When it comes to planning for retirement, many investors want to keep things simple—and keep it “in the family.” Some people own only Vanguard funds, while others restrict their retirement holdings to just Fidelity funds.
Well, today, I’m going to explain why (and how!) investors might limit their net eggs to Schwab’s retirement funds.
You might know Charles Schwab for its account offerings—indeed, with some 36 million brokerage accounts, and another 5.4 million workplace plan participant accounts, you might already have your investment funds run through Schwab.
But you don’t have to have a Schwab account to build your retirement. That’s because Schwab also offers some of the largest and most cost-efficient retirement funds in the game—funds you can buy through most account providers.
Today, I’m going to introduce you to some of the best Schwab retirement funds you can find. They’re effective, they’re inexpensive, and they’ve also been selected for their utility inside tax-advantaged accounts like a 401(k), individual retirement account (IRA), or health savings account (HSA).
Disclaimer: This article does not constitute individualized investment advice. These securities appear for your consideration and not as personalized investment recommendations. Act at your own discretion.
What Do You Want in a Retirement Fund?
Once you’re ready to invest your retirement savings and put that money to work in mutual funds, you’ll want to consider these critical factors:
- Assets: First, a robust retirement portfolio should provide diversification across multiple asset classes—stocks and bonds at the very least, as well as possibly real estate and commodities, all of which you can typically get through mutual funds and ETFs. Diversifying your retirement portfolio across these asset classes helps spread risk and smooth your returns. You can do this easily through Schwab, which provides one of the country’s largest collections of funds—stock and bond alike.
- Risk: Every single person has a different appetite for risk. Your neighbor might be perfectly happy to go gung-ho for growth and be invested 100% in stocks even when they hit age 70. But many other people prefer to protect their wealth instead as they get older. So the funds you initially own, and the funds you put more money into as you cycle through the many stages of life, should reflect your own personal ability to stomach market volatility and changes to your portfolio balance.
- Fees: Every dollar spent on fees and expenses is a dollar no longer available to grow and compound over time, so keeping expenses cut to the bone is vital. When all else is roughly equal, lower-fee funds are better, and Schwab funds’ costs sit below the industry average.
- Income: Finally, you ideally want your retirement portfolio to produce regular income—in the form of both bond interest and dividends. Stock prices can suffer during nasty corrections and bear markets, but income-generating funds can help provide for your living expenses without forcing you to sell at an inopportune time. (Just note that you don’t necessarily need all of your retirement funds to generate income.)
Schwab’s wide assortment of retirement-focused funds provides just about any investor with the tools to address these and other vital planning considerations.
Why Schwab Mutual Funds?
Charles Schwab is a U.S.-based brokerage and banking company founded in 1971 as a traditional brokerage company and then as a discount brokerage service in 1974. It’s the largest publicly traded investment services firm with more than $10 trillion in client assets. And it offers a wide range of financial services, such as investment advice and management, trading services, financial planning, banking services, workplace and individual retirement plans, annuities, and more.
But why would you invest in its mutual funds?
Schwab offers more than 100 mutual funds collectively boasting over $1 trillion in assets under management (AUM), and it’s not for nothing. Not only do Schwab funds feature below-industry-average annual expenses, but they also charge no load or transaction fees. Schwab also offers you products for whichever management style you prefer; it has numerous actively managed funds run by seasoned teams, but it’s also one of the largest providers of indexed mutual funds.
In short: Schwab’s retirement funds are among some of the best on the market, you have plenty to choose from, and they won’t leave your wallet in tatters.
The Best Schwab Retirement Funds for 2025
Now that we’re through with introductions, let’s explore some of the best Schwab funds you can use to assemble a long-term retirement portfolio.
Importantly, these retirement funds are best held in tax-advantaged retirement accounts, such as a 401(k) or IRA. That’s because many of them come with at least one of two tax considerations:
- Turnover: Turnover refers to how often investments are rotated in and out of a fund. If a mutual fund sells a stock for a profit, that generates a capital gain, which can be passed on to you in the form of a capital-gains distribution. You would then owe capital-gains taxes on that distribution during that tax year. Funds with high turnover can be really tax-inefficient, as they can pass along a lot of short-term capital gains that are taxed as ordinary income, at rates up to 37%, not to mention an additional 2.5% for the net investment income tax.
