by Lan Turner

during your peak earning years and ensure a steady, reliable income during retirement. By following the SCHG and SCHD strategy, you can achieve a balanced approach to investing—one that grows your assets while providing the security of regular income as you transition into retirement. This guide will equip you with the knowledge and tools necessary to implement this strategy effectively, ultimately leading to a more comfortable and financially secure retirement. 1. Understanding the Two ETFs: SCHG and SCHD What is SCH? SCH refers to Schwab, a leading financial services company known for its commitment to providing high-quality, low-cost investment products. Charles Schwab Corporation, often just called Schwab, is one of the largest brokerage firms in the United States. It offers a wide range of financial services, including trading, investment advisory, banking, and wealth management. Schwab's philosophy focuses on putting investors' interests first, providing them with accessible tools and resources to achieve their financial goals. The company manages various ETFs (Exchange-Traded Funds), with SCHG and SCHD being two of its standout offerings. These ETFs allow investors to easily access diversified portfolios without needing to select individual stocks, making them ideal for those seeking a simple, cost-effective way to invest. SCHG (Schwab U.S. Large-Cap Growth ETF): Focus on Growth SCHG, or Schwab U.S. Large-Cap Growth ETF, is designed for investors who are in the accumulation phase of their financial journey, typically younger individuals who are working and earning income. This ETF focuses on large-cap growth stocks—companies with a market capitalization typically exceeding $10 billion and strong potential for significant revenue and earnings growth. Investment Strategy: SCHG invests in a portfolio of U.S. large-cap companies that are expected to grow at an above- average rate compared to other companies. The ETF's holdings include some of the biggest names in the technology and consumer sectors, among others, aiming to capture the rapid growth in these industries. Why SCHG for Younger Investors? Younger investors have a longer time horizon and can afford to take on more risk in exchange for the potential of higher returns. SCHG’s growth-

Side Note: While this document focuses on SCHG and SCHD, I also have a strong appreciation for JEPI and JEPQ. Everywhere in this document where I mention SCHG and/or SCHD, you can substitute JEPI and JEPQ if those funds better align with your investment goals. The key difference between these fund pairs is that SCHG and SCHD focus on traditional stock ownership—SCHG for growth and SCHD for dividend income—while JEPI and JEPQ use an options-based strategy to generate returns. JEPI and JEPQ sell covered calls to generate premium income, which allows them to provide higher yields than traditional dividend funds but limits their potential for share price appreciation. If your priority is maximizing income rather than long-term capital growth, JEPI and JEPQ can serve as strong performing alternatives.

oriented approach aligns perfectly with this mindset, as it seeks to provide capital appreciation over the long term. SCHD (Schwab U.S. Dividend Equity ETF): Focus on Dividends SCHD, or Schwab U.S. Dividend Equity ETF, is tailored for investors looking to generate a steady income from their investments. This ETF focuses on U.S. large-cap stocks known for their ability to pay and grow dividends consistently. Investment Strategy: SCHD targets companies with a solid track record of paying dividends. These are typically well- established firms with strong cash flow and a commitment to returning value to shareholders through regular dividend payments. SCHD screens its investments based on criteria like dividend yield, dividend growth, and payout ratios to ensure the quality and sustainability of its holdings. Why SCHD for Income Generation? As investors near retirement or seek income to supplement their lifestyle, stability and reliability become more important than high growth. SCHD's focus on dividend-paying stocks provides a predictable income stream, making it an ideal choice for those transitioning to or already in retirement. The consistent dividends can serve as a reliable source of cash flow, reducing the need to sell assets to generate income. Complementary Nature: How SCHG and SCHD Work Together SCHG and SCHD are designed to work together, providing a balanced approach to investing over an individual's lifetime. While SCHG focuses on growth and capital appreciation, SCHD emphasizes income and stability through dividends. This dual strategy allows investors to align their portfolios with their changing financial needs: Early Career (Accumulation Phase): Focus on SCHG for growth. Younger investors can take advantage of their longer time horizon to invest heavily in SCHG, allowing their money to compound and grow over time. Mid to Late Career (Transition Phase): Begin shifting towards SCHD as retirement approaches. Starting around age 50 to 55, depending on your risk tolerance—earlier for more risk-averse individuals and later for those less risk- averse—investors should begin the process of transitioning a portion of their portfolio from SCHG to SCHD, following the

1% rule outlined in this guide. This shift ensures that as investors get closer to retirement, they are more focused on income generation and less exposed to market volatility. Retirement (Distribution Phase): Prioritize SCHD for income. Upon reaching retirement, a substantial part of the portfolio will be in SCHD, providing a steady dividend income. Meanwhile, the remaining portion in SCHG still allows for some growth potential, helping the portfolio keep pace with inflation and longevity needs. This complementary nature of SCHG and SCHD offers a simple, effective way to transition from a growth-focused portfolio in the early years to an income-focused one in retirement, providing peace of mind and financial security at every stage of life. 2. Why Choose SCHG for Growth? Growth Focus: The Importance of Prioritizing Growth When You're Young and Working When you're in the early stages of your career, time is one of your greatest assets. Investing in growth-oriented assets like SCHG (Schwab U.S. Large-Cap Growth ETF) allows you to harness the power of compounding over a long-time horizon. Growth investments are characterized by their potential to increase significantly in value, though they may come with higher volatility. Young investors can typically afford to take on this risk because they have ample time to

