv this angle! Thank you for your efforts.
Thank you for watching and for the kind words!
Love your channel. Do you know of any dividend etfs with a yield between 4-5% without a high expense ratio like DIVO?
None that I track, personally. There are a lot of them. My favorite 'high yielding' ETFs are JEPI and JEPQ. They aren't the highest yield, but they are based on great indexes and will have a solid total return in addition to the 7% to 10% yield.
The expense ratio is 0.35%, which is pretty good for an actively managed fund.
Appears JEPQ is the best choice for a person who is already retired and has less than $15,000 to invest.
I think it’s a great option in that scenario assuming the person needs cash-flow right away.
@@JeffTeeplesbro i seriously need that cash flow😢
When you look at total returns, it’s hard for me to not look at JEPQ and think that it’s not a top Growth ETF when you reinvest the dividends
It replicates the upside of the Nasdaq despite it being capped and it performs better in a down market than the Nasdaq
I don’t care if it’s not as tax efficient
For sure, JEPQ is a great holding. I have it right now in my portfolio.
Just to be clear though, it actually reduces the upside of the Nasdaq-100. It doesn't replicate it (but I know what you mean in general, it uses the same index). Just don't want to mislead anyone on accident here.
It lowers the ceiling (commonly referred to as upside) and raises the floor of the Nasdaq-100 index. Over many decades, QQQM will very likely have greater total returns (more ceiling raises over time, ignoring short term) and JEPQ will have WAY more cash flow.
It is my favorite high yielding ETF, so I'm a massive supporter of JEPQ. But it is objectively better to hold the Nasdaq-100 for 10+ years IF:
1) You don't need cash flow
2) You DCA in at all times
@@JeffTeeples I agree, and yes that’s what I meant when I said capped upside. I think what I prefer about JEPQ over QQQM as a long term investment is that it’s safer. I’m ok with the capped upside and tax inefficiency of it because it(like the Nasdaq) will more than likely consistently outperform the S&P 500 for decades to come, especially with Tech getting more and more advanced
What I’ve started to notice is that as time goes on, JEPQs total returns are slowly starting to catch up to QQQ since it’s much better in a bear market. It’s a small sample size of course but I think it’s still worth noting
Since ETFs like FEPI and the Yieldmax ones qualify their distributions as ROC, what would happen if my cost basis reaches zero? I thought I heard somewhere that the distributions would then be considered capital gains?
Wow, that is interesting. I didn't know about FEPI, but just read up a little bit. It sounds like what you are saying is correct. It breaks my hard rule of being under a 0.50% expense ratio for me to consider (it is at 0.65%) investing in, but I still want to watch how it performs. Thank you for the question (that I didn't have a great answer for).
Great video, would you consider a bond position? or do you consider the 10% a short term bond position
Hey Todd. Thank you for the question. I will never hold a bond, personally, outside of the 10% MM. I also don't plan to have JEPQ, either. I should mention, I'm not implying that bonds are bad.
My goal is to have dividend producers like SCHD and DGRO that grow the dividends every year. Now, I'll need quite the portfolio size, which is what I'm working on with consistent dollar cost averaging over the years. I don't plan to sell shares, and therefore will never care about my portfolio value at any one point in time (in retirement).
But there are many great ways to go about it. I don't like bonds because they guarantee my purchasing power stays flat. This is based on 100+ years of data, to be clear. Many assume I don't like bonds because of the recent underperformance. That has zero to do with it for me.
Excellent presentation. Thank you.
Thank you for the kind words! I appreciate it.
great video ! does it matter if JEPI/JEPQ is in ROTH IRA account ? Will it still increase taxable income ?
Thank you for the positive feedback Kumar. JEPI and JEPQ are great in a Roth IRA because there is zero taxes. It only matters in a taxable brokerage account.
Thank you @@JeffTeeples ! You are the best ! Let me stack up JEPI/JEPQ in my ROTH !
Thank you so much, you did it again, eye opener!
Thanks Brianna! I'm glad it was helpful. I appreciate your unreal support.
@jeffTeeples, if I have a 401k and decide to use JEPQ in addition to SCHD… will I need to do anything with the income earned from JEPQ every year prior to retirement? Or will all of this be taxed once withdrawal of assets takes place after age 60?
Hey Norb. There will be zero tax implications or action items until you begin to withdraw the funds in retirement.