- Interest income: Interest income, which is paid out by bonds, preferred stocks, and other fixed-income assets, is also tax-inefficient, as it’s taxed as ordinary income (again, up to 37%). And given that interest income is typically the bulk of your return from bonds, most of your returns are being taxed at those unfavorable rates.
However, you’ll have no immediate tax consequences whenever dividends, capital-gains distributions, interest income, and other fund payments are made within a tax-deferred account such as a 401(k) or IRA—you’ll only ever be subject to taxes when you withdraw funds, likely at retirement. And if they’re made within a Roth account, you’ll generally never experience those tax consequences.
All of that said, some of these Schwab retirement funds will do perfectly fine even inside of a good, old-fashioned brokerage account.
1. Schwab S&P 500 Index Fund
- Style: U.S. large-cap stock
- Management: Index
- Assets under management: $112.1 billion
- Dividend yield: 1.2%
- Expense ratio: 0.02%, or 20¢ per year for every $10,000 invested
The majority of fund managers who run large-cap funds (funds that invest in larger companies) struggle to consistently beat the S&P 500 Index, particularly once you include their fees in the equation.
How bad is it? According to S&P Dow Jones Indices’ SPIVA (S&P Indices versus Active) data, roughly 85% of actively managed large-cap funds have failed to beat the S&P 500 across the trailing 10-year period.
Me? I say if you can’t beat it, join it.
The Schwab S&P 500 Index Fund (SWPPX) isn’t just a cheap way to get access to the S&P 500—it’s one of the cheapest ways across both mutual funds and ETFs alike, charging a razor-thin expense ratio of just 0.02%. It’s harder to get much closer to free than that.
The S&P 500 is a collection of the largest and most dominant American companies. To be selected for this stock market index, a company must have a market capitalization of at least $20.5 billion, its shares must be highly liquid (shares are frequently bought and sold), at least 50% of its outstanding shares must be available for public trading, it must have positive earnings in the most recent quarter, and the sum of its previous four quarters must be positive. Once a company is in the index, it doesn’t necessarily get kicked out if it fails to meet all of the criteria at some point in the future, but the selection committee would take that under consideration.
Turnover tends to be low in this Schwab index fund, as only a handful of stocks enter or leave the index in any given year. This makes SWPPX an extremely tax-efficient option for taxable investment accounts. But if you do the majority of your investing through a tax-advantaged retirement account, consider holding SWPPX there, too. Sure, you won’t enjoy a premium tax edge, but you’ll still be putting your money into one of Schwab’s best retirement funds.
Want to learn more about SWPPX? Check out the Schwab provider site.
Related: Best Schwab Funds for a 401(k)
2. Schwab Dividend Equity Fund
- Style: U.S. large-cap dividend stock
- Management: Active
- Assets under management: $537.0 million
- Dividend yield: 1.8%
- Expense ratio: 0.88%, or $8.80 per year for every $1,000 invested
Qualified dividends are taxed at the same lower rates as long-term capital gains. This is by design.
Dividends were previously taxed like bond interest, as ordinary income. But following the tech bust of 2000-02, the Bush administration changed the tax laws in an attempt to encourage more responsible behavior from both investors and the companies they invest in. The thinking was that lowering the tax on dividends would encourage more companies to pay dividends and encourage more investors to take a long-term investor mindset as opposed to a short-term gambler mindset.
It was a godsend for income investors, but let’s be clear: Dividend stocks are still woefully tax-inefficient. Long-term capital gains remain unrealized—and thus not taxable—until you sell, whereas dividends are still taxed when they are received … even if at a lower rate than in decades past.
For this reason, it’s generally going to make sense to keep dividend stocks and dividend funds in a tax-deferred retirement account. And one worthy contender is the Schwab Dividend Equity Fund (SWDSX).