ride out market fluctuations and capitalize on the long-term growth of their investments. By prioritizing growth in the early years, you build a strong financial foundation that can be shifted to more stable, income- generating investments as retirement approaches. Comparative Analysis: SCHG vs. QQQ and SPY To illustrate SCHG’s effectiveness as a growth investment, let's compare it to two well-known market benchmarks: QQQ (Invesco QQQ Trust) and SPY (SPDR S&P 500 ETF Trust). SPY represents the S&P 500, a broad index comprising 500 of the largest U.S. companies. It is widely regarded as the standard for U.S. equity market performance. QQQ tracks the Nasdaq-100 Index, which is heavily weighted toward technology and other high-growth sectors. The chart included in this guide shows the performance of SCHG compared to QQQ and SPY over the past year. Notably, SCHG outperformed both QQQ and SPY, with a return of 35.01% compared to QQQ’s 28.61% and SPY’s 26.33%. This demonstrates SCHG’s ability to provide robust growth, making it an excellent choice for younger investors focused on capital appreciation. Warren Buffett's Quote: A Benchmark to Beat Warren Buffett, one of the most successful investors of all time, has often advised that most people should simply invest in the S&P 500 and "walk away." His rationale is that beating the market is challenging, and the S&P 500 offers a diversified, relatively low-risk option that historically delivers solid returns. Buffett’s advice underscores the reliability of SPY as a benchmark, emphasizing its role in reflecting the overall health of the U.S. economy. However, for those willing to take a slightly more focused approach, SCHG offers the opportunity to outperform the S&P 500. While SPY includes all sectors of the economy, SCHG zeroes in on large-cap companies with high growth potential. This focused strategy means that, while it may have slightly higher risk, SCHG can provide returns that outpace the broader market, as shown in its historical performance. Flexibility and Performance: The Edge of SCHG One of the key advantages of SCHG is its flexibility in stock selection:

Less Diversification than SPY: SCHG is not as widely diversified as SPY, which means it can concentrate more on sectors and companies poised for substantial growth. This concentration can lead to higher returns during bull markets when growth stocks outperform. Broader Scope than QQQ: Unlike QQQ, which is limited to the Nasdaq-100 and thus predominantly tech-focused, SCHG is not restricted to any single index. It can select from a broader universe of large-cap growth stocks across all major U.S. exchanges. This flexibility allows SCHG to balance its portfolio by including high-growth stocks from various sectors, not just technology, which can reduce risk and enhance returns. Conclusion SCHG is a powerful tool for growth-oriented investors, especially those in their early career stages. By focusing on large-cap companies with the potential for significant growth, SCHG offers a compelling opportunity to build wealth over time. Its ability to outperform broader market benchmarks like SPY and more tech-focused indices like QQQ demonstrates its effectiveness. For investors willing to take a slightly more aggressive stance, SCHG provides a pathway to not only meet but potentially exceed the market's performance, setting the stage for a robust financial future. 3. Why Choose SCHD for Income? Income Generation: The Importance of Dividends in Retirement As investors approach retirement, their financial needs shift from building wealth to generating a steady and reliable income. Dividends become a crucial component of retirement planning because they provide a regular cash flow without the need to sell investments. This is where SCHD (Schwab U.S. Dividend Equity ETF) excels. SCHD focuses on high-quality, dividend-paying stocks, selecting companies with a strong track record of consistent and growing dividend payments. These dividends can serve as a dependable income source during retirement, helping to cover living expenses, healthcare costs, and other needs without depleting the principal investment. By investing in SCHD, retirees can benefit from a predictable stream of income that supports their lifestyle while maintaining their investment base.

Stability and Lower Volatility One of the key advantages of SCHD is its ability to provide stability and reduce portfolio volatility. As investors age, they typically have a lower risk tolerance and a shorter time horizon to recover from market downturns. SCHD helps address this by focusing on dividend-paying stocks, which are generally less volatile than growth stocks. Companies that consistently pay dividends are often established, financially stable, and have a proven ability to generate cash flow. This focus on stability makes SCHD an excellent choice for those seeking to reduce the overall risk in their portfolio. The regular dividend payments also act as a cushion, providing returns even in times of market volatility. Total Return Potential While SCHD is primarily chosen for its income-generating capability, it also offers the potential for total returns through modest capital appreciation. This means investors not only benefit from the income provided by dividends but also from the potential increase in the value of the underlying stocks. The combination of income and growth allows SCHD to provide competitive total returns over time, making it a versatile investment that aligns well with both income and growth objectives. As a result, retirees can enjoy a reliable income stream without completely sacrificing the potential for their investment to grow. Sector Diversification: Balanced Exposure Across Various Sectors SCHD’s portfolio includes a range of companies across various sectors, ensuring that investors are not overly concentrated in any single industry. This sector diversification reduces the risk associated with downturns in specific sectors and provides a more balanced approach to income investing. SCHD includes companies from sectors such as consumer goods, healthcare, financials, and industrials, all of which have a history of paying stable and growing dividends. This broad exposure ensures that the ETF can maintain its dividend payments even if one sector underperforms, offering investors a diversified source of income that is less sensitive to market fluctuations.

