If you’re self-employed or run an owner-only business, you can make substantial contributions toward your retirement with an Individual 401(k) plan. It’s easy to administer and has many of the same benefits as a traditional 401(k). Best of all, you direct how your contributions are invested.
What are the fees and commissions?
- Monthly service fees: $0
- Account minimum: $0
- Commissions: $8.95 per online trade;1 $0 per Schwab ETF online trade in your Schwab account2
There are no fees to open or maintain your account. Other fees may apply; please see Account Pricing.
What do I get with this Individual 401(k) plan?
Every Schwab account comes with one-on-one investment help and guidance. With this account, you’ll also get:
- Higher potential contribution limits than SEP-IRA and profit-sharing plans
- Ability to make profit-sharing contributions and salary deferrals
- Tax-deductible contributions and tax-deferred earnings
- Flexible annual contributions
- Retirement planning tools and resources in our IRA Center
- 24/7 service and support
Account fees and commissions
There is no fee to open or maintain an account at Schwab.
- Minimum opening deposit: $0
- Monthly service charge: $0 (other fees apply)
- Trade commissions: $8.95 per online trade;1 $0 per Schwab ETF online trade in your Schwab account2
Want complete pricing details?
Find out more about our fees and minimums.
Quick answers to related questions
Have questions about our Individual 401(k) plan? Here are responses to some of the most common questions we hear. If you have a specific question that’s not answered here, please call us at 866-855-6637.
Get detailed instructions in Establish Your Plan, or call us at 866-855-6637 if you have questions.
An Individual 401(k) plan is available to self-employed individuals and business owners, including sole proprietors, corporations, partnerships, and tax-exempt organizations with no employees other than a spouse. You must have a minimum 5% business share to be eligible.
Contributions to an Individual 401(k) plan are tax-deductible. Earnings grow tax-deferred and assets are not taxed until they are withdrawn in retirement.
Plan accounts are funded with a combination of salary deferrals and annual profit-sharing contributions. Vesting is immediate, and participants can direct how contributions are invested. Individual 401(k) plans do not need to be funded annually.
The maximum combined contribution, including salary deferral, cannot exceed $50,000 for 2012 (or $55,500 if age 50 or over) and $51,000 for 2013 (or $56,500 if age 50 or over). You can make profit-sharing contributions of up to 20% of your self-employment income, up to a maximum of $50,000 for 2012 and $51,000 for 2013. And you can make a pre-tax salary deferral of up to $17,000 for 2012 (or $22,500 if age 50 or over) and $17,500 for 2013 (or $23,000 if age 50 or over).
You must establish your Individual 401(k) plan by December 31 or fiscal year-end, whichever comes first. Salary deferrals generally must be made by the end of the business tax year. Profit-sharing contributions are due by the business’s tax-filing date (plus any extensions).
You’ll need to file IRS Form 5500 annually when your plan assets reach or exceed $250,000.
You must have a triggering event—generally either termination of employment or retirement—to take a distribution. Withdrawals before age 59½ may be subject to a 10% penalty. Distributions are subject to a mandatory 20% federal tax withholding, except for Required Minimum Distributions (RMDs), hardship withdrawals, and direct rollovers.
If you own 5% or more of the business, you must begin taking RMDs annually, starting with the year you reach age 70½. If you don’t start taking RMDs when required, or if you take less than the required amount, you’ll face a 50% penalty on the total amount of the distribution.
You may not take loans from your Individual 401(k) account.
Start here to establish your plan.
Follow these instructions for establishing and contributing to a Schwab Individual 401(k) plan. Note: To establish your plan, you will need an Employer Identification Number (EIN).
|
1. Print and complete the adoption agreement. Retain a copy and return the signed original to Schwab.
|
Adoption Agreement
|
|
2. Review the basic plan document, which describes and governs your account, and keep it for your records.
|
Basic Plan Document
|
|
3. Print and complete your account application. Retain a copy and return the signed original(s) to Schwab.
|
Account Application
|
|
4. Distribute the pricing guide to all participants.
|
Charles Schwab Pricing Guide
|
|
5. Optional: Review the benefits, features, and contribution eligibility of the plan.
|
Information Sheet
|
What comes next?
After you’ve done your initial paperwork, here are the next steps.
The
Plan Summary describes the plan benefits and eligibility requirements. Fill in the information and provide a photocopy of the completed document to each participant.
Do not return this document to Schwab.
All participants, including the business owner, must complete the
Elective Deferral Agreement to indicate the elective deferral amount to have withheld from compensation. Retain the original completed copy for your records and provide a photocopy to plan participants.
Do not return this document to Schwab.
Send one check made payable to Charles Schwab & Co., Inc., FBO “Your Company Name” along with a letter listing the exact amount to be deposited per account number and the plan year for which you are contributing. Be sure your check total matches the total amount of participant contributions. Mail your check to one of the addresses below:
Charles Schwab & Co., Inc.
P.O. Box 628291
Orlando, FL 32862-8291 |
Charles Schwab & Co., Inc.
P.O. Box 52114
Phoenix, AZ 85072-2114 |
Use the
Contribution Transmittal Form to record contributions to your participant accounts, including the business owner’s.
Take the next step.
Ready to establish a Individual 401(k) plan? Get detailed instructions above in Establish Your Plan.
Need help? Call 866-855-6637.
1. Restrictions apply: The $8.95 commission does not apply to foreign stock transactions, large block trading transactions requiring special handling, or restricted stock transactions. All broker-assisted and automated phone trades are subject to service charges. See the Charles Schwab Pricing Guide for details. Employee equity compensation transactions are subject to separate commission schedules.
2. Restrictions apply: Online trades of Schwab ETFs™ are commission-free at Charles Schwab & Co., Inc. (member SIPC), while trades of third-party ETFs are subject to commissions. Broker-assisted and automated phone trades are subject to service charges. A minimum deposit of $1,000 is required to open most Schwab brokerage accounts. Waivers may apply. See the Charles Schwab Pricing Guide for details. All ETFs are subject to management fees and expenses.
Investors should consider carefully information contained in the prospectus, including investment objectives, risks, charges, and expenses. You can obtain a prospectus by visiting www.schwabetfs.com. Please read the prospectus carefully before investing.
Investment returns will fluctuate and are subject to market volatility, so that an investor's shares, when redeemed or sold, may be worth more or less than their original cost. Unlike mutual funds, shares or ETFs are not individually
redeemable directly with the ETF.
This information is not intended to be a substitute for specific individualized tax, legal, or investment planning advice. Where specific advice is necessary or appropriate, Schwab recommends consultation with a qualified tax advisor, CPA, financial planner, or investment manager.
Account must be approved and funded before trading can occur.
Schwab ETFs are distributed by SEI Investments Distribution Co. (SIDCO). SIDCO is not affiliated with Charles Schwab & Co., Inc.
