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Independent Review of the Schwab Retirement Income Variable Annuity

What will we be covering in this annuity review?

In this review of the Schwab Retirement Income Variable Annuity we will be going over the following information:

  • Product type
  • Fees
  • Current rates
  • Realistic long-term return expectations
  • How it is used
  • How it is most poorly used

Annuities can be complex. That’s where having an Annuity Investigator who loves math comes in.
We make the complex, simple.

If you have been considering the purchase of an annuity because you’re seeking tax-advantaged growth of savings, as well as the guarantee of a future income in retirement, then the Schwab Retirement Income Variable Annuity could quite possibly be a good option for you.

However, before going out and making a commitment to this annuity – or for that matter, on any annuity – it is highly recommended that you first have a good understanding of just exactly how the product works so that you know what you can anticipate.

Annuities are complex products, and the more “bells and whistles” that they offer, the more confusing they tend to be. This is the case even for well-educated consumers. Because of that, many investors aren’t really sure what they are purchasing – only to find out after they’ve locked themselves into the product, it really isn’t all that it was cracked up to be.

Unfortunately, though, by that time, it is typically much too late to get out of the annuity contract – at least not without incurring some significant surrender penalties. And going this route is definitely not the way to grow and/or protect your hard-earned savings.

That’s where the Annuity Gator comes in!

Annuity and Retirement Income Planning Information You Can Trust

If this is your first visit to our website, please allow us to welcome you here to AnnuityGator.com. We are a team of experienced financial and annuity pros who are highly focused on offering the most comprehensive, and unbiased, reviews of annuities on the planet. We’ve been doing this for many years now – much longer than our competitors – and so we have become a well-known source of annuity information on the Internet.

With that in mind, if you’ve been looking for more information about annuities online, then it is a good possibility that you have noticed there’s a lot of conflicting information out there about these products. This, however, isn’t really a surprise, because there is also a great deal of confusion about how they work, and which type of annuity may be best for certain circumstances.

You might also have attended an annuity seminar or workshop recently where, in return for a free dinner or lunch, you were provided with details about the Schwab Retirement Income Variable Annuity, or some other similar financial product.

Attending this seminar could even be the catalyst that has ultimately led you right here to our website. But even though there is literally a plethora of websites that market their annuities to consumers, there are a fair number of these sites that will also attempt to “lure” you in by making very enticing claims like:

  • High income payments
  • Lowest annuity fees
  • Guaranteed lifetime income
  • 7 – 8% Rate of Return

Does this, by chance, look familiar?

While these claims can be inviting, the truth is that it is absolutely essential that you first make sure that they are actually true. This is particularly the case if you are seriously thinking about moving a large sum of your retirement savings into one of these “featured” financial vehicles.

In any case, whatever the reason is that you landed here on our website, you are definitely in the right place right now if you want to find out more about this – or any – annuity. That’s because we provide all of the details and resources, including not just the good, but also the bad and the ugly.

This is really the only way that you will be able to make a truly well-informed buying decision (or alternatively, to make a decision to pass on this particular annuity and move on to something else that may be more suitable for your specific financial goals).

This annuity review is provided here for you in order to help you ensure that you’re moving in the right direction with this (and/or other) annuity and to guide you on what to look for in terms of the pros and the cons.

So, if you are ready to get started, let’s dive on in!

Schwab Retirement Income Variable Annuity at a Glance

Product NameRetirement Income Variable Annuity
IssuerCharles Schwab through Pacific Life
Type of ProductVariable Annuity
S&P Rating (for Pacific Life)AA-
Phone Number(800) 772-4448
Websitehttps://www.schwab.com

Opening Thoughts on the Charles Schwab Retirement Income Variable Annuity

Initially, a consumer-friendly company that allowed customers to purchase securities at a “discount” price, Charles Schwab has expanded its offerings throughout the years. Today, Schwab offers a long list of insurance and investment products, including mutual funds, Exchange Traded Funds, stocks, bonds, CDs, money market funds, options, futures, and of course, annuities.

The company has earned a long list of awards and accolades, including:

  • Ranked as #1 Broker Overall in the 2019 Investor’s Business Daily Best of the Online Brokers Survey
  • Ranked at #1 in the Customer Service, Low-Cost / Free ETF Trading, and Trade Reliability categories in the 2019 Investor’s Business Daily Best of the Online Brokers Survey
  • Ranked as one of the Top 50 companies on the 2019 “World’s Most Admired Companies” by Fortune
  • Ranked as “Best in Class” Overall in 2019 by StockBrokers.com

Schwab does not itself underwrite the annuities that it offers to its clients. Rather, they provide products via insurance carriers. In the case of the Schwab Retirement Income Variable Annuity, this product is actually underwritten by Pacific Life Insurance Company – a company that is also well respected in the insurance and financial services niche.