SCHD shares as possible. The more SCHD shares you own, the greater your monthly dividend income will be. Since dividends are paid out based on the number of shares you own, owning more shares directly translates to higher dividend payouts, providing a steady and reliable income stream that can support you throughout retirement. Think of it this way: In your early and mid-career years, prioritize growth by investing heavily in SCHG. Allow your investments to grow and compound. Then, as you prepare to transition into retirement, gradually increase your holdings in SCHD to maximize your dividend payouts. This strategic shift ensures that as you move from income accumulation to income distribution, you have built a strong, stable base of dividend-generating assets to sustain your financial needs. By following this approach, you can effectively balance growth and income, securing a prosperous future while still enjoying the benefits of your hard work. 4. The Practical Strategy: From Growth to Income Start Early with SCHG: The Importance of Saving Aggressively and Investing in SCHG During the Working Years The foundation of a successful investment strategy is laid during the early working years. When you’re young and earning a steady income, your primary financial focus should be on growing your wealth. This is where SCHG (Schwab U.S. Large-Cap Growth ETF) comes into play. By investing in SCHG, you tap into a portfolio of large-cap growth stocks that have the potential for significant capital appreciation. The key is to save aggressively—every dollar you can save and invest in these early years will benefit from the power of compounding over time. The more you can invest now, the more your money will grow, giving you a strong financial base to transition into the income-focused phase later in life. The Transition Age (55+): Introduction to the Gradual Shift from Growth to Income As you approach the age of 55, it’s time to start thinking about transitioning your investment focus from growth to income. This doesn’t mean you abandon growth altogether but rather that you begin to prepare your portfolio for the income needs of retirement. Starting at age 55—or earlier if you’re more risk-averse, perhaps around age 50—you gradually shift a portion of your investments from SCHG, which is growth-oriented, to SCHD (Schwab U.S. Dividend Equity

ETF), which is income-focused. This shift is designed to balance your portfolio between the need for continued growth and the desire for stable, reliable income. By making this gradual transition, you ensure that your portfolio is well-positioned to meet your financial needs as you move closer to retirement. The 1% Rule: A Simple, Effective Transition Strategy To make this transition smooth and systematic, you can follow the 1% Rule: At Age 55: Begin by allocating 55% of your portfolio to SCHD (the dividend-focused ETF) and 45% to SCHG (the growth-focused ETF). This marks the start of the gradual shift towards income generation. Annual Adjustment: Each year, increase the allocation to SCHD by 1% and decrease the allocation to SCHG by 1%. This means at age 56, you would have 56% in SCHD and 44% in SCHG. At age 57, the allocation would be 57% in SCHD and 43% in SCHG, and so on. This annual adjustment continues until you reach the typical retirement age of 65. This simple rule helps to ensure that your portfolio is increasingly geared towards generating income as you approach retirement while still maintaining some growth exposure. Example Scenario: Gradual Shift from Age 55 to Age 65 Let’s walk through a practical example to illustrate how the 1% Rule works in action. Suppose you have a portfolio of $500,000 at age 55, with 55% ($275,000) allocated to SCHD and 45% ($225,000) to SCHG. Here’s how the portfolio allocation would change each year: At Age 55: 55% SCHD ($275,000), 45% SCHG ($225,000) At Age 56: 56% SCHD ($280,000), 44% SCHG ($220,000) At Age 57: 57% SCHD ($285,000), 43% SCHG ($215,000) …and so on. At Age 65: 65% SCHD ($325,000), 35% SCHG ($175,000) By age 65, you have successfully shifted the majority of your portfolio into SCHD, positioning yourself to take advantage of its dividend income. At the same time, you still have 35% in SCHG to provide continued growth potential. This balanced approach ensures that your portfolio is prepared to meet the income needs of retirement while still

growing to keep pace with inflation and extend the longevity of your assets. Conclusion The 1% Rule offers a clear, manageable pathway from a growth- focused investment strategy to one that emphasizes income. Starting early with SCHG allows you to harness growth during your working years, while gradually transitioning to SCHD ensures your portfolio aligns with the changing needs of retirement. This strategic approach not only prepares you financially for retirement but does so in a way that reduces risk and provides peace of mind. By following this practical strategy, you can confidently navigate the journey from growth to income, achieving a secure and comfortable retirement. 5. Retirement and Beyond: Leveraging Dividends for Income Reaching Retirement: 65% in SCHD and 35% in SCHG As you approach retirement, the gradual shift from growth to income will have positioned your portfolio in a way that balances the need for stability with the potential for continued growth. By the typical retirement age of 65, following the 1% Rule, your portfolio should consist of approximately 65% in SCHD (Schwab U.S. Dividend Equity ETF) and 35% in SCHG (Schwab U.S. Large-Cap Growth ETF). This allocation provides a solid foundation of income through dividends from SCHD, ensuring a steady cash flow to support your retirement lifestyle. Meanwhile, the remaining 35% in SCHG allows your portfolio to continue growing, helping to combat inflation and extend the longevity of your assets. This balanced approach ensures that you are not overly exposed to market volatility while still benefiting from potential capital appreciation. Flipping the Dividend Switch: From Reinvesting to Taking Income One of the critical transitions in retirement is moving from reinvesting dividends to using them as a source of income. During your working years and the early transition phase (55+), you likely reinvested dividends from SCHD back into the fund to take advantage of compounding and growth. However, upon reaching retirement, it's time to flip the switch. Instead of reinvesting, start taking your SCHD dividends as income. This change provides a regular, predictable stream of cash that can be

