If you opened an account with Schwab, this is the section for you. We’ll fund the account and then place trades to buy ETFs (Exchange-Traded Funds).
Funding the account
This is where your company sends money into the Schwab i401k on your behalf so you can buy the ETFs. When you fund the account, it sits in cash until you make a trade.
To fund the account:
Send them a check to them with your i401k account number on it, OR
Open an individual brokerage account (it’s free and will show up on the same app/website as the i401k), then transfer money into that account from your bank account on their app/website. Then, call their Retirement Services department and have them manually transfer it into your i401k.
Ph (800) 694-9449
Yes, this is a pain in the ass, and I’ve complained about it. Remember, this is you as the employer sending money into a retirement account for your employee, which happens to be you. You’re an awesome boss!
How do you classify the i401k deposit in QuickBooks?
Hopefully, you use Quickbooks Online or something like it to manage your business. If you don’t, have a look; it makes life so much easier once you learn how it works and saves so much time. When you send money to your i401k, classify it as ‘Retirement Payable’, so your accountant knows what it is.
Making a trade - it’s buy time people!
Yep, it’s so easy you can do it in a cafe (using a VPN, of course.) Remember, we are freelancers, so we are naturally hip and cool.
These are the Schwab ETFs we are using for the Three-Fund Portfolio
As you know, an ETF is very similar to a Mutual Fund. It contains a pool of hundreds or thousands of companies but is traded like a stock on a stock market exchange.
SCHB - US Broad Market ETF
SCHF - International Equity Index ETF
SCHZ - U.S. Aggregate Bond Index ETF
OR - The Vanguard versions are below. You can buy the Vanguard ETFs on the Schwab platform as well. Buy either the Schwab version OR the Vanguard ones. Not both, as they do the same thing.
VTI - Vanguard Total Stock Market
VXUS - Vanguard Total International
BND - Vanguard Total Bond Market
Making the trade
Click Trade at the top of the page> All-In-One Trade Ticket
Put the stock ticker in the symbol box, start with SCHB
Action: Buy
Order Type: Market (this means it will buy as soon as you send it or when the market opens if it’s not between 9:30am - 4:30pm). We don’t need the other order types.
Use the calculator to set up how many shares to buy.
Check the Reinvest Dividends button (This will automatically buy more shares with any dividend funds paid to you from the ETF).
Hit the Review Order Button, check it’s correct and then hit Place Order.
The order will execute and a few seconds later if the market is open (9:30am - 4:30pm Mon-Fri) or they will execute as soon as the market opens if it’s closed.
The shares will show in Accounts>Positions page. Now buy SCHF and SCHZ based on what mix you chose.
EXAMPLE: With $5,000 to invest in a 70/20/10 portfolio
70% SCHB - US Broad Market ETF = $3,500
20% SCHF - International ETF = $1,000
10% SCHZ - US Bond = $500
Does it matter what date you trade?
We buy every quarter, so Jan, April, July, Oct.
The day doesn’t matter; we want to be regular and systematic; this takes your emotions out of the equation. Say the market is tanking, and the pundits say the world is ending. This is when you’re not going to want to buy; with this system, you just put the fear aside and buy anyway, which is the right thing to do. Our time horizon is decades, not just a year or two.
If you’re nearing retirement, this is a different story. You should talk to a financial planner. I like advisors or planners who are ‘advice-only’ and charge a one-time fee for their advice. The other type charges you a percentage of your assets every year.
Can I buy more often than every quarter?
Hell yeah, as much as you like, don’t sell when the market drops or people are panicking.
OK, that’s it, just keep doing that every quarter!
Jan 1 - April 1 - July 1 - Oct 1
This is AI generated you at 55 with well over $1,000,000 in your i401k. Yes, you take at least ten weeks off a year now because you are set. Your growing assets mean you can pick your clients, work less, and enjoy life.
Financial literacy, investing, and the resulting assets are real freedom
Head over to The Knowledge for other articles on investment and finance. There are some other great tax savings accounts we can use with the i401k.