Pacific Life has been helping clients to grow and protect wealth for nearly a century and a half. Throughout the years, this insurer has grown and expanded, both in terms of client base and assets under management.

The company held approximately $158 billion in total assets as of year-end 2017, as well as more than $11.2 billion in equity. With more than $9.4 billion in operating revenues and operating income in excess of $774 million, Pacific Life is more than able to uphold its promises to policyholders.

Because of its strong financial footing, as well as its timely payout of policyholder claims, Pacific Life has earned high ratings from the insurer rating agencies, including the following (as of 2018):

  • A+ (Superior) from A.M. Best Company
  • A+ (Strong) from Fitch Ratings
  • A1 (Good) from Moody’s Investor Service
  • AA- (Very Strong) from Standard & Poor’s

Pacific Life is currently ranked as #313 on the 2018 Fortune 500 list, based on its gross revenue. The company is also ranked as one of the world’s most ethical companies for 2019, and in 2018 earned a DALBAR Insurance Services Award.

While variable annuities have taken somewhat of a back seat to other, safer, alternatives like fixed and fixed indexed annuities over the past decade, there is a definite niche for these products – particularly with those who are seeking the opportunity for a higher rate of return, as well as the tax-deferred growth of assets.

Before we get into the gritty details, here are some necessary legal disclosures…

This is an independent annuity product review. It is not a recommendation to purchase or to sell an annuity. Charles Schwab has not endorsed this review in any way, nor do we receive any type of compensation for providing this review. This annuity review is meant solely to be an independent review at the request of our readers so that they may see our perspective when breaking down the positives and the negatives of this particular annuity. Prior to committing to the purchase of any type of insurance and/or investment vehicle, it is critical that you do your own due diligence, and that you also talk with a properly licensed professional if you have any questions that relate to your specific situation. All of the names, materials, and marks that have been used in compiling this annuity review are the property of their respective owners.

For additional information on how to compare variable annuities so that you can decide which may be the best one for you, click here in order to obtain our free truth about variable annuities report.

How Schwab Describes the Retirement Income Variable Annuity

The Retirement Income Variable Annuity is described as a provider of a secure income stream for life – no matter how your investments perform.

This variable annuity is actually issued through Pacific Life Insurance Company, with its investments professionally managed by Charles Schwab Investment Management, Inc. As with other types of annuities, the funds that are inside of this annuity are allowed to grow on a tax-deferred basis.

This annuity provides three trust portfolios via the Schwab VIT Portfolios that offer the broad asset class and sector diversification that is required in today’s complex global economy. Each portfolio, comprised primarily of exchange-traded funds (ETFs), offers broad diversification through exposure to both domestic and international stocks, as well as fixed income, and cash investments, plus limited exposure to other asset classes such as real estate and commodities.

Your broad portfolio options consist of balanced, balanced with growth, or growth – and you can ideally choose which is best for you, based on your objectives and risk tolerance. You are also allowed to switch between portfolios, tax-free, if your investment needs change over time.

You can find additional information on the different portfolios HERE.

For an added charge, you can purchase an optional death benefit and/or Guaranteed Lifetime Withdrawal Benefit, or GLWB, which can provide you or your heirs with added financial protection. The death benefit legacy protection for your beneficiaries can be achieved with an optional Return of Purchase Payments Benefit or Stepped-Up Death Benefit.

When the time is right, the Schwab Retirement Income Variable Annuity can also provide you with a stream of income. Here, for instance, you can secure lifetime income through annuitization or by purchasing the optional Guaranteed Lifetime Withdrawal Benefit.

The GLWB allows you to lock in an annual retirement income equal to 5% of your contract’s highest anniversary value for the single life rider, or 4.5% for the joint-life rider. This can be done on any contract anniversary date after you purchase the rider.

With the GLWB rider, you can remain in the market in order to help with counteracting the effects of long-term inflation, but without jeopardizing future income. For more in-depth details on how income may be structured through the Schwab Retirement Income Variable Annuity, you can go HERE.

Before committing to an annuity contract of any kind, it is important that you have a good understanding of what your financial goals are, and how that annuity may (or may not) help you to reach those goals.

How an Insurance or Financial Professional Might “Pitch” this Annuity

Given its long list of features, it is likely that a financial or insurance advisor would describe the Schwab Retirement Income Variable Annuity as a way to enhance and grow your retirement portfolio, as well as a way to supplement your retirement income down the road.

With that in mind, remember that variable annuities are designed for doing two main things. These include growing principal and producing retirement income. But in reality, these types of annuities are not really all that good at producing income. One reason for this is because of the risk that they present to the investor, as well as to the insurance companies that offer them.