used to cover daily living expenses, healthcare costs, and leisure activities in retirement. SCHD’s focus on high-quality dividend-paying stocks ensures that these dividends are reliable and continue to grow over time, providing a hedge against inflation. This switch not only helps maintain your lifestyle but also allows you to avoid dipping into your principal investments, preserving your capital for the long term. Continuing the 1% Shift: Further Stabilizing the Income Stream Even after retirement, the 1% Rule remains a valuable tool for managing your portfolio. Continuing to shift 1% annually from SCHG to SCHD provides several key benefits: Enhanced Stability: As you age, your investment horizon shortens, and your need for stability increases. By gradually increasing your allocation to SCHD, you reduce your exposure to the market volatility associated with growth stocks. This ongoing adjustment ensures that your portfolio becomes progressively more income-focused, aligning with your evolving financial needs. Increasing Income: With each 1% shift, more of your portfolio is invested in dividend-paying stocks, thereby increasing the income generated by SCHD. This strategy helps maintain or even increase your retirement income over time, which can be particularly beneficial in offsetting rising living costs or unexpected expenses. Simplicity and Consistency: The 1% Rule provides a simple and consistent approach to managing your portfolio in retirement. It removes the guesswork and emotional decision- making from the equation, offering a systematic way to ensure your investments are aligned with your financial goals. This simplicity can be especially reassuring in retirement, allowing you to focus on enjoying your life rather than constantly managing your investments. Conclusion Reaching retirement is a significant milestone, and having a solid strategy for leveraging dividends for income is crucial to maintaining a comfortable lifestyle. By the time you retire, with 65% of your portfolio in SCHD and 35% in SCHG, you’re well-positioned to benefit from a reliable income stream while still having some growth potential. Flipping the dividend switch allows you to start using the

dividends from SCHD as a steady source of income, and continuing the 1% annual shift ensures that your portfolio remains aligned with your needs as they evolve. This approach not only provides financial security but also peace of mind, knowing that your investment strategy is designed to support you throughout your retirement years. 6. Benefits of This Strategy Simplicity and Automation: Minimal Need for Active Management One of the standout features of this SCHG and SCHD investment strategy is its simplicity. It’s designed to be straightforward, making it accessible even to those who may not have extensive investment knowledge or experience. By using just two ETFs—SCHG for growth and SCHD for income—investors can create a well-rounded portfolio without the need to constantly monitor and rebalance their investments. The 1% Rule provides a clear, easy-to-follow guideline for gradually shifting from growth to income as one ages. This approach allows investors to effectively "set it and forget it," relying on a systematic strategy that automatically aligns with their changing financial needs over time. This automation reduces the stress and complexity of active portfolio management, giving investors peace of mind. Risk Management: Gradual Shift Reduces Exposure to Market Volatility As investors transition from their working years into retirement, their risk tolerance typically decreases. The 1% Rule built into this strategy offers a practical form of risk management by gradually reducing exposure to the more volatile growth-oriented SCHG and increasing allocation to the stable, income-focused SCHD. This gradual shift helps protect the portfolio from significant market downturns, particularly as the investor nears retirement age when preserving capital becomes more critical. By slowly moving from growth to income, investors can enjoy the benefits of both worlds—capital appreciation during their early years and stability and income as they approach and enter retirement. This balanced approach mitigates the risks associated with market volatility and ensures that the portfolio can weather various market conditions. Income Security: Reliable and Growing Income Stream Through Dividends from SCHD

A key benefit of this strategy is the emphasis on generating a reliable income stream through dividends from SCHD. As investors transition into retirement, having a dependable source of income becomes increasingly important. SCHD focuses on high-quality dividend- paying stocks, which provide a consistent and often growing stream of dividends. This predictable income helps cover daily living expenses, healthcare costs, and other retirement needs, reducing the need to sell off investments to generate cash. By prioritizing dividend income, this strategy ensures that retirees can maintain their lifestyle without the anxiety of market fluctuations affecting their financial security. The growing nature of dividends also provides a natural hedge against inflation, ensuring that income keeps pace with rising costs over time. Flexibility for Early Retirement: Potential to Retire Early if Dividend Income Meets Living Expenses Another significant advantage of this strategy is its flexibility, particularly the potential for early retirement. By focusing on saving aggressively and investing in SCHG during the early years, investors can grow their portfolio quickly. As the portfolio grows, the shift to SCHD begins, increasing the dividend income generated. If the income from SCHD meets or exceeds the investor’s living expenses before reaching the traditional retirement age of 65, it opens the possibility of retiring early. This flexibility allows investors to enjoy their retirement years sooner and with greater financial independence. The strategy encourages saving and investing early, providing the option to take advantage of financial freedom at an earlier stage in life. Conclusion The SCHG and SCHD investment strategy offers numerous benefits, making it an attractive option for individuals seeking a straightforward and effective approach to building wealth and securing a reliable income in retirement. Its simplicity and automation minimize the need for constant management, while the gradual shift from growth to income provides a natural risk management mechanism. The focus on dividend income ensures financial security, and the potential for early retirement adds a layer of flexibility that can significantly enhance the quality of life. By adopting this strategy, investors can confidently navigate their financial journey, knowing they have a plan that adapts to their evolving needs and goals. 7. Implementing the Strategy: Step-by-Step Guide

