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All About Annuities (Infographic Courtesy Of Charles Schwab & Co., Inc. 0912-5784)

Investors seeking an easy-to-understand, low-cost retirement funding option that can generate guaranteed income for life can now consider the new Schwab Retirement Income Variable Annuity (SRIVA), Charles Schwab announced today.

The new Schwab Retirement Income Variable Annuity, featuring an optional guaranteed lifetime withdrawal benefit (GLWB), was developed for investors seeking a low-cost, easy-to-understand variable annuity that offers a guaranteed income stream, investment diversification, and professional guidance. SRIVA’s guarantees are backed by Pacific Life, one of America’s leading insurance providers.

Investors who select the SRIVA with the GLWB option are purchasing additional protection to ensure a minimum level of income for life, regardless of how the markets perform. With the GLWB, the income stream is protected in the event of a market downturn, even if the underlying portfolio value of the variable annuity drops to zero.

“For many investors, knowing the amount of money that is reliably being generated every month - regardless of the market’s impact - is invaluable,” says Tina Valenzuela, vice president of insurance services at Charles Schwab. “Variable annuities can be a great fit for addressing these concerns. Unfortunately, many annuities with a GLWB can be complicated and expensive. We’re thrilled that we’re able to offer a variable annuity with an income guarantee option that is understandable, flexible and accessible.”

With a minimum investment of $50,000, investors can purchase the Schwab Retirement Income Variable Annuity as well as an optional Guaranteed Lifetime Withdrawal Benefit rider. Benefits include:
  • Tax-deferred growth potential. Retirement savings grow tax-free until withdrawal at retirement.
  • Guaranteed income. In addition to annuitization, the optional GLWB rider allows an investor to secure an annual lifetime income stream equal to five percent of a protected payment base that locks in the highest contract anniversary value achieved since purchase of the rider.
  • Pricing. The base fee is 60 basis points – less than half of the industry average of 134 basis points, according to Morningstar 1 – and each of the underlying portfolios has an investment expense ratio of 80 basis points. The GLWB rider can be added at any time until age 85 for 80 basis points, or for 100 basis points for a joint GLWB. There are no hidden charges or surrender fees.
  • Investments and access. Schwab clients have three simple portfolios to choose from – balanced, balanced with growth and growth – each is broadly diversified and professionally managed by Charles Schwab Investment Management, Inc. If an investor’s needs change over time, he or she can transfer among these three investment choices, tax-free. With the GLWB option, investors can also access their annuity assets and withdraw them for emergencies or unexpected expenses 2, even while they are taking lifetime income (investors should be aware that the GWLB is not a contract value and is not available for withdrawal like a cash value and that their actual contract value and death benefit will deplete with each withdrawal).
  • Professional guidance. By sitting down with any of Schwab’s 1200+ financial consultants to talk about their retirement planning options, investors get tailored advice and professional help in determining whether the SRIVA or other annuity options are right for their retirement income needs.

When it Comes to Annuities, Confusion Reigns

Although Schwab’s latest retirement survey found that a majority of Americans (84 percent) want their savings to produce a steady stream of income in retirement, most investors don’t understand that annuities can be a solution. Valenzuela points out that the survey found that close to half (44 percent) of Americans grade themselves a ‘D’ or ‘F’ on their annuities awareness.

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