Annuities 101

Annuities are a retirement savings vehicle that provide protected a safe and steady way to grow your retirement savings and lifetime income that is guaranteed to last as long as you do.

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Types of Annuities

There are several types of annuity contracts to choose from. Whether you are looking for income options, a retirement savings vehicle, or legacy planning tools, My Annuity Store can help tailor to meet your specific goals.

Annuity type comparison chart

Types of Annuities

Lifetime Income

An annuity can provide you income for as long as you live through annuitization, which converts your assets into an income stream at no extra cost, or via an optional benefit rider available for an additional cost.*

Legacy Planning

An annuity can provide you the opportunity to create a living legacy by preserving funds for future generations in a tax-efficient manner.

Spousal opportunities

An annuity can be used to protect and preserve assets for a surviving spouse through death benefits and/or living benefits to sustain their ongoing lifestyle.

The Value of an Annuity

An annuity is a long-term, tax-deferred investment that is issued by an insurance company and purchased through a financial advisor. It is designed to create a customized plan for each investor’s unique needs while helping protect what matters most to them in retirement.

Annuities are Flexible

Flexible Timing

Invest a lump sum now or add money over a period of time.

Flexible Opportunities

Choose options for lifetime income, legacy planning, and spousal guarantees.

Flexible Annuity Options

Flexible withdrawals

Take withdrawals as planned. There’s an option to withdraw early, but it may come with a penalty.

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Money savings

Fixed Annuity Rates

A fixed annuity is designed to be a high-yield retirement savings account. They pay a guaranteed interest rate for a set number of years. Sometimes referred to as a “CD Type Annuity” because of the similarities between the two.

Interest

Indexed Annuity Rates

A fixed index annuity provides an opportunity to earn more interest when the markets are performing and downside protection from a potential stock market downturn.

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Frequently Asked Questions

A fixed annuity provides principal protection with the stability of a fixed, guaranteed rate of return. Fixed indexed annuities offer principal protection with the opportunity to earn an attractive capped rate of return based a preselected market index, without investing directly in the market. Variable annuities do not offer principal protection, but offer the potential for uncapped growth with the ability to participate in the market through a variety of professionally managed portfolios.

Annuity fees will vary depending on the product. Typically, you will see insurance charges (which pay 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 (which pay 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, withdrawals of taxable amounts are subject to ordinary income tax, and withdrawals may be subject to a market value adjustment. Also, note that withdrawals prior to age 59½
may be subject to a 10% federal tax penalty.
 

The performance of the underlying investment options of a variable annuity is subject to market fluctuation and is not guaranteed.
 

A My Annuity Store Specialist 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 withdrawals before age 59½.

 

Many annuities have standard 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.

A roll-up death benefit guarantees an annual growth rate credited to your contract for your beneficiaries. Adjustments are made for additional premium payments or withdrawals.

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.

Fixed deferred annuities may be a good fit if you are looking for guaranteed growth, principal protection, and have other funds for liquidity needs (at least three to ten years).

Fixed indexed annuities allow you to protect your principal with the opportunity to generate market-capped growth, and may provide protection of lifetime income for you and your spouse with an optional guaranteed lifetime withdrawal benefit,3 available for an additional cost. Additionally, fixed indexed 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 beneficiaries.4

Variable annuities provided through Schwab offer competitive pricing, with no surrender charges² and base annuity fees that are 30%-60% below the industry average1. For an additional cost, an optional living benefit can provide guaranteed lifetime income based on your original investment or annual gains or, depending on the annuity and rider elected, the opportunity to increase your future income for up to ten years while you prepare for retirement. Finally, 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 Annuity Specialist 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 Annuity Specialist can perform an analysis to determine whether it may make sense to exchange your current annuity with 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.

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