Now that we’ve outlined the strategy and its benefits, let’s walk through the practical steps needed to implement this SCHG and SCHD investment plan. Whether you're just starting out in your career or approaching retirement, these steps will guide you on how to set up, maintain, and adjust your investments to achieve financial security and peace of mind. Step 1: Setting Up Accounts The first step in implementing this strategy is to open a brokerage account. Most major brokerage firms, including Schwab, offer accounts that allow you to invest in ETFs like SCHG and SCHD. Here’s how to get started: Choose a Brokerage: Select a reputable brokerage that offers low fees, a user-friendly platform, and access to the SCHG and SCHD ETFs. Schwab, Vanguard, Fidelity, and others are popular choices. Open an Account: Follow the brokerage’s process to open a new account. This may involve providing personal information, verifying your identity, and linking a bank account for funding purposes. You can choose to open a taxable brokerage account or, for retirement savings, an IRA (Individual Retirement Account). Fund Your Account: Transfer money from your bank account into your new brokerage account. Start with an initial amount that fits your budget, and plan to contribute regularly to grow your investment. Purchase SCHG and SCHD: Once your account is funded, you can begin purchasing shares of SCHG and SCHD. In the early years, allocate most of your funds to SCHG to prioritize growth. As you near age 55, begin purchasing more SCHD shares according to the 1% Rule. Step 2: Automating Investments To simplify the investment process and ensure consistency, consider setting up an automated investment plan: Set Up Automatic Transfers: Arrange for regular transfers from your bank account to your brokerage account. This could be weekly, bi-weekly, or monthly, depending on your preference and cash flow.

Automate Purchases of SCHG: Use your brokerage’s automated investment features to regularly buy shares of SCHG with the transferred funds. Automating this process helps you stay disciplined, ensuring you continue to invest in your growth portfolio without needing to remember each transaction. Dollar-Cost Averaging: Automating investments allows you to take advantage of dollar-cost averaging, which involves buying a fixed dollar amount of an ETF regularly, regardless of its price. This strategy reduces the impact of market volatility and helps accumulate more shares over time. Step 3: Rebalancing Annually The 1% Rule is central to this strategy, guiding the gradual shift from SCHG to SCHD as you age. Here’s how to implement it: Annual Review: At least once a year, review your portfolio to check the current allocation between SCHG and SCHD. Compare this to the target allocation based on your age (e.g., at age 55, the target is 55% SCHD and 45% SCHG). Adjust Allocations: If the allocations are off-target, rebalance your portfolio by selling a portion of SCHG and buying more SCHD to align with the 1% Rule. This shift should increase SCHD allocation by 1% and decrease SCHG allocation by 1% each year. For example, move from 56% SCHD and 44% SCHG at age 56 to 57% SCHD and 43% SCHG at age 57. Use Automated Tools: Many brokerages offer automatic rebalancing tools that can adjust your portfolio allocations according to set parameters. Utilize these features to streamline the rebalancing process. Step 4: Managing Dividends Managing dividends is a crucial aspect of this strategy, especially as you transition from reinvestment to income withdrawal: Set Up Dividend Reinvestment Plans (DRIPs): During your early and mid-career years, set up DRIPs for SCHD. This means that any dividends received from SCHD will automatically be reinvested into purchasing more SCHD shares. Reinvesting dividends boosts your portfolio’s growth by compounding returns over time.

Transition to Income Withdrawal: As you approach retirement, evaluate when to switch from reinvesting dividends to taking them as cash. This usually happens around the age of 65 when the majority of your portfolio is in SCHD. Contact your brokerage to stop DRIPs and start receiving dividend payments directly into your cash or checking account. This provides a steady stream of income to cover living expenses in retirement. Conclusion Implementing this SCHG and SCHD investment strategy is straightforward and can be accomplished with just a few steps. By setting up accounts, automating investments, rebalancing annually, and managing dividends effectively, you can ensure your portfolio evolves to meet your changing financial needs. The key is to start early, remain consistent, and adjust gradually. With this systematic approach, you’ll be well-positioned to build wealth during your working years and enjoy a secure, income-supported retirement. 8. Considerations and Potential Adjustments While the SCHG and SCHD investment strategy provides a solid framework for building wealth and generating income, it’s important to recognize that individual circumstances and market conditions may necessitate adjustments. Here are some key considerations to keep in mind to ensure the strategy remains aligned with your goals and circumstances: Market Conditions: How to Adapt the Strategy in Different Market Environments Financial markets are inherently unpredictable and can be influenced by various factors, including economic conditions, interest rates, inflation, and geopolitical events. Here’s how to adapt the SCHG and SCHD strategy to different market environments: Bull Markets (Strong Economic Growth): In periods of strong economic growth, growth stocks like those in SCHG often outperform. If you’re in the early or mid-phase of the strategy, it might make sense to slightly overweight SCHG to capture more growth. However, be cautious not to deviate too far from the 1% Rule to avoid excessive risk. Bear Markets (Economic Downturns): During economic downturns, dividend-paying stocks in SCHD tend to be more

