Ways people use the Schwab PCRA in their 401(k)
The Schwab PCRA turns part of your 401(k) into a brokerage account you direct, with an advisor if you want one. Here is what that makes possible, compared with trying to do the same thing outside your 401(k). Figures are for 2026.
Taxes on what you do inside the account
Trade without a tax bill today
Sell an investment at a gain in a regular brokerage account and you may owe tax that year. Inside the Schwab PCRA in your 401(k), you can change investments and rebalance with no tax due at the time of the trade. Dividends and interest stay in the account untaxed too. Tax comes later, when money is paid out of your 401(k). We don't give tax advice, so check your own numbers with a tax preparer. If you want someone to look at this for your 401(k), we can help you find an advisor.
Put the tax-heavy holdings where tax is deferred
Some investments create a tax bill every year, like bond interest. Others mostly wait until you sell. If you have savings both inside and outside your 401(k), where you hold each kind can change what you pay in tax. The Schwab PCRA in your 401(k) has a wide enough list that the tax-heavy holdings can often sit inside, where the income is not taxed along the way. What belongs where depends on your whole picture. If you want someone to look at this for your 401(k), we can help you find an advisor.
How much you can put in and direct yourself
Self-direct the big bucket
In 2026 you can put up to $24,500 into a 401(k), and more if you are 50 or older. An IRA takes $7,500. So if you want to choose your own investments with tax-advantaged money, the biggest bucket you have is probably the one at work. The Schwab PCRA in your 401(k) is how you direct it yourself, if your 401(k) allows it and you meet its minimums. If you want someone to look at this for your 401(k), we can help you find an advisor.
Catch-up at 50, and a bigger one at 60 to 63
Turning 50 raises your 401(k) limit. In 2026 the extra amount is $8,000, for a total of $32,500. If you are 60 to 63 and your 401(k) offers it, the extra amount is $11,250. One new rule: if your Social Security wages from your employer were over $150,000 last year, the extra dollars must go in as Roth. Where allowed, those dollars can be invested through the Schwab PCRA in your 401(k). Your tax preparer can explain the Roth effect. If you want someone to look at this for your 401(k), we can help you find an advisor.
The saver's credit, in its last year
Not every money advantage is for big balances. If your 2026 income is under $40,250 as a single filer or $80,500 as a married couple, the federal saver's credit can give back part of what you put into your 401(k). This is its last year in this form. In 2027 it becomes a deposit into your retirement account. It works with or without the Schwab PCRA in your 401(k). A tax preparer can tell you if you qualify. If you want someone to look at this for your 401(k), we can help you find an advisor.
Roth
Roth with no income limit
Earn too much and the Roth IRA door closes. In 2026 it starts closing at $153,000 for single filers and $242,000 for married couples. A Roth 401(k) has no income limit and a much higher ceiling. If your 401(k) offers Roth and allows Roth dollars in the Schwab PCRA in your 401(k), you can choose the investments yourself. Whether Roth or pre-tax fits you is a tax question for your preparer. If you want someone to look at this for your 401(k), we can help you find an advisor.
The mega backdoor Roth
Some 401(k)s have two switches most people never notice. One allows after-tax contributions on top of the usual $24,500. The other allows those dollars to be converted to Roth inside the 401(k). With both, total 2026 contributions from you and your employer can reach $72,000. If Roth dollars are allowed in the Schwab PCRA in your 401(k), you can direct them yourself. Many 401(k)s have neither switch, and the tax details matter. If you want someone to look at this for your 401(k), we can help you find an advisor.
Convert to Roth without leaving
Moving pre-tax money to Roth usually means having it in an IRA first. Some 401(k)s let you convert inside the 401(k) while you are still working. The amount you convert is taxed as income that year, and it cannot be undone. After that, the money stays in your 401(k), and where Roth dollars are allowed in the Schwab PCRA in your 401(k), you can direct it yourself. How much to convert, if any, is a question for your tax preparer. If you want someone to look at this for your 401(k), we can help you find an advisor.
Clear the way for a backdoor Roth IRA
High earners sometimes use a two-step move to fund a Roth IRA. It gets taxed if you also hold pre-tax IRA money, because the IRS counts all your IRAs together. A 401(k) is not counted. Some 401(k)s accept pre-tax IRA money, and once inside, it can be invested through the Schwab PCRA in your 401(k) under the usual minimums. This one has real tax traps, so talk with a tax preparer first. If you want someone to look at this for your 401(k), we can help you find an advisor.
