Charles Schwab 401k Plan Overview
Charles Schwab provides 401k plans among its various investment services. If you’re currently paying hundreds of dollars per year to maintain your 401k somewhere else, you should seriously consider Schwab.
Available Charles Schwab 401k Versions
Schwab offers two types of 401k plans: individual and business. The individual 401k, also called a solo or self-employed 401k, is for owner-only businesses with no other employees besides possibly a spouse. The business 401k is designed for larger companies with employees.
Schwab acts as the custodian for individual 401k plans. Having a trustee is optional, but loans are not permitted.
401k Taxation
Schwab’s solo 401k uses a traditional tax setup, meaning contributions are made before taxes and are deductible in the year they're contributed. Unfortunately, Schwab doesn't directly offer a Roth option for self-employed 401ks. However, a workaround exists: using a third-party administrator to set up a Schwab Roth solo 401k.
Schwab’s business 401k can be set up as either a Traditional or Roth plan. With the Roth option, contributions from both employers and employees are made after taxes. This provides no immediate tax deduction, but withdrawals may be tax-free.
Employment Requirements
Schwab’s self-employed 401k, as its name indicates, requires self-employment. Specifically, it’s suitable for business owners, sole proprietors, corporations, partnerships, and tax-exempt organizations with no employees besides a spouse. Additionally, the business owner must have at least a 5% ownership stake in the business to open this type of account.
The business 401k can be set up by any business, small or large, even large corporations. Employees can contribute through salary deductions, and the company itself can also contribute funds.
Technically, the business creates the 401k plan, and each employee opens their own account under that plan. The self-employed 401k functions similarly, except in this case, the business and employee are the same person (though they might have separate tax IDs, as explained below).
Charles Schwab Personal Choice Retirement Account
Businesses offering Schwab’s 401k plan can include Personal Choice Retirement Accounts (PCRAs). A PCRA is a brokerage account inside the 401k, allowing employees to choose their investments independently. Schwab does not provide investment advice for PCRAs.
Charles Schwab 401K Investment Options
Schwab’s 401k plans, whether solo or business, offer many investment options. These include stocks, options, ETFs, closed-end funds, mutual funds, and fixed-income securities.
However, Schwab does not offer a robo-managed option for its 401k plans. But you can set up a solo 401k with professional investment advice, which is helpful if you're not comfortable managing your own investments. Schwab has a large network of independent financial advisors across the country who can help manage solo 401k accounts.
Charles Schwab 401k Pricing
Schwab’s solo 401k has no opening, maintenance, or closing fees. There’s also no minimum deposit required; you can open a 401k account with $0. This is excellent pricing for a 401k.
Once your solo 401k is active, it follows Schwab’s standard commission schedule, meaning trades of U.S.-listed stocks and ETFs have no fees. Many mutual funds also have no transaction fees. Some bond trades are free as well. Options trades cost 65¢ per contract.
Business 401k fees vary depending on the company’s needs and are typically negotiated with Schwab. PCRAs might include an account maintenance fee.
Opening a 401k at Schwab
Opening a self-employed 401k at Schwab involves more paperwork compared to a regular brokerage account or IRA, and it's usually not fully digital.
Previously, the IRS allowed solo 401ks to be opened using a Social Security Number. Now, an Employer Identification Number (EIN) is required. You’ll need an EIN to open a 401k at Schwab or elsewhere.
Once you have the EIN, complete Schwab’s adoption agreement form to establish your plan. This PDF form is fillable and should be accurately filled out, as errors require resubmission and delay the process.
Next, complete the solo 401k account application form, which is also fillable. The employer's information goes into the first section, and the employee’s information into the second. For self-employed individuals, details might overlap. The second section can use a Social Security Number if desired.
Both completed forms must be submitted to Schwab, either together or separately. You can submit them via:
- Fax
- Website upload (use the Messages icon in the upper-right corner)
- In-person at a Schwab branch
- Regular mail
To open a business 401k, you’ll need to call Schwab at 877-456-0777.
Software and Trading Tools
After your 401k account is active, it has access to the same resources as other Schwab accounts, including:
- An easy-to-use website with educational and research tools
- Web-based trading platform (thinkorswim)
- Desktop applications (thinkorswim)
- Two mobile apps (standard Schwab app and thinkorswim)
- Platform for Apple Watch
Charles Schwab 401k Transfers
You can transfer a 401k from another provider to Schwab. First, open a Schwab 401k, then request a transfer using Schwab’s online form (found under the Move Money tab). Schwab handles the transfer.
You can also roll over a Schwab or other 401k into a Schwab IRA. First, open the IRA, then contact your 401k provider and request a rollover into your new IRA. This time, the transfer is handled by the existing plan administrator. If you're self-employed and manage your own plan, you can easily transfer assets by using the appropriate distribution form. Always consult a licensed tax advisor before making transfers or rollovers.
Updated on 5/9/2025.
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