stable and resilient. If the market is highly volatile or experiencing a downturn as you approach retirement, consider accelerating the shift to SCHD beyond the 1% Rule to prioritize income and capital preservation. This approach can help protect your portfolio from significant losses. Interest Rate Changes: Rising interest rates can affect both growth and income investments. Growth stocks may suffer as borrowing costs increase, while high-dividend stocks might become less attractive compared to fixed-income investments. In such scenarios, monitoring market conditions and making small adjustments to your SCHG/SCHD allocations can help optimize your portfolio’s performance. Personal Circumstances: Adjusting the Strategy Based on Individual Retirement Goals, Risk Tolerance, and Income Needs Each investor’s situation is unique, and the SCHG and SCHD strategy should be tailored to fit personal circumstances: Retirement Goals: If you plan to retire earlier or later than 65, you may need to adjust the timing of the 1% shifts. Early retirement might require a faster shift towards SCHD to ensure sufficient income. Conversely, delaying retirement could mean maintaining a higher allocation to SCHG for longer to capitalize on growth. Risk Tolerance: Some investors may be more comfortable with risk, while others may prefer a more conservative approach. If you have a higher risk tolerance, you might maintain a slightly higher allocation to SCHG, even as you approach retirement, to maximize growth potential. If you are risk-averse, you may want to accelerate the shift to SCHD to prioritize stability and income. Income Needs: Your specific income needs in retirement will influence how much you rely on SCHD for dividend income. If you expect higher living expenses or have fewer sources of retirement income (e.g., no pension), you might shift more aggressively into SCHD. If you have significant other income sources, you could maintain a balanced allocation that includes more SCHG for growth. Tax Considerations: Understanding the Tax Implications of Dividend Income and Capital Gains

Tax planning is an important part of any investment strategy, and understanding how taxes affect your income from SCHD and gains from SCHG is crucial: Dividend Income Taxes: Dividends from SCHD are generally taxed as qualified dividend income, which may be taxed at a lower rate than ordinary income. However, this depends on your income level and tax bracket. It’s important to understand how dividend income will affect your tax situation, especially if you plan to use dividends as a primary source of retirement income. Capital Gains Taxes: Selling shares of SCHG to rebalance or to fund retirement needs may trigger capital gains taxes. Long- term capital gains (on assets held for more than a year) are taxed at a lower rate than short-term gains. Planning your withdrawals and rebalancing transactions to maximize long- term gains and minimize tax liability is essential. Tax-Advantaged Accounts: Consider using tax-advantaged accounts like IRAs or 401(k)s for your SCHG and SCHD investments. These accounts offer tax deferral on gains and dividends, reducing your annual tax burden and potentially allowing your investments to grow faster. Roth IRAs, in particular, offer tax-free growth and tax-free withdrawals in retirement, making them ideal for implementing this strategy. Required Minimum Distributions (RMDs): If your SCHG and SCHD investments are in tax-deferred accounts, remember that RMDs will be required starting at age 72. Plan your allocations and withdrawals accordingly to meet RMD requirements while minimizing the impact on your overall strategy. Conclusion While the SCHG and SCHD strategy offers a robust framework for retirement planning, it’s important to remain flexible and adaptable. Market conditions, personal circumstances, and tax considerations can all influence how best to implement and adjust this strategy. By staying informed, reviewing your portfolio regularly, and making thoughtful adjustments, you can ensure that your investment approach remains aligned with your financial goals, providing security and peace of mind as you progress through your financial journey.

9. Frequently Asked Questions What if I want to retire before 65? Retiring before the traditional age of 65 is certainly possible with this strategy, especially if you have saved aggressively and invested wisely. If you’re considering early retirement, you can adjust the 1% Rule to accelerate the shift from SCHG to SCHD. For example, you could start reallocating at an earlier age or increase the annual shift from 1% to 2% or more, depending on your income needs and risk tolerance. The key is to ensure that by the time you retire, a substantial portion of your portfolio is in SCHD to generate sufficient dividend income to cover your living expenses. Additionally, consider other sources of income, like part-time work or other investments, to bridge the gap until your portfolio generates enough income to sustain you comfortably. How do I know when to start taking dividends as income? The decision to start taking dividends as income rather than reinvesting them typically aligns with your transition into retirement. A good rule of thumb is to begin withdrawing dividends when you stop working full-time and start relying on your investment portfolio for daily living expenses. This usually occurs around age 65 but could be earlier if you’ve planned for early retirement. Review your budget and income needs to determine when your dividend income will be necessary to meet your financial goals. Once you’re ready, you can contact your brokerage to switch from a Dividend Reinvestment Plan (DRIP) to receiving dividend payments directly into your cash or checking account. It’s important to have a clear understanding of your income needs and ensure that your portfolio is structured to meet them consistently. What happens if the market drops significantly? Market downturns are a natural part of investing, and having a strategy in place helps manage these periods of volatility. If the market drops significantly, SCHG, being growth-oriented, might experience more volatility than SCHD. However, the gradual shift to SCHD as you age helps mitigate this risk, as SCHD’s focus on dividend-paying stocks provides more stability. During a downturn, dividends from SCHD can continue to provide income, even if the market value of the investments declines. If you’re close to retirement and the market drops, consider accelerating the shift from SCHG to SCHD to further