Managers Wei Li, Bill McMahon, and James Serhant aim to hold dividend stocks but produce less risk than the Russell 1000 Value Index. SWDSX includes some traditional higher-than-average yielders among its largest holdings, including JPMorgan Chase (JPM) and Big Oil titans Exxon Mobil (XOM) and Chevron (CVX). But while the fund might have a dividend focus, that doesn’t mean that it’s a stodgy widows-and-orphans investment. SWDSX is full of quality blue-chip stocks with a history of consistently paying dividends, including growth names like Microsoft, which is the fund’s third-largest holding.
If you’re looking for a good collection of dividend-paying workhorses that you can own for the long term, Schwab Dividend Equity is a worthy addition to your retirement portfolio.
Want to learn more about SWDSX? Check out the Schwab provider site.
3. Schwab Global Real Estate Fund
- Style: Global real estate
- Management: Active
- Assets under management: $286.5 million
- Dividend yield: 3.3%
- Expense ratio: 0.71%, or $7.10 per year for every $1,000 invested
Real estate has been a preferred asset class since the dawn of human civilization. And today, real estate investment trusts (REITs) offer the potential for both high yield and respectable capital gains.
REITs enjoy a special tax status that allows them to avoid corporate taxation so long as they distribute at least 90% of their net profits as dividends. Because of this tax incentive, REITs tend to be one of the highest-yielding sectors and a perennial favorite among income investors.
Unfortunately, this also makes REITs very tax-inefficient, as a large percentage of the total return comes from taxable dividends. What’s more, REIT dividends are generally not classified as “qualified dividends.” Qualified dividends are taxed at the long-term capital gains rate (0%, 15% or 20% depending on your tax bracket). Non-qualified dividends are taxed as ordinary income, like bond interest, and can face rates as high as 37%, depending on your bracket. Thus, it makes more sense to hold REITs and REIT funds in a tax-advantaged fund like a 401(k) or IRA rather than a taxable brokerage account.
Schwab investors looking for real estate exposure could consider the Schwab Global Real Estate Fund (SWASX). The fund is a diversified REIT fund with a global presence. Approximately 60% of the fund is invested in American REITs, with the rest scattered across Europe, Asia, Australia, and Canada. The portfolio has minimal exposure to the office sector, which has been affected by work-from-home policies, and is most heavily allocated to diversified, retail, and industrial properties.
This is a growth-focused real estate fund that focuses on total return, including both capital gains and income. But its 3.3% current yield is mighty competitive in a world in which the S&P 500 yields only 1.2%.
Another reason to consider SWASX for your retirement account? Turnover. There is no precise, universally accepted threshold for what constitutes “a lot” of active trading, but I would consider any fund with portfolio turnover over 30% or so to be fairly tax-inefficient. The higher that number goes, the more inefficient the fund. Schwab Global Real Estate has annual turnover of about 85%. All of that trading creates capital-gains distributions, but you can snuff out the IRS consequences in a tax-advantaged account.
Want to learn more about SWASX? Check out the Schwab provider site.
Related: 9 Best Schwab ETFs to Buy [Build Your Core for Cheap]
4. Schwab Small-Cap Equity Fund
- Style: U.S. small-cap stock
- Management: Active
- Assets under management: $624.8 million
- Dividend yield: 0.2%
- Expense ratio: 1.09%, or $10.90 per year for every $1,000 invested
An old Wall Street maxim says “you never go broke taking a profit.” There is a lot of wisdom in that quote. As a general rule, buying and holding good stocks or good funds and allowing them to compound over years or even decades is the way to go. But having at least part of your portfolio in actively traded strategies can also make sense, particularly in bear markets. Actively traded strategies have their stretches when they outperform passive index strategies, and they can potentially help you to avoid major declines.
But as mentioned before, active trading strategies are tax-inefficient. And you see a lot more of that in the world of small-cap equities. Because smaller companies are often younger companies, the small-cap space tends to move quickly. Successful companies “graduate” to mid- or even large-cap status, and those that are unsuccessful often disappear altogether. So it’s common to see a lot of turnover.
Case in point, check out Schwab Small Cap Equity Fund (SWSCX), managed by Wei Li, Iain Clayton, and Holly Emerson. Their 370-stock portfolio has a turnover of 106%, effectively meaning that each year, on average, the entire portfolio turns over (and then a little more on top).
