How a Retiree Three Years Into RMDs Turned a $940,000 IRA Into a $6,700 Monthly Paycheck Without Buying an Annuity

How a Retiree Three Years Into RMDs Turned a $940,000 IRA Into a $6,700 Monthly Paycheck Without Buying an Annuity

David Beren

Sun, August 30, 2026 at 3:29 PM GMT+3 5 min read

Quick Read

• Hitting $6,700 monthly from a $940,000 IRA demands an 8.55% blended yield, achievable only in the aggressive tier of BDCs, CEFs, and high-yield equity.

• Conservative dividend funds at 3.5% yield require $2.3 million in capital, which is more than double this retiree's balance, making that tier completely out of reach.

• A dividend-growth portfolio starting at $32,900 annually surpasses a frozen 10% stream within 12 years, but a retiree three years into RMDs lacks that runway.

• Read More: Learn 7 ways to generate income with a $1,000,000+ portfolio (sponsor)

Three years into required minimum distributions, a 76-year-old retiree needs his IRA to do one very specific job. It has to throw off $6,700 a month, which comes to $80,400 a year, without eating into principal during a rough market and without handing the whole balance over to an insurance company. The account holds $940,000, and the RMD schedule is already forcing withdrawals, so the real goal is to make those distributions cover the required withdrawals instead of selling shares to meet them.

The math here is brutally simple. Divide your income target by your yield, and that tells you how much capital you need. At $80,400 of annual income, here is what each yield tier actually demands.

Conservative Tier: 3% to 4% Yield

Broad dividend growth funds, blue-chip dividend aristocrats, and total-market index yields sit here. To generate $80,400 at 3.5%, the math says $80,400 divided by 0.035 equals roughly $2,297,000 in capital. That is more than double this retiree's balance. Principals tend to appreciate, distributions grow with earnings, and sequence-of-returns risk is muted. Sleep-at-night quality, but out of reach at $940,000 unless the income target drops sharply.

Moderate Tier: 5% to 7% Yield

This is high-yield blue-chip equity, preferred shares, REITs, and covered-call equity funds. At 6%, $80,400 divided by 0.06 equals $1,340,000. Still $400,000 short.

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Altria (NYSE:MO) anchors this tier. Shares are around $69, the forward payout is $4.44 annualized after the latest hike to $1.11 quarterly, and the yield sits near 6.5%. Altria has raised the payout in a straight line from $0.86 in 2021 to $1.11 today, and its beta of 0.50 means it does not whipsaw the account balance. The catch is well documented: declining cigarette volumes, negative book value, and Altria's own 14 P/E hint at how the market prices the terminal risk.

Aggressive Tier: 8% to 14% Yield

Business development companies, closed-end bond funds, mortgage REITs, and leveraged credit vehicles live here. At roughly 9%, $80,400 divided by 0.0855 equals $940,000. That is precisely this retiree's balance.

The allocation cited above splits the account into 35% ARCC, 35% MO, and 30% PDI. Ares Capital (NASDAQ:ARCC) pays $0.48 quarterly, $1.92 annualized, yielding roughly 10% on a $20 share price. Management reported core earnings of 47 cents against the 48-cent dividend, $988 million ($1.38 per share) of spillover income, and non-accruals of 2.4% at cost, well below the BDC historical average. PIMCO Dynamic Income Fund (NYSE:PDI) pays $0.2205 monthly, roughly 17% on a $15 price. The blended yield lands north of the 9% needed, providing a modest cushion.

The costs here are real, as one fund is a leveraged closed-end vehicle with a history of irregular year-end distributions and a one-year price decline of about 9%. Another saw its net asset value slip to $19.35 per share, down $0.24 from the previous quarter. Sheltering all three inside the IRA is the smart tax move, since BDC and CEF distributions would otherwise hit ordinary-income rates at the 22% or 24% federal bracket that most retirees find themselves in once RMDs start.

What Most Readers Miss About Yield

A 3.5% dividend growing 8% a year doubles the income stream in roughly nine years. A frozen 10% distribution stays at 10% forever, then loses ground to inflation. On this $940,000 account, a hypothetical growth-tilted portfolio starting at $32,900 of annual income would surpass a static $80,400 stream within a dozen years. The retiree three years into RMDs generally does not have that runway, which is why the aggressive tier fits the situation (the payment calendar, the withdrawal order, and the mix are laid out in our free Paycheck Portfolio Method guide). A 55-year-old asking the same question should answer it differently.

Three Actions

1. Reprice the target. Pull the actual spending number from bank statements. If real outflows are $5,200 rather than $6,700, the required yield drops to roughly 7%, and the portfolio can shift toward Altria and away from PDI, materially cutting NAV-erosion risk.

2. Stress-test the RMD. Overlay the IRS Uniform Lifetime factor for age 76 against distribution income. If cash yield exceeds the RMD, reinvest the excess; if it lags, plan which position to trim before the December deadline.

3. Model the ten-year total return. Compare a 3.5% dividend-growth ETF against this 8.5% blended sleeve using historical NAV plus distributions. The compounding gap tells the real cost of buying current income.

A $1,000,000 Income Portfolio

If you've saved over $1,000,000, this guide is for you. The last thing you want in retirement is to run out of money, you want your money to generate lasting income while you enjoy your life.

Now you can learn the strategies wealthy retirees use to fund their retirement with The Definitive Guide to Retirement Income from Fisher Investments. Download the guide today! (sponsor)

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