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Annuities: Charles Schwab: Saving for Retirement Income


A Schwab Financial Consultant can work with you to see if anannuity— ​and the steady, secure income stream itprovides— ​would complement your retirement income plan.

Keep in mind that Schwab’s variable annuity fees are 30%–50% below the industry average.¹


All guarantees are based on the financial strength and claims-paying ability of the issuing insurance company (not Schwab).

Request more annuity information by mail.

If you have an existing variable annuity, use our Variable Annuity Expense Analyzer to see how much you could save by exchanging it for a low-cost Schwab annuity.

Before considering an exchange of your current annuity, carefully consider surrender charges on your existing contract, loss of guaranteed benefits, and differences in features, costs, services, and company strength, as well as other factors that could reduce or eliminate the benefit of an exchange.


Annuities are contracts between you and an insurance company that can provide you income through a unique combination of investment and insurance features. Annuities can complement other retirement plans and, depending on what type you select, they may provide guaranteed lifetime income, opportunities for tax-deferred growth, flexible withdrawals, and legacy protection for your beneficiaries. Guarantees subject to the financial strength and claims-paying ability of the issuing insurance company.

When purchasing an income annuity your assets become a guaranteed income stream for life, or for a specific period of time. Many clients purchase income annuities to cover their essential expenses, as defined by them, in retirement. For an additional cost, income annuities may offer a cost-of-living-adjustment, increasing your income each year, to help address inflation risk.

Charles Schwab offers two types of income annuities: Single premium immediate annuities and deferred income annuities. The key difference between these two product types is when income begins. For single premium immediate annuities income generally begins “immediately”, whereas deferred income annuities, the income doesn't begin for at least 13 months from your last premium payment, but may be deferred by up to 40 years.

Fixed annuities, sometimes referred to as fixed deferred annuities, provide guaranteed asset growth at a fixed rate for a specific time period. The growth is tax-deferred which can help you accumulate more assets instead of paying taxes during the accumulation phase, and your assets are protected from market uncertainty. If you choose to receive guaranteed income, you can choose income for life or for a specific time period.

With a variable annuity, investments, often called sub-accounts, are chosen from within the annuity. The performance of the investments determines the value of the account and subsequently, the amount of income you will receive. The growth of the investments is tax-deferred which can help you accumulate more, instead of paying taxes during the accumulation phase. If you choose to receive guaranteed income, you can choose income for life or for a specific time period.

What is the difference between fixed and variable annuities?

A fixed annuity provides the stability of a fixed, guaranteed rate of return while variable annuities have the potential for tax-deferred growth and a chance to participate in the market through a variety of professionally managed portfolios. Guarantees subject to the financial strength and claims-paying ability of the issuing insurance company.

What kinds of annuities does Charles Schwab offer?

Charles Schwab offers income annuities (single premium immediate annuities and deferred income annuities), fixed deferred annuities and low-cost variable annuities¹ with an optional guaranteed lifetime withdrawal benefit (GLWB).

Income annuities provide guaranteed lifetime income or income for a specific period of time that you choose. A single premium immediate annuity provides income “immediately.” A deferred income annuity provides income at a future date that you select.

Fixed deferred annuities deliver guaranteed growth and principal protection of your assets.  

Low-cost variable annuities1 may provide (a) guaranteed lifetime income, (b) guaranteed death benefit options, (c) a variety of investment options, and (d) tax-deferred growth potential.

When might an annuity be a good option for your situation?

Depending on your needs, annuities may be a good addition to your financial plan.

Income annuities
may be a fit if you're seeking a guaranteed, steady stream of income you can't outlive. The guaranteed lifetime income may help cover essential expenses in retirement, as defined by you, regardless of how long you live. If you need income "immediately", a single premium immediate annuity may be right for you. If you need income in the future, a deferred income annuity may be more appropriate.

A fixed deferred annuity may be a good fit if you are looking for guaranteed growth, principal protection, and have other funds for near-term (at least three-years) liquidity needs.

Low-cost variable annuities1 through Schwab offer the ability to withdraw your assets at any time without surrender charges2, and may provide protection of lifetime income for you and your spouse with an optional guaranteed lifetime withdrawal benefit3, available for an additional cost. Additionally, variable annuities provide the potential for tax-deferred investment growth, and, with an optional death benefit, may provide you with the confidence in knowing your assets are protected for your beneficiaries4.

A Schwab Financial Consultant can help you determine which annuities would fit your financial plan. If you already have an annuity and feel it may not be meeting your current needs, a Schwab Financial Consultant can perform an analysis to determine whether it may make sense to exchange your current annuity to one at Schwab.

Before deciding to replace your existing contract, however, please consider any surrender charges on your existing contract; possible loss of guaranteed

benefits; differences in features, costs, services, and company strength; and other factors which could reduce or eliminate the benefit of the exchange.

