Yes, Charles Schwab offers solo 401(k) plans for self-employed people and business owners with no employees

Charles Schwab's solo 401(k) is called the Schwab Solo 401(k), and it's designed for people who are self-employed or own a business with no full-time employees (your spouse can be involved). You can open one if you have self-employment income from freelance work, consulting, a side business, or any other self-directed venture. 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.

The main appeal is that Schwab handles the administrative side — they file the required paperwork with the IRS, provide the plan documents, and give you access to their investment platform. You don't have to hire a third-party administrator or pay extra fees for that service, which is a real cost difference compared to some competitors.

Key Takeaways

  • Schwab's solo 401(k) is free to open and has no annual administration fees, which saves money compared to plans that charge $500 to $1,000 per year.
  • You can contribute up to $69,000 in 2024 (the limit changes yearly), split between employee deferrals and employer contributions, as long as you have enough self-employment income.
  • The plan includes a loan feature that lets you borrow up to half your balance (with a $50,000 cap) if you need cash, though you'll pay interest and have repayment terms.
  • Schwab handles IRS filing and compliance, so you don't need to hire a separate administrator or file Form 5500 unless your plan grows above $250,000 in assets.
  • You can choose between a traditional solo 401(k) (pre-tax contributions) or a Roth solo 401(k) (after-tax contributions), or open both at the same time.

How much you can contribute each year

Your contribution limit depends on how much self-employment income you earned. For 2024, you can contribute up to $69,000 total across both employee and employer portions (the limit increases slightly each year for inflation). That breaks down as: employee deferrals up to $23,500, plus an employer contribution of up to 25% of your net self-employment income after the self-employment tax deduction.

The math matters because you can't contribute more than you actually earned. If you made $40,000 in self-employment income, your maximum contribution would be lower than the full $69,000 limit. Schwab's website has a contribution calculator that walks you through the numbers based on your income.

If you're 50 or older, you can make an additional catch-up contribution of $7,500 in 2024, bringing your potential total to $76,500. This applies to the employee deferral portion only, not the employer contribution.

Traditional versus Roth: which one to choose

A traditional solo 401(k) lets you deduct your contributions from your taxes in the year you make them, which lowers your taxable income now. You pay taxes on the money when you withdraw it in retirement. This works well if you're in a high tax bracket right now and expect to be in a lower one later.

A Roth solo 401(k) uses after-tax money — you don't get a tax deduction this year — but your withdrawals in retirement are tax-free. This makes sense if you think tax rates will be higher in the future, or if you want to lock in today's tax rate. Roth accounts also have no required minimum distributions at age 73, which gives you more flexibility.

You can open both a traditional and a Roth solo 401(k) at Schwab in the same year, and your combined contributions across both plans can't exceed the annual limit. Some people split their contributions between the two to hedge their tax bets.

The solo 401(k) loan feature

One advantage of a Schwab solo 401(k) over an IRA is the ability to borrow from your own plan. You can take a loan for up to 50% of your vested balance, with a maximum of $50,000. The interest rate is set by Schwab and is typically competitive with bank rates, and you pay the interest back into your own account, not to a lender.

The loan term is usually five years, though it can be longer if you're borrowing to buy a primary residence. You have to repay on a set schedule, and if you leave your job or business, the loan typically becomes due within 60 to 90 days. If you don't repay, it's treated as a withdrawal and you'll owe income tax plus a 10% penalty if you're under 59½.

This feature can be useful in a cash crunch, but it's not a substitute for an emergency fund. Borrowing from retirement savings means that money isn't growing for your future, and the repayment obligation is real.

Fees and what Schwab charges

Schwab charges no annual administration fee for the solo 401(k) plan itself, which is a major advantage. You won't see a $500 or $1,000 bill just for maintaining the account. However, you do pay investment fees on the funds you hold inside the plan — those are the same expense ratios and trading costs you'd pay on any Schwab account.

If your plan balance grows above $250,000, you'll need to file Form 5500 with the Department of Labor each year. Schwab doesn't file this for you, so you'll either need to do it yourself (it's free to file online) or hire a tax professional or accountant to handle it. That's typically a $300 to $500 cost per year once you hit that threshold.

Loan origination fees, if you take a loan, are usually $75 to $100. There's no fee to open the account or to make contributions.

Who can and cannot have a solo 401(k)

You can open a solo 401(k) if you're self-employed or own a business with no full-time employees. Your spouse can work in the business with you and still may have access to. You cannot have a solo 401(k) if you have any employees other than a spouse, even if they work part-time. If you hire an employee, you'd need to switch to a SEP-IRA, a Solo 401(k) with a safe harbor provision, or a full small-business 401(k) plan.

You need to have self-employment income in the year you contribute. If you had zero income, you can't make contributions that year, though you can still maintain the account. You also need to open the plan by December 31 of the year you want to make contributions for, though you can make contributions until your tax filing deadline (usually April 15 of the following year).

How to open a Schwab solo 401(k)

You can open a Schwab solo 401(k) online through their website in about 15 minutes. You'll need your Social Security number, business information, and details about your self-employment income. Schwab will generate the plan documents and file the necessary paperwork with the IRS on your behalf.

Once it's open, you can fund it by transferring money from your bank account or by rolling over funds from another retirement account if you have one. You can make contributions anytime up until your tax filing deadline for that year. Schwab's platform lets you invest the money in stocks, bonds, mutual funds, ETFs, or money market funds — the same options available in a regular Schwab brokerage account.

If you already have a Schwab brokerage account, opening a solo 401(k) is even faster because they already have your information on file. If you're new to Schwab, you'll set up a brokerage account first, then add the solo 401(k) plan to it.

Frequently Asked Questions

Can I have a solo 401(k) if I also have a W-2 job?

Yes. You can have a solo 401(k) based on self-employment income from a side business or freelance work, even if you also work a regular job. However, your employee deferrals across all 401(k) plans you participate in (including your employer's plan) can't exceed $23,500 in 2024. Your employer contributions to the solo 401(k) are separate and not subject to that limit.

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 maintain a solo 401(k). You'd need to close it or convert it to a different type of plan. Schwab can help you understand your options, which might include a SEP-IRA or a small-business 401(k) that allows employees. Any money already in the solo 401(k) can usually be rolled over to the new plan.

Do I have to invest the money in Schwab funds?

No. You can invest in any stocks, bonds, mutual funds, or ETFs available through Schwab's platform. You're not limited to Schwab-branded products. The solo 401(k) is just the account structure; the investment choices are up to you.

Can I withdraw money before retirement?

You can take a loan from your solo 401(k) as described above. For actual withdrawals before age 59½, you'd generally owe income tax plus a 10% early withdrawal penalty, with some exceptions (like hardship withdrawals, though these have strict rules). It's better to think of a solo 401(k) as money you're setting aside for retirement, not as an emergency fund.

What if my business income varies year to year?

That's fine. You can contribute different amounts each year based on what you earned. In a year with low income, you might contribute very little or nothing. In a high-income year, you can max out your contributions. There's no minimum contribution requirement, so the plan is flexible for people with uneven earnings.