Help and what it costs
Bring your own advisor
Most people think an advisor can't help with 401(k) money until they retire or change jobs. Schwab's own page says otherwise: "Your plan may even allow them to manage your PCRA." If your 401(k) allows it, an advisor you choose can manage the Schwab PCRA in your 401(k) while you are still working. Schwab's form lets the advisor trade. It never lets them withdraw. Not every 401(k) has switched this on. If you want someone to look at this for your 401(k), we can help you find an advisor.
The advisor's fee may come out of the account
If you pay an advisor out of pocket, you pay with money that has already been taxed, and that fee is no longer deductible. Some 401(k)s let an advisor's fee for managing the Schwab PCRA in your 401(k) come out of the account itself, with pre-tax dollars. Some don't. The trade-off is that a fee taken from the account leaves less invested. Your tax preparer can tell you what it means for you. If you want someone to look at this for your 401(k), we can help you find an advisor.
Keep the core funds and add the PCRA
Using the Schwab PCRA in your 401(k) is not all or nothing. Your regular funds stay available, and most 401(k)s ask you to keep some money in them. Many people use both: the regular funds for part of their savings and the PCRA for investments the menu doesn't offer. Costs differ from one investment to the next, and your 401(k)'s fee notice lists them. An advisor can help you compare. If you want someone to look at this for your 401(k), we can help you find an advisor.
What you can own
More to choose from than the menu
Your 401(k) menu is short on purpose. The Schwab PCRA in your 401(k) is the longer list. Where your employer allows the full range, that can mean individual stocks, ETFs, thousands of mutual funds, Treasuries and CDs, all inside your 401(k). Some employers limit it to funds. Nobody at work reviews what you pick, and Schwab says the account is for knowledgeable, experienced investors, so it is not for everyone. If you want someone to look at this for your 401(k), we can help you find an advisor.
Lock in income as retirement gets close
A bond fund has no end date. A Treasury or a CD does. Where your employer allows them, the Schwab PCRA in your 401(k) can hold individual Treasuries and CDs that come due in the years you choose. Some people near retirement line them up one year after another. The interest is not taxed until you take money out of your 401(k). Prices can fall if you sell early, and how to set one up is a question for an advisor. If you want someone to look at this for your 401(k), we can help you find an advisor.
Income strategies on stocks you hold
A few 401(k)s allow limited options trading in the brokerage account. Where the employer permits it and Schwab approves, the Schwab PCRA in your 401(k) can be used for covered calls, protective puts and cash-secured puts, and nothing beyond those. The money received is not taxed along the way. These strategies have real risks, including having your shares sold, and many 401(k)s don't allow them at all. This is one for experienced investors and their advisors. If you want someone to look at this for your 401(k), we can help you find an advisor.
What staying in the 401(k) keeps
The age 55 rule
Here is a rule many people learn too late. If you leave your employer in or after the year you turn 55, the IRS lets you take money from that 401(k) without the 10% early withdrawal penalty. IRAs do not get this rule. They wait until 59 and a half. The Schwab PCRA in your 401(k) gives you a wide choice of investments while your money stays where the age 55 rule applies. Income tax still applies. If you want someone to look at this for your 401(k), we can help you find an advisor.
Federal creditor protection
Money in an employer's 401(k) is generally protected from creditors by federal law, with no dollar cap. IRAs are protected too, but differently. In bankruptcy, the IRAs you funded yourself are covered up to about $1.7 million, and outside bankruptcy each state sets its own rules. The Schwab PCRA in your 401(k) is 401(k) money, so the federal protection comes with it. This is general information, not legal advice, and an attorney can tell you how it applies to you. If you want someone to look at this for your 401(k), we can help you find an advisor.
No required withdrawals while still working
At 73 the IRS makes you start taking money out of IRAs, working or not. A 401(k) at the job you still hold is different. If you don't own more than 5% of the company, you can generally wait until the year you retire. Meanwhile the Schwab PCRA in your 401(k) lets you keep choosing how that money is invested. Roth 401(k) dollars have no required withdrawals in your lifetime. Your tax preparer can confirm your dates. If you want someone to look at this for your 401(k), we can help you find an advisor.
You can still borrow
People sometimes worry that using the Schwab PCRA in your 401(k) means giving up the loan feature. It doesn't. If your 401(k) offers loans, they are still there. The general limit is half your vested balance, up to $50,000. The loan comes from your regular funds, so money in the PCRA may need to be sold and moved back first. IRAs don't allow loans at all. Borrowing has costs and risks of its own. If you want someone to look at this for your 401(k), we can help you find an advisor.
