How a 62-Year-Old Could Turn a $790,000 401(k) Rollover Into a $4,900-a-Month Income Stream Without an Annuity

Converting a $790,000 401(k) rollover into monthly income can look simple at first, but several moving parts can quietly reduce what actually lands in the account over time.

A 62-year-old looking to move $790,000 out of a 401(k) wants to generate a $4,900 monthly paycheck without handing the principal to an insurer in exchange for an annuity. A six-fund portfolio with fixed weights can come very close. Based on prices and distribution rates from late October 2026, it would produce about $4,940 per month, or roughly $59,300 a year. That implies a blended yield of about 7.5%, meaning around $784,000 would be enough to meet the target, though only with a small cushion.

What an Annuity Would Deliver

An income annuity purchased with the same sum would provide a guaranteed check for life, no matter how markets perform. But the tradeoff is giving up the principal to the insurer. This portfolio keeps the principal invested and leaves room to adjust later, though it does not guarantee income and the holdings distribute cash in different ways.

How to Move the Money Without Creating a Tax Problem

A direct rollover, in which the plan sends the money straight to the IRA custodian, avoids mandatory withholding under 26 U.S.C. § 3405(c)(2). If the check is made out to the retiree instead, 20% must be withheld. Since this investor is 62, the 10% early-withdrawal penalty no longer applies.

Required minimum distributions begin at age 75 for anyone who reaches 74 after 2032, including this retiree. Inside an IRA, every withdrawal is taxed as ordinary income. The terms “qualified dividend” and “return of capital” matter only in a taxable account.

An 11.5% Payout Treated as Return of Capital

NEOS S&P 500 High Income ETF (CBOE:SPYI) holds S&P 500 stocks and sells index call options to collect premium income. A 25% allocation means $197,500 in the fund. Its forward distribution rate of about 11.5% would generate roughly $22,750 a year. Monthly payouts in 2026 ranged from $0.51 to $0.54 a share. NEOS says those distributions are classified as a return of capital, meaning part of the payout is effectively your own money coming back. The fund’s 19a-1 notices provide the monthly breakdown.

Another Option-Income Fund Adds Some Overlap

JPMorgan Equity Premium Income ETF (NYSEARCA:JEPI) combines lower-volatility stocks with option income. A 20% allocation equals $158,000, and a forward yield of about 7.2% would produce around $11,340. Its 2026 distributions ranged from $0.34 to $0.45. Together, SPYI and JEPI account for nearly half the portfolio and about 57% of its income, leaving much of the payout dependent on option premiums that tend to fall when markets are calm. The two funds use similar strategies, so the diversification benefit is limited.

A Landlord Rebuilding Its Dividend After a Cut

W. P. Carey (NYSE:WPC) owns 1,748 warehouses, factories, and stores leased long term to single tenants. At 15%, or $118,500, its yield of about 5.9% would generate roughly $6,990. It pays out just over 70% of AFFO, a cash-based measure that adds depreciation back because that non-cash expense can make earnings-based payout ratios look worse for real estate landlords. The quarterly dividend was reduced from around $1.07 in 2023 to $0.86, then has increased every quarter since, reaching $0.95.

A 10.3% Lender With Tight Dividend Coverage

Ares Capital (NASDAQ:ARCC | ARCC Price Prediction) is a business development company that lends to private midsize businesses and passes the interest income to shareholders. Its loans average 10.3%, and the main risk is borrower default. A 15% position, or $118,500, would bring in about 10.3%, or $12,230. Second-quarter core earnings of $0.47 were just below the $0.48 dividend, though over the past 12 months core earnings were higher than the payout, and $1.38 per share of carried-over taxable income also supports it. Net asset value fell to $19.35 from $19.94.

The Most Stable Holding, and the Lowest Yield

Vanguard High Dividend Yield ETF (NYSEARCA:VYM) tracks the FTSE High Dividend Yield Index, which selects U.S. stocks with above-average dividend yields. At 10%, or $79,000, it has a trailing 12-month yield of about 2.3% and a forward yield near 2.2%, producing roughly $1,730. Its annual expense ratio is 0.04%.

Treasury Bills, With Income Already Declining

Treasury bills with maturities of under three months make up iShares 0-3 Month Treasury Bond ETF (NYSEARCA:SGOV). At 15%, or $118,500, it pays about 3.6% and roughly $4,250 a year. That yield follows short-term interest rates. Monthly distributions have already eased from $0.36 to $0.30. Among the holdings, this is the income stream most likely to shrink further.

What Supports the $4,900 Goal

Ares Capital’s steady dividend and W. P. Carey’s rising payout provide the firmest base for this paycheck. SPYI, JEPI, and SGOV will change from month to month. A free Paycheck Portfolio guide lays out the process of turning a lump sum into something that functions like a paycheck, including the payout schedule and withdrawal order. Two checks are worth making each year:

• Add the last 12 months of actual distributions and compare the total with $58,800. If the portfolio falls short, spending would need to be reduced or shares sold.
• Compare SPYI’s share price and Ares Capital’s net asset value with their levels from a year earlier. Declines would indicate the paycheck is being supported by principal.