The way it is now, people are free to act out of love or selfishness. If they act out of love, God will greet them and help them, if not, then they can be what they want to be and God will not interfere with their free-will, but they reap what they sow, and until they volunterally change their mind, they can be as evil as they like. If this leads to their circumstances becoming more and more unpleasant for them, that is not God's vengeance, but rather His mercy, as such unpleasantness may cause these people to reflect and re-think their ways - otherwise they are likely to stay evil for eternity (and thus in the Hell of their own creating - imagine some managers we know if left unchecked!).
The alternative would be to populate the universe with creatures that were incapable of doing bad things. Such people would effectively be robots, always doing what God wanted, or programmed them to do. Thus there would be a lifeless and lonely universe for eternity. At best such people could have no more free-consciousness than an insect, with limited capacity for free action, and with any greater amount of consciousness you arrive at the problem above.
But I can tell you this - God in His love is the most caring, gentle person you can imagine. Have you ever wished there was someone who would love you unconditionally, no matter what stupid things you did or said? If so, you were perhaps not so much imagining such a person, but in your soul remembering God, as He is that person and down deep perhaps your soul still yearns for Him? This is maybe how we should think of God: as someone who loves you above all else and unconditionally - as there is such a piece of the infinite God that exists just for you. God as in the son is Jesus in His wisdom, and the Father is He in His Spirit of Love. Of course God (the Father) in His love would find it very hard to punish anyone or let anything unpleasant happen, but God in His wisdom, does and must! That is why I think Jesus the son (wisdom) is said to be the Judge - as the Father would be way too soft! If you are a parent you may have experienced this same situation - you love your child, yet at times for the sake of disciplining him or her, may have had to put this love aside and act in the way that you think would best help - and you know what: he or she may even have resented you for it, saying: Why must it be this way? Why cannot I just be happy always and do what I want? - Does that mean you lacked love or did not act wisely?