You may need to log in after dividends are paid each month (for JEPQ) and each quarter (SCHD) if you do not have DRIP turned on (dividend reinvestment plan).
Otherwise the dividends will sit as cash and not continue working for you. It's best to reinvest them and get more JEPQ or SCHD over the years.
That was a fantastic explanation… thank you!
Thank you Ren, I appreciate the feedback.
Good stuff Jeff. I like how you try to keep things simple, unlike Average Joe Investor, whose channel is not reflective of how an average Joe invests because it’s full of covered call videos.
I appreciate the positive feedback. Thank you for watching. I should steal his channel name! (:
@@JeffTeeples Your attention to detail leads me to believe that you have an accounting background. Are you a CPA?
Great call! (: I do not have a CPA. However, I was getting over 90% on every practice test after getting my master's degree in accounting (the ones that use real past questions). I never did sit to become a CPA after starting at Boeing.
I'm not talking down education at all, but I'm not overly enamored with initials after my name. I like reading, learning, and staying open-minded. I have nothing against it, of course, and I think it's impressive people go for it. Just not for me I guess.
@@JeffTeeples “A fisherman always sees another fisherman from afar…..”-GGekko
I know it’s not a good idea to try to time the markets. However, I have this feeling that the US market is way overpriced right now. I do consider that overseas markets are better buys. Is there some way to benefit from investing in more reasonably priced overseas markets but also get the tax benefits of qualified dividends for retirement investing.
Thank you for watching and for the question. I can't speak to the details of the non-US taxes. I don't want to misinform on accident as I'm not overly educated on that topic.
As far as them being overpriced, I feel you there. What I would do is make target allocations that take away your 'feelings' of the markets. Auto-buying the dip is very important over time, and you can literally never be wrong with target buying. Feelings and timing the market are difficult to manage for us humans. But putting it on a system that is right 100% of the time is possible.
The way to set this up is as follows. Keep in mind, I'm totally making up the %'s for this example, just to put numbers to it.
Say you want 75% of your portfolio in US, and 25% overseas. We'll use VTI for US, and VXUS for International.
If you have $10,000 to invest, you would put in $7,500 into VTI and $2,500 into VXUS. Regardless of the price. Now you have a base portfolio.
If you dollar cost average into your mix, you will buy whatever one has fallen below its allocation each week (or month) when you add new money to the portfolio.
This will buy the 'better value' at all times based on what is ACTUALLY cheaper at the time. Not based on our gut feelings or the news. If the US market is running up (like it has been), you will automatically buy more VXUS to get it 'back to 25%'. If that big crash comes to the US, you will be buying VTI to get it 'back to 75%' of your portfolio.
I've been doing it for years and it is virtually impossible not to buy the comparative dip.
Hi Jeff
Great video by the way.
This example of retirement portfolio is perfect for my situation and goals in a very near future.
I am from Canada, so can you tell me if these same ETF’S will also be qualified here ?!
I understand that the tax bracket and % may vary, but if they are also qualified inCanada, that would be great.
Thank you for watching and for the feedback. I'll be honest here, I'm not sure about the answer to this question. My investing research / knowledge has been entirely based on being a US holder. I don't want to make up an answer that can be misleading.
Great video. So let’s say we follow the modern 3 fund portfolio in a Roth. We would just sell our shares of let’s say vgt, and voo and buy jepq and jepi when we are about to retire?
Absolutely. If you are in a Roth or a Traditional IRA (or any retirement account), you will be able to sell VGT and VOO with zero tax implications.
In a Roth, you'll never be taxed of course. In a traditional, you will only be taxed when you withdrawal the money in the future.
Even taxable accounts aren't too bad for converting what you need. As long as you are selling long-term capital gains (to convert to JEPQ and JEPI) you will likely pay 0% or 15% taxes. 0% if you do it incrementally over a few years (assuming you don't have over 123k of regular income in retirement).
@@JeffTeeples Just want to get this right: if I put my JEPQ in my Roth account (and pass the five-year rules), the dividends that spin off are tax free, correct? Thanks in advance...great stuff here!!
Can SVOL be dropped in this mix for people close to retirement?
I wouldn't add something with an expense ratio of 116 basis points (my limit is 50 bps because expense ratios take 6 or 7 figures long-term) personally, but it can be added to the dividend mix.
