Annuities offer you guaranteed income for life—in any market.

Annuity Frequently Asked Questions.

How do annuities work?

With a variable annuity, investments, often called sub-accounts, are chosen from within the annuity. The performance of the investments determines the value of the account, and subsequently the amount of income you will receive. The growth of the investments is tax-deferred, which can help you accumulate more, instead of paying taxes during the accumulation phase. The performance of the underlying investment options is subject to market fluctuation and is not guaranteed. If you elect to receive guaranteed income, you can choose income for life or for a specific time period.

Fixed annuities, sometimes referred to as fixed deferred annuities, provide guaranteed asset growth at a fixed rate for a specific time period. The growth is tax-deferred, which can help you accumulate more assets instead of paying taxes during the accumulation phase, and your assets are protected from market uncertainty. If you elect to receive guaranteed income, you can choose income for life or for a specific time period.

Indexed annuities provide opportunity for growth tied to the positive performance of a market index, as well as a level of protection when market index performance is negative. However, you're not directly invested in either an index or the market. Charles Schwab offers two types of indexed annuities—fixed indexed annuities (FIAs) and registered index-linked annuities (RILAs).² Some key differences to be aware of: RILAs offer a potentially higher return in exchange for limited protection from market loss. FIAs offer lower potential return in exchange for 100% principal protection when market performance is negative. The growth is tax-deferred, which can help you accumulate more assets instead of paying taxes during the accumulation phase. If you elect to receive guaranteed income, you can choose income for life or a specific time period.

When purchasing an income annuity, your assets become a guaranteed income stream for life, or for a specific period of time. Many clients use a portion of their assets to purchase an income annuity to help cover their essential expenses, defined by them, in retirement. For an additional cost, income annuities may offer a cost-of-living adjustment, increasing your income each year, to help address inflation risk.

Charles Schwab offers two types of income annuities: single premium immediate annuities and deferred income annuities. The key difference between these two product types is when income begins. For single premium immediate annuities, income generally begins "immediately," whereas for deferred income annuities, the income doesn't begin for at least 13 months after your last premium payment, but may be deferred by up to 40 years.

Guarantees are subject to the financial strength and claims-paying ability of the issuing insurance company.

What kinds of annuities does Charles Schwab offer?

Charles Schwab offers variable annuities, fixed annuities (fixed deferred annuities), indexed annuities (fixed indexed annuity and registered index-linked annuity) and income annuities (single premium immediate annuities and deferred income annuities).

Variable annuities provided through Schwab offer (a) low costs, with no surrender charges³ and base annuity fees that are 35%–65% below the industry average,¹ (b) guaranteed lifetime income, (c) guaranteed death benefit options, (d) a variety of investment options, and (e) tax-deferred growth potential.

Fixed annuities (fixed deferred annuities) deliver guaranteed growth and principal protection for your assets.

Indexed annuities (fixed indexed annuities and registered index-linked annuities) may provide (a) market-capped growth, (b) a level of principal protection for your assets, (c) guaranteed lifetime income, (d) a guaranteed death benefit option, and (e) tax-deferred growth potential. Some key differences to be aware of: Registered index-linked annuities offer a potentially higher return in exchange for limited protection from market loss. Fixed indexed annuities offer lower potential return in exchange for 100% principal protection when market performance is negative. 

Income annuities provide guaranteed lifetime income or income for a specific period of time that you choose. A single premium immediate annuity provides income "immediately." A deferred income annuity provides income at a future date that you select.

When might an annuity be a good option for your situation?

Depending on your needs, annuities may be a good addition to your financial plan.

Variable annuities provided through Schwab offer competitive pricing, with no surrender charges³ and base annuity fees that are 35%–65% below the industry average.¹ 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 10 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 of knowing your assets are protected for your beneficiaries.⁵

Fixed annuities (fixed deferred annuities) may be a good fit if you are looking for guaranteed growth, principal protection, and have other funds for liquidity needs (for at least 3 to 10 years).

Indexed annuities (fixed indexed and registered index-linked annuities) provide an opportunity for growth rate tied to the positive performance of a market index, as well as a level of protection when market index performance is negative. Some key differences to be aware of: registered index-linked annuities offer a potentially higher return in exchange for limited protection from market loss. Fixed indexed annuities offer lower potential return in exchange for 100% principal protection when market performance is negative. The fixed indexed annuities offered through Schwab can also provide lifetime income for you and your spouse with an optional guaranteed lifetime withdrawal benefit,⁴ available for an additional cost. Finally, indexed annuities offer a guaranteed death benefit to help provide you with the confidence in knowing your assets are protected for your beneficiaries.⁵

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.

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. 

What should I be aware of?

Annuity fees will vary depending on the product. Some products have 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 and death benefits.

Withdrawals from an annuity will reduce the value of your annuity and the death benefit. Withdrawals of taxable amounts are subject to ordinary income tax and if made prior to age 59½ may be subject to a 10% federal tax penalty. 

Early withdrawals may be subject to surrender charges and/or market value adjustment. Additionally, with a registered index-linked annuity (RILA), which is a complex insurance and investment vehicle, if you take a withdrawal prior to the end of the index term, an Interim Value calculation is used. The Interim Value does not reflect the actual performance of the applicable index. Refer to the RILA product prospectus for more details.

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

With a RILA, there is a risk of loss of principal if negative index returns exceed the selected protection level. Gains or losses are assessed at the end of each term. 

A Schwab Annuity Specialist can help you determine which annuities may fit your retirement strategy.

How are annuities taxed?

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.

How do annuities compare to other retirement options?

Charles Schwab offers various financial tools to help you with your retirement and planning. Work with your Financial Consultant to determine which product or products are a good fit for you.

How might annuities benefit my heirs?

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.

What goes into getting an annuity?

A Schwab Annuity Specialist can help you determine which annuities may fit your retirement strategy.