reduce risk and protect your portfolio. It’s also important to avoid making impulsive decisions; staying invested and following your long- term strategy is often the best course of action during market volatility. Remember, downturns can be an opportunity to buy more shares at lower prices, enhancing long-term growth prospects when markets recover. Can I use this strategy if I have other retirement accounts or pensions? Absolutely! The SCHG and SCHD strategy can complement other retirement savings plans, such as 401(k)s, IRAs, or pensions. You can implement this strategy within tax-advantaged accounts like a Roth IRA or traditional IRA to benefit from tax deferral or tax-free growth. If you have a pension or other guaranteed income sources, you may have more flexibility with the SCHG and SCHD strategy. For instance, you might maintain a higher allocation to SCHG for continued growth, knowing that your pension provides a safety net. Alternatively, you can use SCHD to supplement pension income, ensuring that your overall retirement income meets your needs. The key is to consider your total retirement income picture and integrate the SCHG and SCHD strategy in a way that aligns with your goals, risk tolerance, and financial needs. Conclusion The SCHG and SCHD investment strategy is versatile and adaptable, making it suitable for various retirement plans and circumstances. By addressing common questions and potential scenarios, this FAQ section helps ensure that investors can confidently navigate their financial journey, regardless of when they plan to retire, market conditions, or the presence of other income sources. With careful planning and thoughtful adjustments, this strategy can provide a clear path to a secure and comfortable retirement. 10. Conclusion Summary of the Strategy The SCHG and SCHD investment strategy provides a simple and effective roadmap for managing your financial journey from the early stages of wealth accumulation through to a comfortable retirement. The approach revolves around two core ETFs: SCHG (Schwab U.S. Large-Cap Growth ETF) for growth during your working years and SCHD (Schwab U.S. Dividend Equity ETF) for generating a steady

income stream as you near and enter retirement. The key to this strategy is the gradual, systematic shift from growth to income, guided by the 1% Rule. Starting at age 55, you begin reallocating 1% of your portfolio annually from SCHG to SCHD, ensuring that your investments align with your evolving financial needs. By age 65, your portfolio is positioned to provide both stability and a reliable income through dividends, allowing you to enjoy a financially secure retirement. Encouragement to Start Now The best time to start this investment strategy is now. Whether you are just beginning your career or already approaching retirement, taking proactive steps toward your financial goals is essential. The earlier you start saving and investing, the more time your money has to grow and compound. Consistency is key—by regularly contributing to your investment portfolio and following the outlined strategy, you set yourself up for long-term success. Don’t wait for the perfect moment; begin implementing this strategy with whatever resources you have available today. Over time, these small, consistent efforts will accumulate into substantial wealth, providing you with financial freedom and peace of mind. Long-term Outlook The SCHG and SCHD strategy is designed with a long-term outlook in mind, offering a balanced approach that caters to both growth and income needs. By focusing on growth early on and transitioning to income as retirement approaches, this strategy helps protect against market volatility while ensuring a reliable income stream for your later years. The systematic nature of the 1% Rule simplifies decision- making and keeps your portfolio aligned with your changing needs. With the combination of capital appreciation and dividend income, this approach provides a robust framework to support a secure retirement. With confidence in this strategy, you can navigate the ups and downs of the market, knowing that you have a plan tailored to both grow your wealth and provide stability when you need it most. By following the SCHG and SCHD strategy, you position yourself for a prosperous retirement, where you can enjoy the fruits of your hard work with the assurance that your financial future is secure.

What to Do Next: Step-by-Step Checklist Step 1: Open a Brokerage Account Choose a reputable brokerage firm that offers access to ETFs like SCHG and SCHD. Some popular options include Schwab, Vanguard, and Fidelity. Follow the brokerage’s process to open a new account. Decide whether you want a taxable brokerage account or a tax- advantaged account like an IRA for retirement savings. Provide necessary personal information, verify your identity, and link your bank account to fund your brokerage account. Side Note: It’s worth mentioning that you can create two separate portfolios that follow this same strategy—one for retirement in a Roth IRA and another in a taxable account for long-term savings. Both portfolios would function exactly the same, with the same allocations to SCHG and SCHD. The key difference is that the Roth IRA is geared toward building wealth for retirement, benefiting from tax-free growth, while the taxable account is a flexible tool for achieving other life goals. The taxable account can be used to pull profits along the way to fund large purchases, vacations, or simply to enhance your lifestyle as you live your dream. However, don’t let this idea complicate your forward progress. If having two accounts sounds like a good idea but seems complicated, don't let it sideline or derail you from moving forward. Take one step at a time—you can always add the other type of account later. Start with one account, implement the strategy, and once you're comfortable, you can circle back around and add the other. Step 2: Fund Your Account Transfer an initial amount of money from your bank account to your new brokerage account. o Nowadays, most brokerage firms use a straightforward cell phone app that can manage all this for you. o Simply install the app on your phone, link your checking account by entering your account number and bank routing number, and specify the amount of money you want to transfer. The app will handle the transfers, allowing you to set the amount and frequency. o Many apps even allow you to set up transfers on a timed schedule, so the process happens automatically

behind the scenes on a regular basis. This is what I recommend, as consistency is the key to long-term success. Even if it’s a small amount each week or month, you can always add larger amounts as the money comes. This method is called dollar-cost averaging and helps smooth out the highs and lows of market fluctuations. Step 3: Purchase SCHG and SCHD ETFs Start by purchasing shares of SCHG (Schwab U.S. Large-Cap Growth ETF) to focus on growth during your early working years. If you are age 55 or older, begin to allocate a portion of your funds to SCHD (Schwab U.S. Dividend Equity ETF) to start the transition toward income generation. Step 4: Automate Your Investments Set up an automatic investment plan through your brokerage to regularly buy shares of SCHG. This can be done by scheduling automatic purchases using the funds transferred from your bank account. Use dollar-cost averaging by investing a fixed dollar amount regularly, which helps reduce the impact of market volatility. Step 5: Implement the 1% Rule Starting at Age 55 At age 55, shift your allocation to 55% in SCHD and 45% in SCHG. Each year, increase the SCHD allocation by 1% and decrease the SCHG allocation by 1%. For example, at age 56, move to 56% SCHD and 44% SCHG. Continue this annual adjustment until you reach your desired retirement age (e.g., 65), when your allocation will be 65% SCHD and 35% SCHG. Step 6: Rebalance Your Portfolio Annually Review your portfolio at least once a year to ensure it aligns with the target allocation based on the 1% Rule. Make adjustments by selling a portion of SCHG and buying more SCHD as needed to maintain the correct allocation. Use your brokerage’s automatic rebalancing tools if available to simplify this process.

