Warren Buffett has long instructed that after his death, 90% of his estate go into a low-cost S&P 500 index fund and the remaining 10% into short-term U.S. Treasury bills. That simple framework has become a benchmark for everyday investors. Now, one variation of that strategy is drawing attention for replacing those underlying holdings with a pair of options-based ETFs designed to generate income rather than just growth.
According to a report by Yahoo Finance, swapping Buffett's traditional holdings for two funds from NEOS Investments can keep the same 90/10 structure while producing a weighted average distribution yield of roughly 11.26%. The trade-off is giving up some upside potential in exchange for substantially higher cash flow.
The equity side of the portfolio uses the NEOS S&P 500 High Income ETF, known by its ticker SPYI. Rather than simply holding the S&P 500, SPYI combines large-cap U.S. stocks with an actively managed options strategy that both buys and sells SPX index options. Because SPX options are Section 1256 contracts, gains generally receive what is called the 60/40 tax treatment, meaning 60% is taxed at long-term capital gains rates and 40% at short-term rates regardless of how long the investor has held the position. Fund managers also actively harvest tax losses, which allows a large portion of distributions to be classified as return of capital, a designation that generally delays taxation by reducing the investor's cost basis rather than triggering an immediate tax bill.
The income side uses a comparable NEOS fund focused on short-term Treasury bill exposure, replacing the plain cash allocation Buffett originally envisioned. Both funds carry higher fees than simple index products, and the strategy is expected to lag a traditional S&P 500 and Treasury bill portfolio during sustained bull markets. That gap in performance is the direct cost of the higher income stream.
The income question matters especially to retirees facing a well-known tradeoff in Social Security timing. Claiming at 62 locks in a benefit cut of up to 30% below full retirement age. Waiting until 70 adds roughly 8% per year of delay. A worker whose primary insurance amount would pay $2,000 per month at full retirement age receives roughly $1,400 monthly at 62 and about $2,480 monthly at 70.
To bridge that gap from age 62 to 70, a retiree needs to replace roughly $30,000 per year in gross income from other sources. The amount of capital required depends entirely on what yield that retiree is willing to accept, and what risk comes with it. At a conservative 3.5% yield using dividend growth stocks such as Johnson and Johnson, Procter and Gamble, and Coca-Cola, a retiree would need approximately $857,000 in capital. Johnson and Johnson currently yields about 2.1% and has raised its dividend for 64 consecutive years. Procter and Gamble yields roughly 2.9% and just declared a quarterly dividend of $1.0885 payable August 17, 2026, extending a payout record stretching back to 1890. Coca-Cola sits at about 2.5% after raising its quarterly dividend from $0.51 to $0.53 in 2026.
Moving to a moderate yield range of 5% to 7% pulls in REITs, higher-yield pharmaceutical stocks, preferred shares, and covered-call equity funds. Realty Income, which trades under the ticker O, yields roughly 5.0%, pays monthly, and has delivered 670 consecutive monthly dividends. Reaching for a 10% yield would reduce the capital requirement to around $300,000, but strategies at that level carry meaningfully higher risk of eroding the principal that generates the income.
The Yahoo Finance analysis draws a sharp line between dividend growth portfolios, which historically preserve and grow principal, and high-yield strategies that can eat into the base. Low-yield dividend growth portfolios, like those holding Johnson and Johnson or Coca-Cola, typically leave retirees wealthier at age 75 than high-yield strategies that erode principal over time. Johnson and Johnson has returned roughly 169% over ten years. Coca-Cola has returned approximately 145% over the same period.
For investors who find Buffett's original design too focused on growth and not enough on monthly cash flow, the NEOS variation offers a way to stay inside the same framework while drawing income without selling shares. Whether that income holds up across different market environments remains a question that only time and future fund performance will answer.