Small-cap stocks have lagged their large-cap peers in recent years, as the market has been dominated by the “Magnificent Seven” mega-cap stocks. Still, SWSCX has managed to return an annualized 9.9% since inception, and that’s not too shabby. Also, while the strategy itself is pretty aggressive compared to other strategies, among small-cap blend funds, it actually presents pretty average-level risk.
Want to learn more about SWSCX? Check out the Schwab provider site.
Related: 7 High-Quality, High-Yield Dividend Stocks
5. Schwab U.S. Aggregate Bond Index
- Style: U.S. intermediate-term bond
- Management: Index
- Assets under management: $5.4 billion
- SEC yield: 4.5%*
- Expense ratio: 0.04%, or 40¢ per year for every $1,000 invested
Most investors need some exposure to bonds, which is debt that’s issued by governments, companies, and other entities. Their interest payments and relative lack of volatility make them an excellent tool for providing a portfolio with stability and income.
But how much bond exposure you need will vary by age. They’re not great for generating wealth, which is your prime concern when you’re younger, but they’re outstanding for protecting wealth, which becomes increasingly pivotal as you age. So generally speaking, when you’re younger, you’ll want to be primarily invested in stocks … and as you get older, you’ll want to go lighter on stocks and start buying more bonds.
You might not want to buy individual bonds, however. Data and research on individual issues is much thinner than it is for publicly traded stocks. And some bonds have minimum investments in the tens of thousands of dollars. So, your best (and most economical) bet is to buy a bond fund, which allows you to invest in hundreds or even thousands of bonds with a single click.
One of the best Schwab retirement funds you can buy for this access is the Schwab U.S. Aggregate Bond Index Fund (SWAGX), which holds a whopping 10,500 debt issues. At the moment, 44% of the portfolio is in U.S. government bonds, another 25% is in mortgage-backed securities (MBSes), and 24% is in corporate bonds. The rest is peppered around other government-related bonds, municipal bonds, and other debt.
SWAGX’s maturities range from less than a year to more than 20 years. Meanwhile duration—a measure of interest-rate sensitivity—is 5.9 years, implying that a 1-percentage-point hike in interest rates would result in a 5.9% decline in the fund, and vice versa. In short, this is moderate interest-rate risk, which is perfectly acceptable for a basic core bond holding like this.
* SEC yield reflects the interest earned across the most recent 30-day period. This is a standard measure for funds holding bonds and preferred stocks.
Want to learn more about SWAGX? Check out the Schwab provider site.
Related: Best Schwab Funds to Hold in an HSA
6. Schwab Balanced Fund
- Style: Moderate allocation
- Management: Active
- Assets under management: $709.8 million
- Dividend yield: 2.2%
- Expense ratio: 0.50%, or $5.00 per year for every $1,000 invested
Schwab Balanced Fund (SWOBX) and other funds like it go by many names: “Balanced funds.” “Allocation funds.” “Portfolios-in-a-can.” Regardless of the moniker, what they do is all the same—they hold both stocks and bonds, giving you access to a pair of core assets in a single investment.
SWOBX specifically is a moderate allocation fund—one that currently holds a roughly 60/40 split between stocks and bonds/cash.
Managers Zifan Tang, Patrick Kwok, and Drew Hayes achieve their blends not with individual stocks and bonds, but with a small collection of Schwab funds. At the moment, roughly half of assets are invested in U.S. equities, another 10% are in international equities, Meanwhile, virtually all of its bond holdings come from SWAGX, meaning you’re getting exposure to U.S. government bonds, investment-grade corporate debt, MBSes, and SWAGX’s other holdings.
Allocation funds like Schwab Balanced are an ultra-simple way to get stock and bond coverage in the click of a button. Indeed, if you wanted, this Schwab retirement fund could act as your entire portfolio—but only if its stock/bond allocations make sense for achieving your financial goals. SWOBX alone might be too conservative for most investors; if that’s the case for you, it might make more sense as part of a more broadly diversified holdings set.
