Charles Schwab IRA Review

Charles Schwab IRA
Charles Schwab IRA - by, April 1, 2011
4.5/ 5stars
on
Charles Schwab IRA
  • Editor Rating
  • Very Good
Review Summary :

Charles Schwab has been serving investors since 1975. The founder is one of the richest people in America and the company offers many great options for retirement planners when it comes to IRA accounts.

Charles Schwab has its roots in traditional financial services, so it’s not explicitly known as a self-directed company. It does however offer many great investing options suitable for meeting your retirement goals.

 

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Pros:

  • Low non-trading fees
  • Free stock and ETF trading
  • Some mutual fund investments are free
  • Account opening is user friendly
  • Interactive charts
  • Research tools provide trading ideas
  • Provides fundamental research on wide range of assets
  • Account opening is user friendly
  • Interactive charts
  • Research tools provide trading ideas
  • Provides fundamental research on wide range of assets

Cons:

  • Some mutual fund fees are high
  • More research tools would be beneficial
Quick Facts about Charles Schwab IRA
Year Founded:1975
Location:San Francisco, California
Annual Fees:No annual fees.
Offers 401(k)?:Yes
Offers Roth IRA?:Yes
Crypto Offered?:No
Reviewed By:Jack Choros
Published On:April 2, 2020
Last Modified:June 6, 2020
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Charles Schwab is one of the most respected and recognizable name brand investment brokerages in America. The firm’s headquarters are located in San Francisco, California and the company first opened its doors in 1971. It is not just a brokerage but also a bank. Charles Schwab currently ranks as the thirteenth largest banking organization in America. The company is publicly traded and hosts 345 branches around the country, and it’s composed of four divisions: investing, wealth management, trading and banking.

According to data from the end of 2017, Charles Schwab has nearly 11 million active customer accounts and manages over $3.3 trillion in wealth.

Like many other competing brokerages and IRA providers, Charles Schwab has built up enough of a name and enough of a wide range of services to offer investors almost anything and everything they need when it comes to IRA accounts. While the company does have many brick-and-mortar locations and branches around the country, like many other discount brokerages, the bulk of active Charles Schwab customers use the organization’s online platforms to facilitate trades and buy into a wide variety of investment products and services.

In this review will go over those products and services and compare Charles Schwab to some of the leading competitors in the retirement investing sector including Fidelity, E*TRADE, Vanguard, TD Ameritrade, and many others. What investors will find is that Charles Schwab ranks near the top in all of the categories of we’re about to consider. That’s what has given the company its reputation for keeping the money of its clients safe in helping investors retire wealthier.

What is Charles Schwab? What is a Charles Schwab IRA?

As mentioned above, Charles Schwab is more than just an IRA provider, it’s a full-fledged discount brokerage whose bottom line is backed by a slew of bank branches located across America. Not every discount brokerage we are reviewing here at GIG can offer that and what it means for Charles Schwab is that the company can be more competitive in specific areas of investing than some smaller or lesser-known brokerages.

So what is an IRA? IRA simply stands for Investment Retirement Account. IRAs essentially allow investors to pool aside money specifically for retirement purposes. The investor deposits money into the IRA and chooses from a wide selection of investment products and services that they can hold within the IRA. Those investments could be government bonds or stocks. They could also be mutual funds, which is a portfolio that invest in several stocks. It can include certificates of deposit, or commodities like gold and silver.

In this standard age most brokerages, including Charles Schwab, offer investors to main options when it comes to IRAs. The investor can either choose to be self-directed meaning they make their own choices as to which securities to buy, or they can choose from a range of prebuilt portfolios. Some discount brokerages call this “robo advising”, but it’s really just a fancy way of referring to a prebuilt option. There are advantages and disadvantages to choosing both the self-directed and prebuilt approach, and we’ll go over those within the context of specific products and services offered at Charles Schwab.

For now let’s take a look at the kinds of investments that are allowed inside of an IRA in more detail.

The Charles Schwab Management Team

Charles R. Schwab, Founder, Charles Schwab

Charles R. Schwab founded his investment firm in 1971.

Charles R. Schwab, Founder, Charles Schwab

He’s been Chairman and Director of the company since 1986, the year the firm incorporated. He also served as a Director at Yahoo from 2014 to 2016.

Walter Bettinger II is the President and CEO of Charles Schwab.