Step 7: Manage Dividends Effectively Set up a Dividend Reinvestment Plan (DRIP) for SCHD to automatically reinvest dividends back into more shares during your working years. This reinvestment allows your dividends to compound over time, increasing your shareholding and future dividend income. As you approach retirement (typically around age 65), switch from DRIP to taking dividends as cash to generate a steady income stream. This switch will provide you with a regular source of income to cover living expenses without having to sell shares. Flip the switch in your trading software to change your dividend preferences from reinvestment to income withdrawal. o The app will then start putting your dividends into your brokerage cash account. From there, you can set up an automatic withdrawal to your checking account on a regular schedule—bi-weekly, or monthly—based on your preference. This automated system ensures that your dividend income is easily accessible and consistently available to support your lifestyle during retirement. Step 8: Monitor Your Progress and Adjust as Needed Regularly review your investment strategy to ensure it continues to meet your financial goals and needs. Consider making adjustments based on market conditions, changes in your income needs, or significant life events (e.g., early retirement, unexpected expenses). Stay informed about your investments and continue to educate yourself on other wealth-building opportunities as your knowledge grows. Step 9: Stay Committed and Consistent Remember, the key to success is starting early and staying consistent. Regularly contribute to your investment account, even with small amounts. Avoid making impulsive decisions based on short-term market fluctuations. Stick to the long-term plan outlined in this guide.

higher returns than DCA because markets generally trend upwards over time. This strategy takes full advantage of market growth from the outset. o Cons: Market Timing Risk: If the market drops shortly after you invest, your portfolio could experience a significant decline in value, which might be uncomfortable or financially challenging, especially if you plan to live off dividends. Psychological Impact: A large, immediate drop in your investment’s value can be stressful and may lead to poor decision-making, such as panic selling. Dollar-Cost Averaging (DCA): o Pros: Reduced Market Timing Risk: By investing gradually (e.g., $10,000 a week), you reduce the risk of entering the market at a high point. DCA smooths out your entry price over time, which can be less stressful. Less Psychological Pressure: Smaller investments over time make market fluctuations less daunting, which can help you stick to your plan and avoid emotional reactions. Flexibility: Allows you to monitor market conditions and adjust the pace of investing if needed (e.g., accelerating during market dips). o Cons: Potentially Lower Returns: If the market rises steadily, DCA can result in a higher average purchase price than investing a lump sum at the beginning. This could lead to lower overall returns. Delayed Income: Since you're not investing the entire amount upfront, it will take longer to reach the full dividend income potential. 2. Current Market Conditions

Consider the state of the market when making your decision. If the market is experiencing high volatility or is at historical highs, DCA might help mitigate the risk of a significant downturn shortly after investing. Conversely, if valuations appear reasonable or the market is in a downturn, a lump sum investment might make sense to capture potential recovery and growth. 3. Hybrid Approach Combining Lump Sum and DCA: o Invest a portion of the $600,000 upfront to begin earning dividends immediately (e.g., $200,000). o Gradually invest the remaining amount using DCA (e.g., $10,000 per week) over a set period (e.g., 40 weeks). o This approach balances the benefits of both strategies, providing some immediate exposure while reducing timing risk for the remaining funds. 4. Consider Your Income Needs and Time Horizon Immediate Income Needs: If you need the full dividend income right away to cover living expenses, a more significant initial investment may be necessary. You can still use DCA with a large starting amount to meet your income requirements. Time Horizon: If you have a longer time horizon and don’t need immediate income, DCA can be a more conservative approach, allowing you to build your position gradually. 5. Using Market Indicators and Tactical Allocation Market Indicators: Keep an eye on market indicators such as valuation metrics (P/E ratios, dividend yields), economic indicators, and market sentiment. Use these to decide whether to accelerate or slow down your investments. Tactical Adjustments: You can adjust your DCA amounts based on market conditions. For instance, if the market experiences a significant dip, consider increasing your weekly investments to take advantage of lower prices. 6. Monitoring and Rebalancing Ongoing Review: Regularly monitor your portfolio's performance and market conditions. Be prepared to adjust your

strategy if necessary. Rebalance your portfolio periodically to maintain your desired asset allocation. Reinvesting Dividends: Consider reinvesting dividends back into SCHD or other investment vehicles, depending on your need for income. Reinvestment can compound growth over time. Conclusion Both lump-sum investing and dollar-cost averaging have their advantages, and the best choice depends on your risk tolerance, market outlook, and income needs. A hybrid approach often provides a good balance, offering some immediate income while mitigating the risk of market timing. Given your goal of living off the dividends, ensuring that a portion of your investment begins generating income sooner rather than later might be prudent. A gradual approach to investing the remaining funds can help manage risks and provide peace of mind.