What should I be aware of?

Annuity fees will vary depending on the product. Typically you will see insurance charges (pays for the guarantees that the insurance company provides), surrender charges (charges on an early withdrawal based on the time period of the policy or cancellation of the policy), investment fees (pays for the management of the underlying investment options), and fees for optional living benefits or optional death benefits. 

Withdrawals from an annuity will reduce the value of your annuity, and withdrawals of taxable amounts are subject to ordinary income tax. Also, note that withdrawals prior to age 59½ may be subject to a 10% Federal tax penalty. 

The performance of the underlying investment options are subject to market fluctuation and are not guaranteed.

A Schwab Financial Consultant can help you determine which annuities may fit your retirement strategy.

Annuity earnings are tax-deferred during the accumulation phase, which means you do not pay taxes on any earnings each year; you pay taxes on earnings only when you withdraw your money. Any withdrawals of taxable amounts are taxed as ordinary income, and you may be subject to a 10% Federal tax penalty if you take them before age 59½.

How might annuities benefit my heirs?

Annuities have death benefits and optional death benefits. Optional death benefits are available for an additional cost.

An account value death benefit will provide your beneficiaries the amount of your remaining contract value, if any.

A return of premium or purchase payments death benefit provides your beneficiaries with the greater of the account value or the total premium payments less withdrawals. Premium taxes may apply.

A stepped-up death benefit offers you the potential to lock in market gains for your beneficiaries. Adjustments are made for additional premium payments and withdrawals.

Variable annuities are sold by prospectus only. You can request a prospectus by calling 888-311-4887 or by visiting schwab.com/annuity. Before purchasing a variable annuity, you should carefully read the prospectus and consider the investment objectives and all risks, charges, and expenses associated with the annuity and its investment options.

1. Base annuity fee of 0.65% for the Schwab OneSource Choice Variable Annuity and base annuity fee of 0.60% for the Schwab Retirement. Income Variable Annuity compared to the 1.34% industry average according to a February 29, 2016, Morningstar survey of 2,141 variable annuities. This does not include fees associated with the optional death benefits, GLWB, or underlying investment options. 2. Withdrawals prior to age 59½ may be subject to a 10% Federal tax penalty, in addition to applicable income taxes.

3. A guaranteed lifetime withdrawal benefit is not a contract value and is not available for withdrawal like a cash value. The actual contract value will deplete with each withdrawal.

4. Optional death benefits will generally terminate if the contract is annuitized.

Variable annuities are long-term investment vehicles designed for retirement purposes. 

The value of a variable annuity may be more or less than the premiums paid and it is possible to lose money.

Charles Schwab & Co., Inc., a licensed insurance agency, distributes certain insurance and annuity contracts that are issued by insurance companies that are not affiliated with Schwab. Not all products are available in all states.

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Brokerage and insurance products: Are not deposits • Are not FDIC-insured • Are not insured by any federal government agency • Are not guaranteed by the bank or any affiliate of the bank • May lose value

1. Base variable annuity fees of 0.60% for the Schwab Retirement Income Variable Annuity® and 0.65% for the Schwab OneSource Choice Variable Annuity™, as compared to the industry average of 1.34%, according to a February 29, 2016 Morningstar survey of 2,141 variable annuities. This does not include fees associated with underlying investment options or optional riders such as guaranteed lifetime withdrawal benefits and/or death benefits, as applicable.

Variable annuities are sold by prospectus only. Before purchasing an annuity, you should carefully read the prospectus and consider its investment objectives and all the risks, charges, and expenses associated with the annuity and its investment options. For this and other information and to request a prospectus, call Charles Schwab & Co., Inc. at 888-311-4889 or click here.

Pacific Life is a product provider. It is not a fiduciary and therefore does not give advice or make recommendations regarding insurance or investment products. Only a financial consultant can advise if the product purchase and any subsequent action taken with regard to the product are in the client’s best interest.

Great-West Life & Annuity Insurance Company and Great-West Life & Annuity Insurance Company of New York do not offer or provide investment, fiduciary, financial, legal, or tax advice, or act in a fiduciary capacity, for any client unless explicitly described in writing

.

Variable annuities are long-term investment vehicles designed for retirement purposes. The value of a variable annuity may be more or less than the premiums paid, and it is possible to lose money. Variable annuities offer tax deferral on potential growth.

Withdrawals prior to age 59½ may be subject to a 10% federal tax penalty in addition to applicable income taxes.

Charles Schwab & Co., Inc., a licensed insurance agency, distributes certain insurance and variable annuity contracts that are issued by insurance companies not affiliated with Schwab. Not all annuity contracts are available in every state.

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Category: Annuity

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