Walter Bettinger II, President and CEO, Charles Schwab

Walter Bettinger II, President and CEO, Charles Schwab

He’s held onto the role since 2008. He founded The Hampton Company in 1983 and started his Charles Schwab journey when it acquired The Hampton Company in 1995.

John K. Adams Jr., Director, Charles Schwab

John K. Adams Jr. has served as a Director at Charles Schwab since 2015. Prior to that he spent 11 years with UBS Investment Bank and 17 years with Credit Suisse.

Joan T. Dea is the founder of Beckwith Investments.

Joan T. Dea, Director, Charles Schwab

Joan T. Dea, Director, Charles Schwab

She sits on the Compensation Committee and Nominating & Corporate Governance Committee at Charles Schwab. She has similar experience in financial services with companies such as BMO Financial Group and Boston Consulting Group.

Overall, the Board of Directors of Charles Schwab is arguably one of the most influential groups throughout all of America. Charles Schwab has quite the legacy across the world. That being said, most self-directed IRA companies are much smaller than Charles Schwab so comparing this company to others is sort of like comparing apples to oranges. Nevertheless, let’s find out what Charles Schwab has to offer IRA investors.

Investments Allowed in an IRA

Charles Schwab isn’t the only discount brokerage offering stocks, bonds, certificates of deposit, mutual funds, ETFs or commodities as investing opportunities. Many brokerages do that. What’s important to know here is that not every brokerage takes the same approach to charging fees. Most don’t charge anything for stock trades inside of an IRA, but they will charge investors for mutual fund trades. The reason mutual funds come with fees is because a mutual fund manager has to decide which securities belong in which portfolio of mutual funds, and how the money invested within those mutual funds should be divided up between the different companies.

So for example let’s say an investor wants to invest in a mutual fund that focuses on the technology sector. Charles Schwab’s version of a technology mutual fund might only expose for instance 20% of the investor’s money to Apple stock while only 5% of the portfolio might be invested in blockchain or cryptocurrency related companies.

To have an advisor manage these services costs the brokerage money, and those costs get passed down to the investor in the form of loading fees. We’ll cover more of a comparison on pricing and fees lower down in this review, just know that certain types of investments, the cost while others do not.

Some of those costs are nullified for investors who choose to make their own investing choices and execute transactions on their own. For investors who don’t feel comfortable doing that, there’s always the option to choose from prebuilt portfolios. Let’s talk more about how Charles Schwab approaches both.

Self-Directed Investing Options at Charles Schwab

Self-directed investing is where Charles Schwab really shines. As mentioned, investors can choose from a wide variety of securities and as usual, there is no charge for trading stocks. Fees don’t really kick in until investors start trading options or mutual funds, or until they ask for assistance from a customer service representative.

Charles Schwab offers more than 2,000 ETFs available for investing across different asset classes and fund companies. That’s by far a greater number of offerings than any other discount brokerage that we are reviewing.

The cool thing about Charles Schwab is that investors only need to start with as little as $1,000 in order to get involved. That’s not the lowest threshold among providers that we reviewed but it is pretty low. Even if a customer doesn’t have $1,000 to open the account, it’s still possible to do so by committing to an automatic deposit of $100 a month. That’s definitely a very reasonable ask.

The problem is Charles Schwab is that they don’t cater much to people who need advice or help to get there IRA started, to choose the right investments or to make changes on the fly.

No Pre-Built Portfolios at Charles Schwab

Unlike Fidelity or other competing IRA providers, Charles Schwab doesn’t offer any prebuilt portfolios to investors who want some guidance or help choosing investments that match their level of risk tolerance. That has to count as a big consequence of choosing Charles Schwab over other competitors. Nobody wants to make decisions about their retirement investing that are going to impact them when they’re 70, 80 or 90 years old and know that they could’ve done something about it 30 years earlier.

With a lack of prebuilt or Robo-advising style portfolios available to customers, it makes sense that Charles Schwab would charge only $25 for an assisted transaction over the phone. That fee for an assisted transaction is among the lowest in comparison to all competitors. The flipside of that of course is the fact that investors who don’t necessarily know what they’re doing as far as self-directed trading and investing is concerned are going to have to rely on paying that fee every time you need help. This can add up, especially when considering that the mutual fund trading fee is a separate charge of $49.95.

IRA Rollover Rules

Charles Schwab offers five different options for investors who want to rollover a 401(k) into an IRA with the firm. They also offer specialists that can help with the transition through a toll-free number. Check out the options below.