If you invest within an IRA does the tax implications matter other than when you withdraw? Thanks
That is a great question. The tax implications do not matter within an IRA. All gains are treated equally and will be taxed as ordinary income in the year that you withdraw the money. Long-term vs short term gains, ordinary vs qualified dividends vs interest... None of it matters. In a Roth it will never be taxed, and in a traditional the gains will be taxed the same.
Thank you for your extra support of the channel by being a member. Means a lot.
Great video, but how come you don't consider reinvestment?
Thank you for the kind words and the question. I think reinvesting dividends is essential in building wealth. My videos will (generally) assume 100% dividend reinvestments.
However, for retirement scenarios specifically, I will often turn off dividend reinvestments because this is the point where people lose income and need money to pay the bills (generally speaking). It is a *huge* bonus if you are still able to reinvest dividends in retirement! In that case, you are definitely clear (:
Hi Jeff: For dividend yield, do you generally agree that JEPI and JEPQ are better to hold in Retirement/Non-taxable accounts without needing SCHD? Thanks much.
Hey Tommy, thanks for the question. Thank you as well for being a member, it means a lot, and I see that shiny badge of yours by your name (:
JEPI and JEPQ are fantastic holdings in a tax-advantaged account. I agree 100% that holding them there is the best way to roll, long-term.
I still think mixing in some dividend growers, like DGRO and SCHD, is a great idea as well IF the entire yield of JEPI and JEPQ isn't *needed* to pay the bills. It's nice to have a mix of dividend yield and dividend growth. Our future selves will thank us.
great video!
Thank you for watching and for dropping a positive comment.
I heard SCHD recently restructured everything do you think it'll still be as good growth wise in the future? If you are looking long term it is prob still the play as oppose to JEPQ as long as you can bridge the gap short term?
Great question! I'm going to cover the reconstitution and quarter one dividend payment in a week from today! It will be the video I work on this week and release Sunday.
What about Roth IRA--- there should be zero tax / capital gains. I have jepq and jepi in Roth.
Thanks for the comment. That is a great place for JEPI and JEPQ! You are correct, zero taxes in Roth IRA.
For federal taxes that's great, but they are still taxed a ordinary income for state taxes. Correct?
Hey Fred, I don't even think about state taxes where I'm living, but you are correct, I am strictly referring to federal taxes.
If I'm working on my retirement 401k portfolio. Is there a benefit of buying SCHD/JEPQ in my Roth account portfolio?
The traditional IRA and Roth IRA will treat all income the same. Roth never gets taxed again, and traditional is taxed as ordinary income in the year you withdraw it.
For that reason, I generally like keeping assets I think will GROW the most total returns, long-term, in my Roth. For me it is VGT and QQQM mostly. JEPQ and SCHD are fine as well. All gains are tax free forever.
In the traditional 401k or IRA, it is great to have things like JEPQ to control WHEN the ordinary dividends are taxed. JEPQ is rough in a taxable account because it increases your taxable income that year (as if you earned more money). SCHD is great in a taxable account because of the qualified dividends. Same with VOO, QQQM, VGT, or anything else that pays qualified dividends.
Short answer: Roth vs traditional don't 'really' matter for SCHD vs JEPQ. A nice mix in both could be valuable. The only thing that 'directly hurts' is having JEPQ in a taxable brokerage account. Qualified dividend payers are 'about the same everywhere'.
i have schd and jepi
Hey Jason. That is a great 1-2 punch. Thanks for watching and leaving a comment.
I went with SPYI instead of JEPQ and JEPI
Nothing wrong with that. I wish you well. It has seen nice results in the early going!
Got a mix of schd & schg! I'm 21 years old and I wonder if I should focus towards more growth stocks or dividend ETFs like schd and do dividend reinvestment?
Thanks for the question. First of all, great work investing at 21! I'm more jealous than you know (:
I would likely focus more on growth (SCHG) for at least the next 20 years. If you dollar cost average in consistently, and NEVER panic sell when the market crashes (that's when you buy more and build massive wealth long-term), you will come out ahead through all the bumps.
A combination is great, but SCHG will 'very likely' increase your wealth more over the next 20 years.
Don't sweat the inevitable crashes along the way. Also, don't react to the 'news' of investing. You will hear a lot of predictions (: It is all coin flips. Stay the course, zoom out, and watch your wealth appreciate.
@@JeffTeeples Appreciate the advice!