Schwab Annuity Review

The Schwab Retirement Income Variable Annuity is the firm’s lowest-cost variable annuity option. Provided through Pacific Life, the annuity requires an initial investment of $50,000, with a maximum issue age of 85. 

As a variable annuity, this product invests your assets in one of the Schwab VIT Portfolios (Balanced, Balanced With Growth or Growth), or Schwab's Government Money Market Portfolio. Primarily invested in exchange-traded funds (ETFs), the portfolios offer exposure to various market sectors and asset classes. Compared to a fixed annuity, your account has the potential to grow more in value and your benefit payments can be larger during years when your investments perform well. But you also run the risk of seeing those payments fall during market downturns. 

For an additional fee, you have the option to add an Income Generator benefit. If you’re single, this rider allows you to lock in annual retirement income worth 5% of the highest value your contract reaches on any anniversary date. That rate is 4.5% for married couples. This rider protects your income even during times when your investments don’t perform very well.

There's also the Future Income Generator benefit. This allows annuitants to apply a 7% simple interest credit to their base payment for up to 10 years or when they make their first withdrawal. There's also a feature within this that allows you to receive an automatic reset that will lock in market performance for your future income.

But you can’t add these riders if you choose one of the two optional death benefits. The standard death benefit (that comes with the annuity at no additional cost) will give your beneficiary the remaining value of your annuity. The first optional death benefit has an additional cost, as it guarantees the contract value of your total investments, after withdrawals. There's also a stepped-up benefit that guarantees the highest value of your account on your contract anniversary before age 81.

Fees

The base annual fee for this contract is 0.60%, as this rate covers mortality and expense risk fees and administrative fees. Like any investment product, your annuity also bares expenses associated with the funds in your account, as these can vary from 0.54% to 0.57%. In addition, there are fees for optional riders:

Schwab uniquely doesn’t impose surrender fees, which are typically charged in conjunction with withdrawals that are made too early within a contract's life, as dictated by the annuity company. However, any withdrawals made before age 59.5 may be subject to a 10% IRS penalty, on top of ordinary income taxes.

Realistic Return Expectations 

As with all variable annuities, your returns depend on the performance of your investment portfolio and any fees and expenses that may cut into your balance. Schwab VIT Portfolios invest in various exchange-traded funds (ETFs) and mutual funds based on your specific risk tolerance. These funds generally offer exposure to domestic and international stocks and fixed income and cash investments. To a limited extent, they also may provide exposure to alternative asset classes such as real estate and commodities.

With a Schwab Genesis Variable Annuity, clients will be able to invest their funds across a wide variety of 60 investment funds. These funds are managed by a number of popular investment firms, including Fidelity, Franklin Templeton, Invesco, PIMCO, Goldman Sachs and more. Each of these funds comes with its own investment strategy, with some being riskier than others. As a result, management fees for these funds are different.

This contract also offers a guaranteed lifetime withdrawal benefit called SecurePay Life. For an extra fee, this benefit rider will guarantee your annuity income for life, in addition to locking in your gains on each benefit anniversary before annuitization.

The standard, pre-annuitization death benefit for this contract is equal to your account value, minus any taxes or withdrawals. But you can upgrade this benefit with a rider called the Return of Purchase Payments Death Benefit. If you choose to buy this extra feature, your death benefit payout will increase to the greater of your current account value or your total purchase payments, minus withdrawals and taxes.

This annuity is underwritten by Protective Life Insurance Company. The minimum contribution is $5,000, and the maximum issue age is 85.

Fees 

Fees associated with the Schwab Genesis Variable Annuity start with a 0.45% annual fee that covers mortality, expense risk and administrative charges. Depending on the investment fund you choose, your portfolio operating expense will be anywhere from 0.03% to 1.44%. Then, if you add on the SecurePay Life rider, you'll be charged another 1.10%, while the optional Return of Purchase Payments Death Benefit will run you 0.20%.

Additionally, withdrawals made before age 59.5 may be subject to a 10% IRS penalty, on top of ordinary income tax. 

Realistic Return Expectations

At its core, a variable annuity is an investment product. Therefore, its returns are extremely unpredictable, given that it relies on the market for its performance. While certain benefit riders can help ensure you have strong income in retirement, a variable annuity still has risk associated with its potentially high gains.

The Protective Indexed Annuity II is a deferred, fixed indexed annuity. It protects your nest egg by paying a rate linked to either a predetermined fixed return or the return of the S&P 500 Index. The guaranteed periods available for this contract are five and seven years. The annuity requires a minimum initial purchase of $10,000 and the maximum issue age is 85. If you begin your annuity payments after the 10th anniversary of your contract, you may receive a 2% income bonus.

You can divvy up your money between the fixed interest and fixed indexed crediting strategies and make changes on the anniversary of each contract. Money allocated to the fixed interest rate option will be credited interest daily during the guaranteed period. Following the expiration of the guaranteed period, the firm will reset the interest rate on the contract anniversary. 