In fact, because the value of a variable annuity can – and typically does – fluctuate so much, the insurance carrier that offers it can really only guarantee a lesser amount of retirement income than that of a “safer” alternative such as a fixed annuity… for the exact same amount of money that you’ve deposited.

It seems a bit silly, then, to endure countless sleepless nights hoping that the market doesn’t “correct” itself when you may not gain any more in an equity-based product than you would with something that’s guaranteed. So, if your primary goal for purchasing an annuity is to use it for producing income in the future, then a variable annuity may not be your best option.

That being said, when it comes to the investment aspect of variable annuities, these financial vehicles can offer you the opportunity of unlimited growth. But here again, this comes with the “tradeoff” of downside risk – and in some cases, it could be a substantial amount of such risk.

In addition, variable annuities are also known for having high fees. These don’t necessarily only include an up-front commission charge, but also annual fees for account management and maintenance, as well as surrender charges if you withdraw more than 10% of the annuity’s value during its surrender period.

Taking all of this into consideration, it can be even more important than ever for you to be sure that the benefits of this – or any – annuity are well worth it. It is also essential that you know what to anticipate with this type of financial vehicle.

Annuities can be confusing products – and because of that, it is important that you know what you’re getting into, and you know what questions you should ask before moving forward. With that in mind, if you would like some additional tips on what you need to know before buying an annuity, just simply click here so that you can immediately access our free report on how to shop for an annuity.

What About the Fees on this Annuity?

One thing that most of us are familiar with is tradeoffs – and this can be especially true when it comes to financial related products. In other words, if you get a certain benefit, you may have to “pay” for it one way or another.

In the case of the Retirement Income Variable Annuity offered by Charles Schwab, there are several charges to be aware of. These may differ, depending on whether you have the annuity set up for covering one or two lives.

 Individual LifeJoint Life
Base annuity fee0.60%0.60%
Average underlying investment expenses0.62%0.62%
Guaranteed Lifetime Withdrawal Benefit (optional)0.80%1.00%
Return of Purchase Payments Death Benefit (optional)0.20%0.20%
Stepped-Up Death Benefit (optional)0.40%0.40%

For more details on the fees that are associated with this annuity go HERE.

The Annuity Gator’s End Take on the Retirement Income Variable Annuity from Schwab

Where this annuity works the best:

  • For those who are looking for the opportunity to attain market-related growth
  • For those who are seeking lifetime income
  • For those who are seeking a way to diversify their assets
  • For those seeking an additional method of leaving a legacy
  • For those who wish to obtain additional tax-deferred growth and have already maxed out their 401(k) and IRA options

Where this annuity works the worst:

  • For those who have a low-risk tolerance
  • For those who do not intend on using the lifetime income feature

In Summary

If you’ve been going back and forth with the thought of purchasing a variable annuity – or any annuity, for that matter – but you’ve been hesitant to move forward because you just aren’t sure which annuity might be right for you, it is important that you know all of the ins and the outs of a particular product before you sign on the dotted line.

This is because an annuity should always be considered as a long term financial commitment – and if you do end up determining that a particular annuity just isn’t for you after you’ve purchased it, it can be fairly expensive to get out of it.
If you’re still leaning towards the purchase of the Schwab Retirement Income Variable Annuity, then you can be assured that there are definitely some nice advantages that you could attain. However, this annuity may also fall somewhat short – particularly if you are seeking safety of your principal. With that in mind, there could be a better product that fits your specific needs.

The only way to know for sure whether or not this is the annuity for you is to have it tested. We would be happy to provide this testing for you, at no cost or obligation. So, just simply contact us here via our secure online contact form now.

Have Any Additional Questions or Concerns? Notice Any Mistakes in this Review?

We realize that this review went a bit long. So, we appreciate you sticking with us through here to the end. But we truly feel that it is much better to “err” on the side of providing “too much” information than not enough. That being the case, if you feel that this review was beneficial to you, please feel free to forward it on to anybody else who you believe would also benefit from it as well.

Also, as humans oftentimes do, we understand that information about annuities can change quickly. Therefore, if you happened to notice any details in this review that were out of date or that need correction, please let us know that as well, and we will get it fixed quickly.

Are there any other annuities that you would like to also see reviewed?

If you have checked out our list of annuity reviews and there is another annuity (or more than one other annuity) that is not currently in our annuity review database, but that you would like to see reviewed, please let us know the name of the annuity or annuities and our team of annuity “geeks” will get right on it. So, be sure to check back with us soon to see any updates.

Best,

The Annuity Gator

P.S If you would like to read more of our Schwab annuity reviews here are some links to check out:

Independent Review of the Schwab Retirement Income Variable Annuity

 

 

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