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Retirement Income by Rube Goldberg

Updated: Aug 19, 2021

As the adult son of an 84-year-old widowed mother, I have a front row seat to an actual retirement in progress. And a good one it has been, in all the ways retirement can and should be good, from health to wealth.

When I think about my mother’s retirement income, three words come to mind: Scale, Simplicity, and Sustainability. Her two pensions from my father, combined with Social Security, check all three of those boxes. Top it off with substantial RMDs from her IRAs, and that’s the gravy on top.

Not everyone will be as lucky as my mom to have those guaranteed income streams that meet all her needs. But necessity is the mother of invention, and with interest rates so low, yet demand for retirement cashflow so high, the market has responded with some interesting if highly complex innovations that might give Rube Goldberg a run for his money. QYLD, for example, is the Global X Nasdaq 100 Covered Call ETF, offered by Global X Funds. It certainly checks the Scale box with its current yield at roughly 12%, but what about sustainability (its underlying holdings are at least 80% of the NASDAQ-100 index, so not guaranteed), and simplicity? Its operation is anything but simple for the layperson to understand, given that the income it produces results from the call premiums resulting from writing monthly covered calls.

I don’t mean to pick on QYLD- heck I’m interested enough to kick the tires myself, given my own lack of a pension waiting for me. However, the retirement cashflow innovations coming out of the annuity industry today I think stand a better chance of checking those three boxes of Scale, Simplicity, and Sustainability for those looking to build a solid base of income, than just about everything else out there in today’s low-rate world. And for an aging, income seeking population, that’s a good thing.

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