Variable Annuities

For variable annuities you will typically see insurance charges (pays for the guarantees that the insurance company provides), surrender charges (charge on an early withdrawal based on a the time period of the policy or cancellation of the policy), investment fees (pays for the management of the underlying investment options), and, if elected, fees for optional living benefits or optional death benefits (fees that pay for the guarantees that the optional benefits provide).

Variable annuities offered by Charles Schwab do not have surrender charges. 

There are two ways to receive guaranteed lifetime income: 1. Converting your assets into a series of periodic payments (annuitization) for life or a specific period of time. There is no cost for this option and you give up control of your assets. 2. For an additional cost you can choose an optional living benefit that provide guaranteed income for life, the ability to control your assets and remain invested in the market.

Withdrawals from an annuity will reduce the value of your annuity, and withdrawals of taxable amounts are subject to ordinary income tax. Withdrawals prior to age 59½ may be subject to a 10% Federal tax penalty. For nonqualified contracts, an additional 3.8% tax may apply on net investment income.

The performance of the underlying investment options is subject to market fluctuation and are not guaranteed. The contract value of the annuity may be more or less than the premiums paid and it is possible to lose money.

Withdrawals will reduce the death benefit amount in direct proportion to the percentage by which the contract value was reduced. This can increase or decrease the amount deducted from the death benefit.

A Schwab annuity specialist can help you determine which annuity might fit your retirement strategy.