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Schwab Launches Retirement Income Variable Annuity(tm), Expanding Retirement Income Solutions for Investors

SCHW | February 6, 2013

Schwab Launches Retirement Income Variable Annuity™, Expanding Retirement Income Solutions for Investors

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 Morningstar¹– 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 expenses², 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.

Half of Americans say they don’t understand what an annuity is and seventeen percent say their initial reaction to the word “annuity” is “complicated.” There’s also an uncertainty about who to turn to for advice on the product, although survey respondents said they are most likely to turn to a financial advisor or planner (34 percent) for more information on annuities.

“The instrumental role that annuities can play in a retirement income portfolio makes it essential for investors to better understand how they potentially fit into their investment plans,” notes Valenzuela. “Our survey shows that most investors lack a basic understanding of annuities and that more education is needed.”

The Schwab Retirement Income Variable Annuity is available through Schwab branches nationwide. Additional information about the Schwab Retirement Income Variable Annuity is available at schwab.com/annuities or by calling (888) 311-4889. For clear and actionable guidance on how to plan an overall income generation strategy that fits your retirement goals, Schwab has nine Retirement Income Fundamentals that help ease the transition from saving for retirement to spending in retirement available at www.schwab.com/incomefundamentals.

About the Survey

The Charles Schwab Retirement Survey was conducted by Koski Research between January 3 and 7, 2013, using Random Digit Dialing of listed and unlisted numbers, with 20 percent of the sample reached by cellular/mobile phones. Quotas are set to ensure reliable and accurate representation of the entire U.S. population ages 18 and over. Results of any sample are subject to sampling variation. The magnitude of the variation is measurable and is affected by the number of interviews and the level of the percentages expressing the results. The study’s margin of error is +/- 3.1 percent.

About Charles Schwab

The Charles Schwab Corporation (NYSE:SCHW) is a leading provider of financial services, with more than 300 offices and 8.8 million active brokerage accounts, 1.6 million corporate retirement plan participants, 865,000 banking accounts, and $1.95 trillion in client assets as of December 31, 2012. The company was ranked ‘Highest in Investor Satisfaction With Self-Directed Services’ in the 2012 US Self-Directed Investor Satisfaction Study^SM from J.D Power and Associates. Through its operating subsidiaries, the company provides a full range of securities brokerage, banking, money management and financial advisory services to individual investors and independent investment advisors. Its broker-dealer subsidiary, Charles Schwab & Co., Inc. (member SIPC, www.sipc.org), and affiliates offer a complete range of investment services and products including an extensive selection of mutual funds; financial planning and investment advice; retirement plan and equity compensation plan services; compliance and trade monitoring solutions; referrals to independent fee-based investment advisors; and custodial, operational and trading support for independent, fee-based investment advisors through its Advisor Services division. Its banking subsidiary, Charles Schwab Bank (member FDIC and an Equal Housing Lender), provides trust and custody services, banking and lending services and products. Investment products offered by Charles Schwab & Co., Inc. are not insured by the FDIC, are not deposits or obligations of Charles Schwab Bank, and are subject to investment risk, including the possible loss of principal invested. More information is available at www.schwab.com and www.aboutschwab.com. (0213-1179)

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Disclosures

Variable annuities are sold by prospectus only. Before purchasing a variable annuity, you should carefully read the prospectus and consider all risks, charges and expenses associated with the annuity, its investment objective and its investment options. You can request a prospectus by calling 1-888-311-4887 or by visiting www.schwab.com/annuity.

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

All guarantees under the Schwab Retirement Income Variable Annuity are subject to the financial health and claims-paying ability of Pacific Life, not Schwab.

The Guaranteed Lifetime Withdrawal Benefit (GLWB) is an optional rider available for an additional cost. The protected payment base is not a contract value and is not available for withdrawal like a cash value. Your actual contract value and death benefit will deplete with each withdrawal, though you may continue to withdraw the specified annual protected amount for life, even after the account value has been depleted to zero. Withdrawals in excess of the annual protected payment amount may permanently reduce the protected payment base.

Variable annuities are long-term investment vehicles designed for retirement purposes and offer tax deferral on potential growth; however, withdrawals prior to age 59½ may be subject to a 10% Federal tax penalty in addition to applicable income taxes. Variable annuities are also subject to a number of fees including mortality and risk expense charges, administrative fees, premium taxes, investment management fees, and charges for additional optional features. Although there are no surrender charges on the variable annuities offered by Schwab, such charges do apply in the early years of many contracts

The Schwab Retirement Income Variable annuity is issued by Pacific Life Insurance Company in all states except New York and in New York by Pacific Life & Annuity Company. The contracts are sold exclusively by Charles Schwab & Co., Inc. (“Schwab”) through its representatives including both employees and independent contractors and their employees (“Schwab Financial Consultants”). Charles Schwab Investment Management, Inc. (CSIM) is the adviser for the underlying investment options. Charles Schwab & Co., Inc. and Charles Schwab Investment Management, Inc. are separate but affiliated companies and subsidiaries of The Charles Schwab Corporation and are not affiliated with Pacific Life Insurance Company or Pacific Life and Pacific Life & Annuity Company.

The Schwab Center for Financial Research is a division of Charles Schwab & Co., Inc.

¹ Source: 1.34% industry average base annuity fee according to a December 31, 2012 Morningstar survey of 1,925 variable annuities. This does not include fees associated with the optional guaranteed lifetime withdrawal benefit or underlying investment options.

² Tax penalties may apply prior to age 59 1/2 and withdrawals in excess of the protected payment amount may significantly and permanently reduce your future income