Individual 401(k) Plan

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.

Overview

  • What are the fees and commissions?

    • Monthly service fees: $0
    • $0 account open or maintenance fees. Other account fees, fund expenses, and brokerage commissions may apply1.
    • Commissions: $0 per online listed equity trades;2 $0 per Schwab ETF online trade in your Schwab account3
  • 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
    • 24/7 service and support

Account Pricing

There is no fee to open or maintain an account at Schwab.

  • Minimum opening deposit: $0
  • $0 account open or maintenance fees. Other account fees, fund expenses, and brokerage commissions may apply1.
  • Trade commissions: $0 per online listed equity trades;2 $0 per Schwab ETF online trade in your Schwab account3 

Find out more about our fees and minimums.


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 Earnings grow tax-deferred and assets are not taxed until they are withdrawn in retirement.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 $58,000 for tax year 2021 (or $64,500 if age 50 or over); $61,000 for tax year 2022 (or $67,500 if age 50 or older). You can make profit sharing contributions up to 20% of your self-employment income, up to a maximum of $58,000 for 2021 and $61,000 in 2022. And you can make a pre-tax salary deferral up to $19,500 for 2021 and $20,500 for 2022 (or $26,000 for 2021 and $27,000 for 2022 if age 50 or older).

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 were born before July 1, 1949) or age 72 ( if you were born on or after July 1, 1949).  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.


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.
  2. Review the basic plan document, which describes and governs your account, and keep it for your records.
  3. Print and complete your account application. Retain a copy and return the signed original(s) to Schwab.
  4. Distribute the pricing guide to all participants.
  5. Optional: Review the benefits, features, and contribution eligibility of the plan.

Next Steps

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 982600
El Paso, TX 79998-2600

Use the Contribution Transmittal Form to record contributions to your participant accounts, including the business owner’s.

 


Contact

  • 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.

    See all Schwab accounts.