Leave Your Money with Your Ex-Employer’s 401(k)

The benefit to an investor leaving their plan with their ex employer is that they don’t have to make an immediate decision about anything. The downside is they may be sacrificing certain tax or contribution benefits that they could have with a new plan and there still subject to the rules set out by the ex-employer’s 401(k) plan. This is a decent short-term strategy for investors who need time to organize other affairs, but it’s not a long-term strategy that’s recommended for retirement.

Roll Over to Your New Employer’s 401(k)

Investors who like the benefits and advantages of their new employer’s 401(k) plan can also rollover into that. Doing so means protecting the investment from taxes and any potential creditors as federal law indicates is the case, and it also means gaining the benefits of the new plan. The disadvantage is that the investor’s fees may be different with the new employer and it may limit the number of investment choices available.

Rolling Over to an IRA

The advantage to rolling over to an IRA from a 401(k) is that the investor gets more control over their options. 401(k)s are always at the mercy of the employer’s administration rules. An IRA usually opens up more options to the investor. The downside is investors can’t borrow against the value of an IRA the way they can a 401(k).

IRA Transfers

Charles Schwab makes it really easy for investors to transfer their IRA. It doesn’t matter if the investors with another provider, or initiating a trustee to trustee transfer. The company’s copywriting promotes low fees and access to guidance as the top reasons people switch. Transfers can be done in person at an Investor Center, over the phone or online.

Pros and Cons of a Charles Schwab IRA

As with any IRA provider, there are many pros and cons of dealing with Charles Schwab for retirement investing. As is usually the case, whenever a brokerage promotes the fact that they offer advice, they have to earn money on that advice somehow and they do it in the form of fees. What’s great about Charles Schwab is that the firm does a great job of balancing the consumer’s need for paying the lowest fees possible but still getting great advice. But as we’ve stated, every IRA provider has to make their read somewhere and there are few notable downsides to choosing Charles Schwab over competitors.

Let’s go over the pros and cons of choosing Charles Schwab in the most non-biased way possible. Here’s a full and comprehensive review of the pros and cons investors should consider before they make their IRA decision for the long haul.

The Pros of Choosing Charles Schwab for Your IRA

Fees

  • Charles Schwab charges low non-trading fees.
  • Free stock and ETF trading.
  • Some mutual fund investments are free.

Account Opening

  • Most accounts can be opened with no minimum deposit or low minimum deposits and the account opening process is really user-friendly.

Research Offerings

  • Great interactive charts.
  • Provides customers with lots of trading ideas.
  • Provides lots of data on the fundamentals of different assets.

Education

Charles Schwab allows investors to learn about investing in four different ways:

  • A demo account.
  • Video tutorials that explain the platform.
  • More general educational videos.
  • Live and pre-recorded online webinars.
  • Education content on their blog.

The demo account means investors can trade without risk. It’s a pretty common way to lead a customer through the early stages of investing. Most competing brokerages that want to steal business from Charles Schwab also do this. All of the content is easy to consume and it’s detailed enough to get a novice investor going.

The Cons of Choosing Charles Schwab for Your IRA

Fees

Charles Schwab doesn’t take any commission for stock trades, but there are fees for mutual funds and the financing rates can be very high for investors looking to borrow money to leverage their positions.

Account Opening

The only negative to opening an account at Charles Schwab is that it’s not fully digital. Many brokerage firms and direct competitors of Charles Schwab allow investors to open accounts without having to go anywhere. Although nearly everything can be submitted online, Charles Schwab won’t open an account in unless investors finish the process in person.

Research Offerings

The only negative with Charles Schwab’s research offerings is that there’s always room for more research to be included. Of course investors can always sign up for premium newsletters offered by various other stock prediction or investment related services but for the most part getting access to things like interactive charts, trading patterns and data related to fundamental analysis is enough for the average investor to make well-informed decisions that set them up for a solid retirement.

Education

Charles Schwab has an entire section on their website called the Charles Schwab Learning Center. The Learning Center offers all kinds of material for investors from beginner to advanced. It’s interactive, it’s easy to follow and the written content is easy to read. Everything is well organized and will be enough to get the average investor started, even if they have little to no experience.