For index-linked accounts, the indexed rate is capped during the guarantee period. This rate cap is determined within your contract. If the index is negative throughout an entire period, you will not lose any money. Instead, you just won't see any gains.

This annuity comes with a standard death benefit, which guarantees to pay to your beneficiaries the greater of your contract value or guaranteed minimum surrender value if you die before you started receiving payments. When it’s time to start receiving payments, you have five options: lifetime income, specific term, lifetime income with a specific term, lifetime income with a cash refund and lifetime income with an installment refund.

For an extra fee, this annuity can also include a protected lifetime income benefit called SecurePay SE. This provides lifetime retirement income with guaranteed withdrawals at least annually, as well as guaranteed account value growth based on a 7% interest roll-up for up to 10 years.

Fees

While there are no front-end or annual maintenance charges, you will be charged for the SecurePay SE benefit rider. The annual rate for this bonus feature is 0.85%.

Also, if you make any withdrawals beyond the 10% of your contribution within the first year or more than 10% of the account value after the first year and before the end of the end of the guaranteed period, you will have to pay a surrender charge. These go as follows:

Additionally, withdrawals made before age 59.5 may be subject to a 10% IRS penalty, on top of ordinary income tax. 

Realistic Return Expectations 

Your expected rate of return depends on which crediting strategies you choose. If you go with the fixed interest rate, the least risky option, you will have the lowest potential for growth. Ideally, you will keep pace with inflation. If you go with the index-linked options, you have more potential for growth - though not as much as you would if you put your money in the actual stock market. You will likely keep pace with inflation - and maybe then some. Fees for optional riders will also cut into your rate of return.

The New York Life Guaranteed Future Income Annuity II is one of two deferred income annuities that Charles Schwab offers. In exchange for a lump sum or series of premium payments, you will be guaranteed an annual payout rate for the rest of your life, depending on your age and start date. Generally, the longer you wait, the higher the rate you’ll receive.

For when you start receiving an income stream, there are four payout options. They are: 

• Life Only: With this option, payments continue until death or death of surviving spouse in the case of joint accounts.
• Life With Period Certain: This allows you to receive payments for life. But if you die during a set period of 10 to 30 years, your beneficiary will continue to receive payments until the end of the period. If you live past the period, payments continue until death. For joint accounts, the beneficiary would receive payments if the period has not ended when both account holders die.
• Life With Cash Refund: With this, payments are guaranteed for the life of the account holder or holders of a joint life account. If you die before the payments you’ve received are equal to the premium paid, adjusted for withdrawals, your beneficiary will receive a lump sum equal to premium minus withdrawals. For joint life accounts, the beneficiary would receive the lump sum if both owners die before payments are at least equal to the premium paid after withdrawals.
• Life With Installment Refund: This guarantees payments for the life of the account holder or holders of a joint life account. If the owner or owners of a joint life account die before they’ve received payments equal to the premium paid, their beneficiary will receive the remaining installments until the premium is met.

If you’re purchasing these annuities with qualified assets such as those taken from a qualified retirement plan, you can take out a Qualified Longevity Annuity Contract (QLAC). This may provide you with certain tax benefits.

The minimum initial contribution is $100,000. Subsequent minimum payments are $100. The maximum age to buy an annuity is 70 years for qualified retirement plan money and 80 years for non-qualified, QLAC and Roth IRA accounts. You can defer receiving payments for 13 months, up to 40 years.

Fees 

This annuity has no front-end or annual maintenance fees. Since you cannot surrender or withdraw your money from this kind of annuity, there are no surrender fees either. The only additional fees are if you add any riders, such as optional death benefits.

Also, if you start receiving payments before age 59.5, you may incur a 10% penalty from the IRS, on top of income tax.

Realistic Expectations of Return

The longer you live, the better your return, of course. While you generally won't gain much money from this type of annuity, you could, in theory, make more back if you choose lifetime payments and you outlive your premiums.

Provided by Massachusetts Mutual Life Insurance Company, MassMutual Stable Voyage is one of three fixed deferred annuities offered by Schwab. Like a certificate of deposit (CD), this type of annuity guarantees an interest rate for a guaranteed period. If you withdraw money beyond the allowed amount during the guarantee period, you will pay a surrender charge. 

The minimum purchase amount is $100,000 and the maximum issue age is 85 years. The annuity is available as three-, four- or five-year contracts. Once your contract ends, you can move your money elsewhere or renew with a new guarantee period.

Fees 

This annuity does not come with front-end or annual maintenance fees. However, after the first anniversary of your contract, you are allowed to withdraw up to 10% without paying a penalty. Any amount beyond that or within the first year of the contract will be charged the following surrender fees.

Additionally, you may incur a 10% penalty from the IRS if you withdraw money before age 59.5.

Realistic Return Expectations

When you open your contract, MassMutual will list your interest rate. Although the company doesn't publicly release its fixed rates, it's important to compare them to other similar products, like a certificate of deposit (CD). While CDs don't offer the most liquidity, their early withdrawal fees are much less restrictive than fixed annuities. So if you can manage to find a comparable CD rate, that could also be an option for you.