This guide presents an extensive analysis of the Charles Schwab solo 401(k) plan. Kindly note that the scope of this guide is exclusively centered around the Solo 401(k) or Individual 401(k) plan provided by Charles Schwab, tailored for self-employed individuals and small businesses without employees.
As a semi-self-employed individual (while also maintaining my day job), I am consistently seeking enhanced investment and retirement alternatives tailored for self-employed individuals and small businesses.
Enterprises like Charles Schwab, Fidelity, and Vanguard stand as colossal entities overseeing trillions in global assets. Established in 1973, Charles Schwab presently manages a substantial portfolio exceeding 7.3 trillion dollars—a figure that undoubtedly commands attention.
To put this into perspective, the current Gross Domestic Product (GDP) of the United States and Canada stands at $23.32 Trillion and $1.33 Trillion respectively, as of the time of writing this guide.
As the term “financial services supermarket” aptly implies, Charles Schwab offers a diverse range of financial solutions. This guide, however, directs its focus specifically towards Charles Schwab’s Solo 401(k) or Individual 401(k) offering.
Table of Contents
Charles Schwab Solo 401k
Solo 401k is one retirement saving options that allows maximum contributions to any other retirement plan. This is because it gives you the flexibility to contribute both as an employee and as an employer.
Read “What is a Solo 401k Plan“
Read “Best solo 401k providers in 2023 for Self-Employed and Small Businesses“
Read “How to setup a solo 401k account“
Read “Solo 401k contribution limits“
Below we’ll explore the Charles Schwab solo 401k plan in detail-investment options, eligibility, rollovers, Roth plan availability, loan option, contributions, withdrawals and associated fees for these services.
Additionally, we’ll compare Charles Schwab Solo 401k with other Solo 401k providers, enabling you to choose among them, the best solo 401k provider suited to your needs.
Charles Schwab Solo 401k-Features
The table below gives a quick snapshot of the features of the Vanguard Solo 401k plan.
| Investment Options | Charles Schwab allows you to invest from a list of stocks and mutual funds. It offers some of the lowest expense ratio mutual funds. |
| Eligibility | Freelancers or business owners, then with no employees (except the spouse who can be treated as an employee). |
| Roth Plan | Roth option is not available in the Charles Schwab Solo 401k. |
| Rollover | Yes, most of your previous retirement plans can be rolled over or transferred to the Charles Schwab Solo 401k plan. |
| Loan option | Not available |
| Fees | Account opening and maintenance fee-zero Monthly service fee-zero. Other account fees, fund expenses, and brokerage commissions may apply. Trading fee (commissions)-zero for the equities and ETFs listed in Charles Schwab |
| Withdrawals | Withdrawals made before age 59½ are subject to a 10% penalty. Exceptions may apply; please refer to the Basic Plan Document. |
Charles Schwab-Important Points
- Any earnings and contributions are taxed at the time of withdrawal.
- Withdrawals made before age 59½ are subject to a 10% penalty. Exceptions may apply; please refer to the Basic Plan Document.
- You may not take loans from your Schwab Individual 401(k).
- Required Minimum Distributions (RMDs) start at age 73
Charles Schwab Solo 401k investment options
Charles Schwab allows you to invest from a list of stocks and mutual funds. It offers some of the lowest expense ratio mutual funds.
Charles Schwab Solo 401k-Eligibility
To be eligible to the Charles Schwab Solo 401k plan, you need to be self-employed or an owner only business (a business whose only employees are partners and their spouses).
So, you can open a Vanguard Solo 401k plan, if you are self-employed or running a small business in which the only employees are either your spouse or other partners and their spouses.
C corporations, S corporations, and limited liability companies (LLCs), with no common-law employees, can also participate.
Note: You as the business owner can contribute both as the employee and the employer.
Charles Schwab Roth option availability
Charles Schwab does not offer a Roth option and only offers the traditional 401k contributions. I was surprised to know that Schwab does not offer a Roth option (tax free withdrawals).
Charles Schwab Solo 401k-Rollover
Seemingly you can rollover a regular 401k into a solo 401k. You can check with the Charles Schwab representative once before proceeding.
