The Charles Schwab Individual 401(k) — also called the solo 401(k) — lets self-employed workers and small business owners contribute up to $70,000 in 2026 with no account fees. Schwab adds a Roth option and loan access, which makes this plan more flexible than a SEP-IRA for most self-employed earners below $280,000.
2026 Schwab Individual 401(k) Contribution Limits
| Contribution Type | 2026 Limit |
|---|---|
| Employee deferral (traditional or Roth) | $23,500 |
| Catch-up, age 50–59 or 64+ | $7,500 additional |
| Super catch-up, age 60–63 (SECURE 2.0) | $11,250 additional |
| Employer profit-sharing | Up to 25% of net SE income |
| Total annual additions | $70,000 |
| Total with regular catch-up | $77,500 |
| Total with super catch-up | $81,250 |
The IRS sets these limits annually (IRS Notice 2025-82 for 2026). The annual additions limit of $70,000 is the same as a SEP-IRA, but the solo 401(k) lets lower-income self-employed workers contribute far more because the $23,500 employee deferral is not tied to a percentage of income.
Employee vs. Employer Contributions at Schwab
Employee deferral (up to $23,500): This is an elective contribution from your self-employment income. You choose the amount up to the limit, and you can designate it as traditional (pre-tax) or Roth (after-tax). Even if your profits are modest, you can contribute the full employee deferral amount.
Employer profit-sharing (up to 25% of net SE income): Calculated on your adjusted self-employment income — net SE income minus the SE tax deduction. The effective rate works out to roughly 20% of gross self-employment income. These are always pre-tax.
Worked Example: $60,000 Self-Employment Income
On $60,000 of net SE income in 2026:
- SE tax deduction: ~$4,239
- Adjusted income: $55,761
- Employer contribution (25%): $13,940
- Employee deferral: $23,500
- Total 2026 contribution: $37,440
A SEP-IRA at Schwab on the same income would cap at ~$12,000. The solo 401(k) provides an extra $25,000 of tax-advantaged space for the same income level.
Schwab’s Roth Solo 401(k) Option
Schwab allows you to designate your employee deferrals as Roth contributions. Unlike a Roth IRA, there is no income limit for Roth solo 401(k) contributions — you can contribute the full $23,500 in Roth regardless of how much you earn.
Roth contributions grow tax-free and qualified distributions in retirement are not taxed. This makes the Roth solo 401(k) at Schwab especially valuable if you expect your income — and tax rate — to rise over time.
Employer profit-sharing contributions cannot be designated as Roth; they are always pre-tax.
Loans From Your Schwab Solo 401(k)
Schwab allows loans from traditional (pre-tax) Individual 401(k) balances:
- Maximum loan: 50% of vested balance or $50,000, whichever is less
- Repayment: 5 years, level amortization with interest (typically prime rate + 1%)
- Roth balances: Not eligible for loans
- Default risk: If you miss payments, the loan becomes a taxable distribution with the 10% early withdrawal penalty
This distinguishes the solo 401(k) from a SEP-IRA, which does not permit loans.
How to Open a Schwab Individual 401(k)
- Verify eligibility — You need self-employment income (any amount) and no full-time non-spouse employees
- Open by December 31, 2026 — Plan must be established in the tax year you want to contribute for
- Apply at schwab.com — Search “Individual 401(k)” under retirement accounts; the application takes about 15–20 minutes
- Complete the adoption agreement — Schwab provides the plan document at no cost
- Set up your contribution elections — Designate employee deferral amounts and traditional vs. Roth split
- Invest — Choose from Schwab’s full investment lineup
Employee deferrals for 2026 must be made by December 31, 2026. Employer profit-sharing can be funded through October 15, 2027 with a tax extension.
Investment Options at Schwab
Schwab’s Individual 401(k) provides access to:
- Schwab Market Cap Index funds — among the lowest expense ratios available (e.g., SWTSX: 0.03%)
- ETFs — Full ETF marketplace with $0 commissions
- Individual stocks and bonds — $0 commissions
- Schwab OneSource mutual funds — No-transaction-fee fund lineup
- Options — Available for qualified accounts
Schwab’s investment menu is broader than Vanguard’s solo 401(k), which restricts you to Vanguard funds.
Form 5500-EZ Filing Requirement
When your Schwab Individual 401(k) balance exceeds $250,000, you must file IRS Form 5500-EZ by July 31 of the following year. Schwab provides the year-end balance statements you need to complete this filing. Penalties for missing this requirement can reach $250 per day.
Solo 401(k) vs. SEP-IRA at Schwab
| Feature | Schwab Solo 401(k) | Schwab SEP-IRA |
|---|---|---|
| 2026 maximum | $70,000 | $70,000 |
| Roth option | Yes (employee portion) | No |
| Loans allowed | Yes | No |
| Better for income under ~$280K | Yes | Less efficient |
| Plan establishment deadline | December 31 | Tax filing deadline + extension |
| Ongoing complexity | Moderate | Minimal |
Related Schwab Retirement Guides
- Schwab SEP-IRA 2026 — Limits, Setup & Comparison
- Schwab Backdoor Roth IRA 2026 — Step-by-Step Guide
- Schwab Traditional IRA 2026 — Deduction Rules & Limits
- Schwab Roth IRA 2026 — Limits, Rules & How to Open
- Charles Schwab — Complete Investor Guide 2026
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