Yes, Charles Schwab offers solo 401(k) plans for self-employed people and small business owners

Charles Schwab provides solo 401(k) accounts — sometimes called individual 401(k)s or self-employed 401(k)s — through their brokerage platform. A solo 401(k) is a retirement plan designed for people who are self-employed or own a business with no employees (other than a spouse). You can open one at Schwab if you have self-employment income from freelance work, consulting, a side business, or a full-time business you own.

The plan lets you contribute as both an employee and an employer, which means you can set aside more money than you could in a traditional or Roth IRA. Schwab handles the account administration and provides the investment options within the plan, but you are responsible for the annual filing requirements and contribution calculations.

Key Takeaways

  • Charles Schwab solo 401(k) accounts let self-employed people and solo business owners save significantly more for retirement than an IRA allows.
  • You contribute as both an employee (through salary deferrals) and an employer (through profit-sharing contributions), with different limits for each.
  • Schwab charges no account setup or annual maintenance fees for solo 401(k)s, though you pay standard trading commissions on investments you buy.
  • You must file Form 5500-N (a short form) with the IRS each year if your plan balance reaches $250,000 or more at the end of the year.
  • Contributions are due by your tax filing important date (including extensions), giving you time to calculate your self-employment income before you commit money.

How much you can contribute to a Schwab solo 401(k)

The contribution limits change each year. For 2024, you can contribute up to $69,000 total across employee deferrals and employer contributions combined (or $76,500 if you are age 50 or older and make catch-up contributions). The IRS sets these limits annually, and they typically increase in $500 increments when inflation reaches certain thresholds.

Your employee deferral — the amount you contribute from your own income — has a separate cap. For 2024, you can defer up to $23,500 of your compensation (or $30,500 if you are 50 or older). The employer contribution portion is calculated as a percentage of your net self-employment income after accounting for self-employment tax. This is where a solo 401(k) becomes powerful: if you have $100,000 in self-employment income, you might contribute $23,500 as an employee and another $15,000 or more as an employer, depending on your exact income and business structure.

Schwab's website has a contribution calculator that walks you through the math based on your income. You do not have to contribute the maximum — you can contribute less in years when your business income is lower.

Fees and costs at Charles Schwab

Charles Schwab charges no account setup fee and no annual maintenance fee for solo 401(k)s. This is a significant advantage over some other providers, which charge $100 to $300 per year just to keep the account open. You will not pay Schwab a fee straightforward for having the plan.

You do pay standard Schwab trading commissions when you buy or sell investments within the plan — typically $0 for stocks and ETFs, though mutual funds and options have their own pricing. If you hold the investments without trading, there is no ongoing cost beyond the expense ratios of any mutual funds or ETFs you own (which are the same whether you hold them at Schwab or elsewhere).

If your plan balance reaches $250,000 or more at the end of a calendar year, you must file Form 5500-N with the IRS. Schwab does not file this form for you — you either file it yourself or pay a tax professional to do it, typically costing $100 to $300 depending on your accountant's rates.

Investment options within a Schwab solo 401(k)

Schwab offers a broad range of investments you can hold inside the solo 401(k): individual stocks, ETFs, mutual funds (both Schwab's own and third-party funds), bonds, and money market funds. You can also hold certain alternative investments like real estate investment trusts (REITs) and some precious metals, though the rules around what qualifies are strict and governed by IRS regulations.

You cannot hold certain assets in a 401(k) — no collectibles (art, wine, antiques), no life insurance, and no investments in businesses you or your family members control. Schwab's account setup process and documentation explain these restrictions clearly.

The breadth of investment options at Schwab is one reason people choose it for a solo 401(k). You are not limited to a preset menu of funds; you can build a portfolio that matches your risk tolerance and investment philosophy.