More on Research Offerings

Charles Schwab is one of the best IRA providers in the industry when it comes to offering investors access to in-depth research. We’ve already covered some of the pros and cons, but just like the research itself, surface level analysis doesn’t do Charles Schwab’s offerings justice. Here are some of the benefits investors can expect when they dig deep into what Charles Schwab has to offer:

  • Access to a dozen independent research firms: an investor can look up the ticker symbol for a stock or security they’re interested in purchasing and read a list of reports completely free of charge.
  • Access to StarMine: StarMine is an analytics tool offered by Thomson Reuters. More specifically, the service analyses ratings and waits them by their historical accuracy. This allows investors to make a better judgment call as it relates to the price target of a given stock or just check about whether the buy and sell ratings of that security overtime are well deserved or received proper guidance.
  • Daily updates on upgrades and downgrades: many novice investors want to know if there security is trending up or down in the eyes of the game’s top analysts. Charles Schwab provides that information from 125 different firms on a daily basis. It’s a perfect service for giving investors peace of mind as they track the performance of their stocks.

Commission and Fees

Generally speaking, the majority of investors will follow a long-term strategy for their retirement as most financial experts would recommend, so trading commissions and fees aren’t necessarily the number one consideration when it comes to choosing an IRA provider.

That said, even though investment income accumulating in an IRA is a passive endeavor, there’s still a price to be paid for being active and making trades, as always.

Charles Schwab charges $0 for stock and ETF trades. Yes, that’s right, $0. There’s no way investors can top that anywhere else. That makes Charles Schwab a top notch choice for saving money! That said, the brokerage has to make its money somewhere, and there are fees for other types of trades.

Options traders at Charles Schwab will pay between $0 and $0.65 per contract, while mutual fund purchases include a fixed fee of $49.95 per purchase. That’s actually not too bad relative to other brokerages and investing firms and what they charge. And again, the key thing to consider here is that the average IRA investor probably isn’t making trades on a daily basis. IRA accounts are intended for long-term investing. Working professionals with a 30 year investment horizon are probably only reviewing their IRAs once or twice a year. That said, even for investors who are more active with our IRA accounts, Charles Schwab’s fees are totally reasonable.

Here’s brief summary of Charles Schwab fees related to securities:

 SchwabE*TRADEFidelityTD Ameritrade
Standard online stock, ETF and options commissions$0$0$0$0
Standard options per contract fees$0.65$0.65$0.65$0.65
Futures per contract$1.50$1.50Not offered$2.25
Satisfaction gauranteeYesNoNoNo

Customer Service and Support

Like many of the top brokerages providing investors with IRA accounts, Charles Schwab offers 24/7 customer support. That’s over the phone. Investors checking in online can do so between 8 AM and 10 PM Eastern standard Time and normally receive a response from a customer service representative in less than a minute. Investors who wish to speak to somebody face-to-face can go to any one of the 196 brick-and-mortar locations Charles Schwab has sprinkled all across the United States.

Charles Schwab ranks at the top when it comes to customer service and support with only a few other brokerages competing with them in terms of speed and ease of use within their customer support channels.

Charles Schwab SIMPLE IRA

SIMPLE stands for Savings Investment Match Plan for Employees. Charles Schwab’s SIMPLE IRA is for self-employed individuals or small businesses with less than 100 employees wishing to take advantage of tax-sheltered retirement plans.

The advantage of this particular IRA is that the employer can write off employer contributions to employee IRAs as business expenses. Participants in a SIMPLE IRA, meaning the employees, get pretax contributions from the employer and they also get tax-deferred growth within the account.

Employers who want to use this plan can’t have any other employer-sponsored plans and employees must’ve made at least $5,000 with the company they’re working for an order to be eligible.

Charles Schwab vs. E*TRADE

Outside of Charles Schwab there are a few other brokerages that stand above the rest and we’re going to review them all here at GIG. One comparison that investors seem to draw pits Charles Schwab against E*TRADE, so here, we offer our own quick summary of both.

Neither brokerage charges for stock trades. Both charge similar amounts for options trades at $0.65 per contract. E*TRADE charges less to investors who make more than 30 options trades.

While Charles Schwab doesn’t require any minimum deposit to get an account open, E*TRADE asks customers to deposit a minimum of $500. Although that shouldn’t be upon for most people serious about saving for retirement, it is an added unnecessary barrier that Charles Schwab doesn’t require jumping over.

That said, one area where E*TRADE does China were Charles Schwab is when it comes to mutual fund fees. Neither broker charges investors anything when it comes to no-load mutual funds, but loaded mutual funds always come with a fee for the most part. Charles Schwab charges $49.95 for a loaded mutual fund purchase while E*TRADE only charges $19.95.

