Charles Schwab: How Good Are Its Retirement Services?

Charles Schwab & Co., founded in 1973 and headquartered in San Francisco, California, has 36 million active brokerage accounts with more than $9.9 trillion in total client assets as of Sept. 30, 2024. If you’re thinking about placing your retirement assets with Schwab, here’s what you need to know.

Schwab’s Product Offerings

For retirement savings, Schwab offers traditional IRAs, Roth IRAs, and rollover IRAs. For small business owners, Schwab has individual 401(k)s, SEP IRAs, SIMPLE IRAs, business 401(k)s, and personal defined-benefit plans. Schwab will help you transfer your IRA from another provider or roll over your 401(k) from a former employer.

For retirement income, Schwab offers variable annuities, income annuities, and fixed annuities. Schwab’s Mutual Fund Portfolio Builder provides suggested mutual fund portfolios with different asset allocations for different levels of risk tolerance.

Investment Selection

Schwab customers can invest in mutual funds, exchange-traded funds (ETFs), stocks, bonds, certificates of deposit (CDs), futures, and options. Schwab offers more than 50 mutual funds, six fundamental index ETFs, and 19 market-cap index ETFs of its own, plus access to thousands of no-load, no-transaction-fee mutual funds and around 200 commission-free ETFs from other companies.

Schwab Target Funds are mutual funds built on your projected retirement age and designed to take the guesswork out of constructing a portfolio. Schwab’s four MarketTrack Portfolios consist of index funds tailored to different levels of risk tolerance. Schwab’s monthly income funds offer monthly income plus long-term growth potential.

Professional Advice

Schwab offers 24/7 customer service to all clients regardless of how much they’re investing, including help with the paperwork and asset transfer to open an account. If you have at least $25,000 in assets with Schwab, you’re eligible for a complimentary Personal Portfolio Review, which entails discussing your short- and long-term goals, evaluating how your current investments fit with those goals, and getting investment recommendations.

Schwab has eight levels of portfolio management services for investors who want ongoing, customized advice or portfolio management. The entry-level product is Schwab Intelligent Portfolios, a fully automated advisory service that builds, monitors, and rebalances an ETF portfolio for you with a $5,000 minimum investment.

Clients with at least $100,000 at Schwab can take advantage of Managed Account Select, which is a service where professional asset managers invest your portfolio. Fees for equity strategies start at 1% of assets under management. Fixed income strategies start at 0.65%, while the balanced portfolios of both equities and fixed income charge 0.95% to start. The fees may decline with higher asset levels.

At the high end are Schwab’s Private Client service and Advisor Network Service, both for customers with at least $500,000 at the brokerage. Schwab’s personalized investment services are provided by registered investment advisors, meaning the advice you receive must be in your best interest and not that of the advisors.

Account and Investment Minimums

Schwab index funds, mutual funds, target-date funds, monthly income funds, and MarketTrack portfolios have no investment minimums. SEP IRAs, SIMPLE IRAs, and individual 401(k)s also don’t have a minimum deposit requirement.

If you want the higher level of service associated with personalized investment advice, account minimums range from $25,000 to $500,000.

Commissions and Fees

There are no fees to open or maintain a Schwab Roth or traditional IRA account, and online stock trades are free except for broker-assisted and phone trades. Automated phone trades have a $5 service charge, while broker-assisted trades have a $25 service charge, and neither charges commissions.

Bond trades are commission-free for new issues of U.S. Treasury securities. CDs, corporate bonds, and municipal bonds, and government agency securities cost nothing per trade. Schwab’s OneSource ETFs are commission-free and have no fee. However, broker-assisted trades have a $25 service charge.

You can buy and sell Schwab’s OneSource mutual funds without paying any commission. Schwab charges a $49.95 short-term redemption fee on OneSource funds held for 90 days or less. Schwab Intelligent Portfolios have no advisory fees, commissions, or account service fees.

Schwab’s Expense Ratios

Expense ratios for mutual funds and ETFs vary by fund. Schwab’s index funds have expense ratios ranging from 0.03% to 0.06%, and many of the expense ratios are below the industry average for that fund category.

Schwab’s OneSource mutual funds are actively managed funds by Schwab and have no loads or transaction fees. However, they have expense ratios starting from 0.73% for the Schwab Core Equity Fund.

Schwab’s Select List mutual funds, which are no-load, no-transaction-fee funds designed to generate income, have expense ratios ranging from 0.02% to 1.05%. MarketTrack portfolios have expense ratios of 0.49% to 0.52%, while Monthly Income Funds have expense ratios of 0.21% to 0.50%.

Schwab Target Funds have expense ratios of 0.08% to 0.74%, with the expense ratio increasing the further out your retirement date is. Each of these funds is slightly less expensive than the category average. Personalized portfolio management and advice services have different levels of expenses.

The Reputation of Charles Schwab

J.D. Power’s 2024 Self-Directed Investor Satisfaction Study, which surveyed more than 9,800 investors who make investment decisions without help from a personal financial advisor, gave high ranks to Charles Schwab across the board.

The study ranked Schwab as the second-best self-directed broker for investor satisfaction by investors who seek investment guidance. J.D. Power’s seeking guidance segment included eight categories, which are ranked by importance below:

• Firm interaction 
• Account information 
• Investment performance 
• Information resources 
• Financial advisor 
• Commissions and fees 
• Product offerings 
• Problem resolution 

Schwab also ranked second for investor satisfaction for DIY investors or those who don’t seek investment advice. The do-it-yourself segment had seven categories that are ranked below in order of importance: 

• Interaction 
• Account information 
• Commissions and fees 
• Product offerings 
• Information resources 
• Investment performance 
• Problem resolution 

Safety

Your brokerage account securities (stocks, bonds, Treasury securities, CDs, mutual funds, money market mutual funds, and certain other investments) with Schwab are covered by the Securities Investor Protection Corp. (SIPC), a nonprofit organization that will cover the loss of up to $500,000 in securities, including up to $250,000 in cash if the firm goes bankrupt and your assets go missing.

Schwab also carries $600 million in additional coverage, with a per-customer limit of $150 million for securities and $1.15 million for cash. Any uninvested cash in your brokerage account at the end of the day gets automatically swept into Charles Schwab Bank, where it will earn interest and be insured by the Federal Deposit Insurance Corp. (FDIC).

In addition, because any mutual fund shares you own are held by a third-party custodian, neither Schwab nor its creditors can take ownership of them if the brokerage runs into financial problems. Schwab is a member of the Financial Industry Regulatory Authority (FINRA).

If your account loses money because the market declines or you make poor investment decisions, you’re out of luck. There’s no insurance for that, no matter which brokerage holds your money.

The Bottom Line

Charles Schwab has a solid reputation for retirement services, and investors who are just starting out will particularly appreciate the ability to get started saving for retirement with just $100 a month. With services for everyone from beginners to those with half a million or more in assets, most people planning for retirement will find what they need at this brokerage.