Need help? Call 866-855-6637.
However a rollover from your IRA account is not allowed.
Charles Schwab Solo 401k-Contributions
The solo 401k plan allows higher contributions to other types of retirement plans. This is due to the fact that you can contribute both as an employee and as an employer.
- Annual profit-sharing contributions of up to 25% of your compensation or 20% of your net self-employment income.
- Annual salary deferral of up to $22,500 in 2023 ($20,500 in 2022), or $30,000 in 2023 ($27,000 in 2022) if age 50 and up.
- Your combined annual contributions cannot exceed $66,000 for 2023 ($61,000 for 2022) or $73,500 for 2023 ($67,500 for 2022) if age 50 and up
Charles Schwab Solo 401k-Loan option
Charles Schwab does not allow you to take a loan against your Charles Schwab Solo or Individual 401k plan.
Charles Schwab Solo 401k-Withdrawals
No withdrawals are allowed until a specific event or until something of the following happens:
- You reach an age of 59.5 years or more
- You terminated your Charles Schwab Solo 401k plan
In case you withdraw your funds before the age of 59.5 years of age, then you are levied with a penalty fee.
Charles Schwab Solo 401k-Fees
Pricing and Fees:
| Account set up fee | **Account Maintenance Fee | Minimum opening fee | ***Commission | Support and assistance (Brokerage commissions) | |
| Vanguard | Zero | Zero | Zero | for the equities and ETFs listed in Charles Schwab | May incur some fee |
Please note that some account expenses, fund expenses, and brokerage commissions may apply. Check this.
For example, a zero trading fee is not applied to over-the-counter equities (equities that are not listed in the Schwab) and trades placed directly in the Foreign Exchange or in the Canadian market.
Options trade has $0.65 per-contract fee. Service charges apply for trades placed through a broker ($25) or by automated phone ($5).
Exchange process, ADR, and Stock Borrow fees still apply. See the Charles Schwab Pricing Guide for Individual Investors for full fee and commission schedules.
Charles Schwab-Customer Support
Charles Schwab offers a list of phone, chat, and office support for all your challenges and issues while investing your retirement funds.
Customer care number 877-519-1403
For more options to contact customer care please check this page.
Charles Schwab Solo 401k plan comparison with other Solo 401k providers
| Best Solo 401k providers | Investment options available | Fees | Loan | Rollover | Roth option available (Yes/No) | Mobile application (Yes/No) |
| Vanguard | Hundreds of Vanguard mutual funds , mutual funds from other companies, ETFs, stocks, CDs and bonds. | $20 annually for each account held | No | Yes | Yes | Yes |
| Fidelity | A wide range of mutual funds, stocks, bonds, ETFs, and more. | Zero | No | Yes | No | Yes |
| Charles Schwab | Mutual funds (thousand of options), ETFs, stocks, bonds, and cash equivalent options like money market funds. | Zero | No | Yes | No | Yes |
| E*Trade | Over 4,400 mutual funds, options, futures, and fixed-income bonds and CDs. | Zero | Yes | Yes | Yes | Yes |
| TD Ameritrade | Stocks, options (if approved), mutual funds, exchange-traded funds (ETFs), bonds, and CDs | Zero | No | Yes | No | Yes |
Pros and Cons
Conclusion
Charles Schwab is a behemoth in wealth and investment management operating for the past multiple decades. Founded by Charles R. Schwab it has its headquarters in Westlake, Texas, in the United States. Charles Schwab is well known for its Exchange-traded funds (ETFs) and low-cost index mutual funds.
Charles Schwab has the first mover benefit in the brokerage and financial services sector and hence can be your trusted partner to open you solo 401k plan. It charges zero account opening and maintenance fee and most of your trades for equities and ETFs listed in Schwab are free.
Additionally, the plan allows for a seamless rollover of existing retirement plans into the Vanguard Solo 401k through a straightforward process.
Furthermore, Charles Schwab provides the convenience of a mobile application for easy account management.
However, Charles Schwab solo 401k plan does not offer the Roth option and also does not offer loans against your solo 401k funds.
All of these factors should help you to decide whether Charles Schwab solo 401k option is suited to your needs or not.