Still, the added fees that Charles Schwab charges is why the company can have 196 brick-and-mortar locations to serve customers where E*TRADE only has 30+. Charles Schwab also offers way more options when it comes to basic banking services and more than 350 commission free ETFs to choose from. E*TRADE on the other hand only offers closer to 250 ETFs.

The bottom line is that Charles Schwab is more of a full service brokerage where E*TRADE is more focused on the online experience. In some ways E*TRADE offers bigger discounts, but Charles Schwab offers a better bang for the buck overall when it comes to service. Choosing between the two depends on what you really want. An investor who wants to handle everything themselves might use E*TRADE, where somebody with considerable wealth who want some guidance will choose Charles Schwab.

Frequently Asked Questions about Charles Schwab

Please find below some of the most frequently asked questions about investing with Charles Schwab.

Who Is Charles Schwab?

Charles Robert Schwab is the founder of Charles Schwab. He founded the company in 1975 and was born in 1937. He is the pioneer of discounted equity sales. In 2017 Forbes estimated Schwab’s net worth to be north of $8 billion.

What Is Charles Schwab?

Charles Schwab is a discount investment brokerage. It offers investors the opportunity to invest in stocks, bonds, mutual funds, certificates of deposit and other types of securities online, or with the help of an experienced investment advisor.

How Do I Withdraw Money From Charles Schwab?

Investors can withdraw money from a Charles Schwab account by contacting the customer support team at 1-800-435-4000. It’s possible to withdraw online directly to a bank account as well.

Where Can I Cash a Charles Schwab Check?

A check from Charles Schwab can be cashed in any number of ways. Banks, credit unions and payday loan services will accept a Charles Schwab check. Just be aware that a payday loan service will charge a premium to advance the money. Using a traditional bank is more economical and just as convenient.

How Long Does It Take To Receive A Charles Schwab Debit Card?

It takes 7-10 business days to get a Visa debit card for your Charles Schwab account.

Is There A Charles Schwab Robo Advisor?

As mentioned previously in this review, Charles Schwab doesn’t have a Robo advisor exactly. At least that’s not what Charles Schwab calls it. Instead they offer The Single-Fund Strategy group of portfolios broken down in the above sections. They are essentially prebuilt portfolios that cater to different levels of risk tolerance investors can choose from based on the answers they provide in the most common risk tolerance questionnaires the majority of brokerages will ask investors to answer. There is still some choice in terms of which fund or strategy works best for the individual investor to be sure, but overall, the goal is to set it and forget it. The investor picks a portfolio that works for their strategy and other than reviewing their financial situation once a year, they don’t have to look back.

Charles Schwab vs. Schwab and Other IRA Accounts

Another comparison investors seem to make is that of Charles Schwab versus Charles Schwab and of course other IRA accounts are going to be a consideration too. Charles Schwab has been around for a long time and the company boasts more than 300 locations across America serving customers in person. That’s tough to compete with and Charles Schwab Wednesday face-to-face customer service battle by a landslide. But that’s not to say that Charles Schwab doesn’t have a lot to offer. That’s already been established throughout this review.

Both brokerages charge the same fees when it comes to options trading, which are noted several times above. Charles Schwab does charge less for assisted transactions. Investors will only pay $25 a trade when they accept help wears Charles Schwab investors will pay just under $33. Charles Schwab also offers more than 2000 different commission free ETF products to choose from where Charles Schwab offers less than 400.

Although Charles Schwab certainly leads the IRA industry in terms of depth of services and products available, Charles Schwab is just as good a choice. Both companies outrank the competition in the industry in several different categories. Consider taking a look at our overall IRA reviews to get a look at the bigger picture and decide which IRA provider might be the best for you.

Charles Schwab IRA
Charles Schwab IRA - by, April 1, 2011
4.5/ 5stars
on
Charles Schwab IRA
  • Editor Rating
  • Very Good
Review Summary :

Charles Schwab has been serving investors since 1975. The founder is one of the richest people in America and the company offers many great options for retirement planners when it comes to IRA accounts.

Charles Schwab has its roots in traditional financial services, so it’s not explicitly known as a self-directed company. It does however offer many great investing options suitable for meeting your retirement goals.

 

Get Info Kit Now
Have you purchased products from Charles Schwab IRA? Leave a review!

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