Monthly Paying ETFs as a Strategic Income Solution for Retirees

For retirees seeking consistent cash flow in a low-growth economic environment, monthly paying ETFs have emerged as a compelling solution. Among the most prominent options are the First Trust BuyWrite Income ETF (FTHI) and the JPMorgan Equity Premium Income ETF (JEPI). Both funds employ hybrid strategies combining equity exposure with options-based income generation, but their distinct approaches to yield optimization, risk management, and portfolio construction make them suitable for different investor profiles. This analysis evaluates FTHI and JEPI as strategic income tools, drawing on 2025 performance data, yield consistency, and portfolio dynamics.

Yield and Expense Ratio: Balancing Cost and Return

FTHI and JEPI both deliver robust dividend yields, with FTHI posting a trailing twelve-month yield of 8.62% in 2025 compared to JEPI's 8.13%. However, FTHI's higher yield comes at a cost: its expense ratio of 0.85% is nearly double JEPI's 0.35%. This disparity reflects FTHI's more aggressive use of short call options on the S&P 500 to generate premiums, a strategy that amplifies income but also increases operational complexity and management fees according to Sum Growth analysis. For retirees prioritizing cost efficiency, JEPI's lower expense ratio could enhance net returns, particularly when combined with its 8.10% total return for 2025.

Performance and Risk: Volatility vs. Stability

While FTHI outperformed JEPI in annualized returns (11.96% since inception vs. JEPI's 7.70% average), its higher volatility raises concerns for risk-averse investors. FTHI's 15.31% volatility and -32.65% maximum drawdown in 2025 contrast sharply with JEPI's 13.30% volatility and -13.71% drawdown according to Portfolio Lab data. This gap underscores FTHI's exposure to market swings, driven by its concentrated top holdings-such as NVIDIA (7.50%) and Microsoft (6.74%)-which amplify both upside potential and downside risk as detailed by Sum Growth. JEPI, by contrast, maintains a more diversified portfolio with no single holding exceeding 2% of assets, including top positions like Alphabet (1.70%) and Johnson & Johnson (1.64%) according to Stock Analysis.

Dividend Consistency: Predictability for Retirees

Monthly income stability is critical for retirees relying on fixed cash flows. FTHI's dividend consistency in 2025 has shown less variability than JEPI's, which experienced distribution swings ranging from $0.33 to $0.54 per share-a 66% fluctuation as reported by 247 Wall Street. JEPI's covered call strategy, while effective in generating premiums, introduces income volatility tied to market conditions and options expiration cycles according to Mezzi analysis. FTHI's approach, which overlays short calls on broad indices rather than individual stocks, appears to smooth out distribution irregularities, making it a more predictable source of income for conservative investors as noted by Sum Growth.

Strategic Considerations for Income Portfolios

For retirees prioritizing yield and capital appreciation, FTHI's higher returns and concentrated exposure to growth sectors like technology may justify its elevated risk profile. Its 11.54% annual return in 2025 outpaced JEPI's 8.92%, reflecting the performance of its top holdings during a year of strong tech sector gains. However, JEPI's hybrid model-combining large-cap equities with equity-linked notes (ELNs)-offers a more balanced approach, albeit with lower upside potential. JEPI's 7.12% yield and lower volatility make it better suited for portfolios requiring steady, albeit modest, income with reduced exposure to market corrections.

Conclusion: Tailoring the Choice to Investor Needs

FTHI and JEPI represent two distinct philosophies in the monthly paying ETF space. FTHI's aggressive yield generation and growth-oriented holdings cater to retirees willing to accept higher risk for enhanced returns, while JEPI's diversified, low-cost structure appeals to those prioritizing income stability and capital preservation. As 2025 data illustrates, neither fund is universally superior; the optimal choice depends on an investor's risk tolerance, income needs, and broader portfolio strategy. For retirees seeking a core income solution, JEPI's conservative approach may be preferable, whereas FTHI could serve as a satellite holding to boost yield in a well-diversified portfolio.