How to open a solo 401(k) at Charles Schwab

You start by going to Schwab's website and selecting the solo 401(k) option from their retirement accounts menu. Schwab will ask you basic questions: your business structure (sole proprietor, S-corp, partnership, or LLC), your self-employment income, and whether you have any employees. If you have employees, you cannot use a solo 401(k) — you would need a different plan type.

Once you answer the questions, Schwab generates the plan documents you need to sign. These are the legal agreements that establish your plan and comply with IRS rules. You sign them, and Schwab opens the account. The entire process typically takes a few days to a week.

After the account is open, you can start investing when ready. You do not have to make your contribution right away — you have until your tax filing important date (usually April 15 of the following year, or later if you file an extension) to make contributions for that tax year.

Annual filing and record-keeping requirements

If your solo 401(k) balance is under $250,000 at the end of the calendar year, you do not file Form 5500 with the IRS. You still must keep records of your contributions and investment activity, but there is no federal filing requirement. Many small business owners find this threshold helpful — they can run the plan for years without filing paperwork as long as the balance stays below $250,000.

Once your balance reaches $250,000 or more, you must file Form 5500-N (the short form for small plans) by the important date each year. This form reports basic information about the plan: how much you contributed, the plan's ending balance, and whether you took any loans. Schwab provides a year-end statement that shows the information you need to complete the form.

You should also keep copies of your plan documents, contribution records, and any amendments you make to the plan. If you take a loan from the solo 401(k) — which is allowed — you must document the loan terms and repayment schedule.

Solo 401(k) vs. SEP-IRA or Solo Roth 401(k) at Schwab

Charles Schwab also offers SEP-IRAs (Simplified Employee Pensions), which are simpler to set up and maintain but have lower contribution limits. With a SEP-IRA, you can contribute up to 25% of your net self-employment income, capped at $69,000 for 2024. You cannot make employee deferrals the way you do in a solo 401(k), so if your income is modest, a SEP-IRA might not let you save as much.

Schwab also offers Solo Roth 401(k)s, which work the same way as a traditional solo 401(k) but with after-tax contributions and tax-free withdrawals in retirement. The contribution limits are identical; the difference is in the tax treatment. A Roth solo 401(k) makes sense if you expect to be in a higher tax bracket in retirement or if you want tax-free growth on your investments.

The choice between these options depends on your income level, how much you want to save, and your tax situation. Schwab's account setup process lets you compare the options side by side.

Frequently Asked Questions

Can I have a solo 401(k) if I have a W-2 job and self-employment income?

Yes. You can have a solo 401(k) based on your self-employment income even if you work a full-time job elsewhere. However, your total employee deferrals across all 401(k) plans (your employer's plan and your solo 401(k)) cannot exceed the annual limit — $23,500 for 2024. Your employer contributions to the solo 401(k) are separate and not subject to this cap.

What happens to my solo 401(k) if I hire an employee?

Once you hire an employee (other than a spouse), you can no longer use a solo 401(k). You would need to roll the existing plan into a different retirement plan type that covers employees, such as a SEP-IRA or a traditional 401(k). Schwab can guide you through this transition, but it requires closing the solo 401(k) and opening a new plan.

Can I take a loan from my Schwab solo 401(k)?

Yes. Solo 401(k)s allow loans up to 50% of your vested balance or $50,000, whichever is less. You set the interest rate (typically the prime rate plus 1 to 2 percent) and repay the loan over five years or longer if it is for a home purchase. Schwab provides the loan documentation and tracks repayment for you.

Do I have to invest in Schwab's own funds?

No. While Schwab offers its own mutual funds and ETFs, you can invest in any stocks, ETFs, or mutual funds available through Schwab's platform. You have complete control over your investment choices within the plan.

What if I want to convert my solo 401(k) to a Roth?

You can convert funds from a traditional solo 401(k) to a Roth solo 401(k) or a Roth IRA. The amount you convert is taxable income in the year of the conversion. Schwab handles the mechanics of the conversion, but you are responsible for reporting it on your tax return and paying any taxes owed.