Your match does not change
A common worry: "If I use the brokerage account, do I lose my match?" No. Your match is based on what you contribute from each paycheck. Moving money you already have into the Schwab PCRA in your 401(k) changes where it is invested, not what you contribute. One detail to check is that some 401(k)s don't let you move employer money until it is vested. Your 401(k)'s summary document has the rule. If you want someone to look at this for your 401(k), we can help you find an advisor.
Nothing has to be cashed out
Some people think the only way to take control of 401(k) money is to take it out. Cashing out means 20% withheld for federal tax, income tax on the whole amount, and usually a 10% penalty before 59 and a half. Moving money into the Schwab PCRA in your 401(k) is a transfer inside your 401(k). It is not a withdrawal, so there is no tax and no penalty for the move itself. Investments can still lose value. If you want someone to look at this for your 401(k), we can help you find an advisor.
One place for old accounts
Many people have a 401(k) or two left at old jobs. You have choices for each one: leave it, move it to an IRA, cash it out and pay the tax, or ask whether your current 401(k) accepts it. If yours does, that money could then be invested through the Schwab PCRA in your 401(k), under the same minimums as the rest. Each choice changes costs, investments and rules, so none is right for everyone. If you want someone to look at this for your 401(k), we can help you find an advisor.
Your spouse is protected by default
Here is a quiet difference between a 401(k) and an IRA. In most employer 401(k)s, your spouse is your beneficiary by law unless they sign a consent to name someone else. An IRA simply follows the form on file, even an old one. Money in the Schwab PCRA in your 401(k) is 401(k) money, so the same rule covers it. It is worth checking your beneficiary forms every few years. An estate attorney can answer questions about your family. If you want someone to look at this for your 401(k), we can help you find an advisor.
For executives
Diversify around company stock (executive)
If much of your net worth is tied to your employer's stock, your 401(k) may be the easiest place to balance it. The Schwab PCRA in your 401(k) can hold investments chosen to offset what you already own, and they can be adjusted as shares vest with no tax due on the trades. One caution: if your 401(k) holds company stock, selling it inside can give up a tax break called NUA, so ask a tax preparer first. If you want someone to look at this for your 401(k), we can help you find an advisor.
Outside the 3.8% surtax (executive)
Above $200,000 of income for a single filer, or $250,000 for a couple, investment gains in a regular account can carry a 3.8% federal surtax on top of capital gains tax. Trades inside a 401(k) are not counted for that surtax while the money stays inside. The Schwab PCRA in your 401(k) lets you make those trades with a full brokerage menu, where your employer allows it. Withdrawals are taxed later as income. Your tax preparer can size this for you. If you want someone to look at this for your 401(k), we can help you find an advisor.
A trust, not a promise (executive)
If you have a deferred compensation arrangement, it helps to know how it differs from your 401(k). Deferred comp is your employer's promise to pay you later. Your 401(k) is held in a trust for you, apart from the company's own assets. Many executives treat the 401(k) as the flexible piece, and the Schwab PCRA in your 401(k) gives it a full brokerage menu. How the two fit together is a job for a licensed advisor and a tax preparer. If you want someone to look at this for your 401(k), we can help you find an advisor.
2026 rules for high earners (executive)
Three 2026 numbers matter if you earn more. First, if your Social Security wages from your employer topped $150,000 last year, any catch-up contributions must be Roth. Second, ages 60 to 63 can add $11,250 where the 401(k) offers it. Third, total contributions from you and your employer can reach $72,000. Where Roth dollars are allowed, the Schwab PCRA in your 401(k) lets you direct them yourself. A tax preparer can map these to your pay. If you want someone to look at this for your 401(k), we can help you find an advisor.
The trade-offs, too
- Withdrawals are taxed as ordinary income. Pre-tax 401(k) money comes out at ordinary rates, not capital gains rates.
- No tax-loss harvesting. A loss inside the 401(k) gives no deduction.
- Market risk is real. What you buy in the PCRA can lose value, and nobody at your employer watches what you pick.
- Costs. Schwab charges no account fee, but your 401(k) may, some trades cost money, and an advisor charges for advice.
- Minimums and limits. Each 401(k) sets its own rules for how much can go in and what you can buy. Your fee notice and plan documents show them.
Everything on this page is general education, not advice for you. Tax rules have exceptions; a tax professional can confirm how they apply to you. Your 401(k)'s own documents govern. Sources.
Have a question?
Ask us anything about the Schwab PCRA in your 401(k). We answer every question, usually the same day. Got an email from Aimee? Just reply to it.