Turnover is low at under 10%, so capital-gains distributions aren’t much of a worry here. However, Schwab Balanced does generate a decent amount of interest income from its bond portfolio, so an IRA, HSA, or other tax-advantaged account would still make a fitting home.
Want to learn more about SWOBX? Check out the Schwab provider site.
Related: Best Schwab Retirement Funds for a 401(k)
7. Schwab Target-Date Funds
- Style: Target-date
- Management: Active
- Expense ratio: Schwab Target Funds: 0.26%-0.59%, or $2.60-$5.90 per year for every $1,000 invested; Schwab Target Index Funds: 0.08%, or 80¢ per year for every $1,000 invested
One of the challenges in retirement planning is getting the asset allocation right, or having an asset class mix that is appropriate for an investor at your age and stage of life. An ideal portfolio for a 20-year-old is likely going to be very different from that of a 40-year-old, and both those portfolios will be different from what’s ideal for a 60-year-old.
That’s where target-date funds can really add value.
Target-date funds—also called life-cycle funds—are a type of mutual fund that are designed to change their asset allocation over time. Target-date funds start out invested heavily in stocks, then slowly reduce their stock exposure and replace it with bond exposure as they approach their target retirement date, following a glide path.
The target retirement dates are intended to be estimates; they don’t have to be super precise. Generally, most mutual fund families will create target-date funds in five-year increments (say, 2025, 2030, 2035, etc.).
And given the hyper-specific focus on retirement, target-date funds tend to be a mainstay of 401(k) and other retirement plans.
Schwab offers two target-date fund series, both of which hold various funds to provide exposure to U.S. and international stocks and bonds:
- Schwab Target Funds: These hold a collection of actively managed and index funds. While most of Schwab Target Funds’ holdings are other Schwab mutual funds, they will also hold funds from outside providers, including Dodge & Cox and Baird.
- Schwab Target Index Funds: These primarily hold Schwab ETFs.
In general, all of these Schwab retirement funds tend to be economical, but the Schwab Target Index Funds are flat-out cheap, at just 0.08% in annual expenses. And at least as far as Morningstar Medalist ratings go, the Target Index series is considered the better of the two, earning a Bronze rating.
Also worth noting is that Schwab Target Index Funds, despite the name, do have human managers: currently, they are Zifan Tang, Patrick Kwok and Drew Hayes.
Want to learn more about Schwab’s target-date funds? Check out the Schwab provider site.
Related: 7 Best Vanguard Retirement Funds [Start Saving in 2025]
Schwab Funds for Retirement: Frequently Asked Questions (FAQs)
What is the minimum investment amount on Schwab mutual funds?
Schwab is one of the most friendly fund companies for beginners. That’s not just because both its mutual funds and ETFs sport below-industry-average expense ratios, but because you don’t need much money to invest in them in the first place. Most Schwab mutual funds have no investment minimum—you can literally start with as little as $1.
That’s extremely beneficial in self-directed accounts like an IRA. Many mutual funds from other providers require high minimums in the thousands of dollars, hamstringing investors with little capital to work with.
What are index funds?
There are two kinds of funds: actively managed funds and index funds.
With an actively managed fund, one or more managers are in charge of selecting all of the fund’s holdings. They’ll likely have a specific strategy to adhere to, and they’ll be tasked with beating a benchmark index, but they’ll be given a lot of discretion about how to achieve that. These managers will identify opportunities, conduct research, and ultimately buy and sell a fund’s stocks, bonds, commodities, and so on.
An index fund, on the other hand, is effectively run by algorithm. The fund will attempt to track an index, which is just a group of assets that are selected by a series of rules. The S&P 500 and Dow Jones Industrial Average? Those are indexes with their own selection rules. Index funds that track these indexes will generally hold the same stocks, in the same proportions, giving you equal exposure and performance (minus fees) to those indexes.
If you guessed that it’s more expensive to pay a conference room full of fund managers than it is a computer that tracks an index, you’d be right. That’s why actively managed funds tend to cost much more in fees than index funds.
And that’s why ETFs are generally cheaper. Most (but not all) mutual funds are actively managed, while most (but not all) ETFs are index funds.
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