Variable annuities

Variable annuities at Schwab provide tax-deferred savings options

A variable annuity is a long-term investment issued by a life insurance company that may provide unlimited, tax-deferred growth potential, guaranteed1 lifetime income, guaranteed2 death benefit options, and a variety of investment options. Like other tax-deferred savings plans, a variable annuity helps you grow, protect, and manage savings in a tax-advantaged way.

View the key differences between variable annuities (non-qualified assets) and other tax-deferred retirement plans below:

 

Variable annuities

IRA, Roth IRA, Keogh, 401(k)

Contribution free from IRS limits

Yes

No

Tax-deferred investment earnings

Yes

Yes3

Pre-tax contribution

No

Potentially

Contribution reduces taxable income

No4

Potentially5

Distribution taxed as regular income

Yes

Potentially

10% federal penalty for distribution of earnings before age 59½

Yes6

Yes7

Defer start of distributions past age 70½

Yes

No8

Guaranteed* death benefit

Potentially9

No10

Guaranteed living benefit

Potentially11

No12

*Guarantees subject to the financial strength and claims-paying ability of the issuing insurance company, not Schwab.
Same as above.

Schwab's Annuity Concierge Service for Advisors delivers specialized support

Schwab offers dedicated support of the variable annuities we provide through the Schwab Annuity Concierge at no additional cost. This team of licensed annuity professionals is available to assist through all phases of the annuity process: from helping you choose which annuity best fits your client, to supporting the 1035 exchange13 process, to ongoing servicing of existing annuity contracts. The Schwab Annuity Concierge completes the suitability assessment and other essential documentation to ensure each annuity is consistent with the financial goals and investment objectives you have established with your clients.

Schwab offers a choice of variable annuities

Schwab offers two variable annuities from well-known carriers that may provide unlimited, tax-deferred growth potential and a wide selection of professionally managed investment choices to help you tailor asset allocation plans to fit your clients' needs.

Visit the Introduction to variable annuity products offered through Schwab section of the Service Guide for a detailed comparison of both variable annuities we offer—Schwab Advisor Choice Variable Annuity (from Great-West Financial) and Pacific Odyssey Variable Annuity (from Pacific Life).

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This material may not be forwarded or made available, in part or in whole, to any party that is not an institutional investor.

Variable annuities are registered products that are sold by prospectus only. Prospectuses can be obtained by calling 888-667-2145 (option 2). Before purchasing, your customers should carefully read the prospectus and consider its investment objectives and all risks, charges, and expenses associated with the annuity and its investment options.

  1. Guarantees are subject to the terms and conditions of the contract and the claims-paying ability of the insurer and do not apply to the separate account or the underlying investment options available with this contract. Schwab does not provide any insurance guarantees.
  2. Same as above.
  3. Roth IRA earnings are tax-free if the distributions meet certain requirements.
  4. Contributions reduce taxable income if the variable annuities were purchased in a qualified retirement plan, such as a 401(k), or an IRA. The decision to purchase an annuity within a qualified plan or IRA should not be based on the annuity's tax deferred accrual feature as this is already provided by the qualified plan or IRA itself.
  5. A regular IRA reduces taxable income only within certain income guidelines and under certain circumstances. A Roth IRA does not reduce taxable income.
  6. Subject to certain exceptions.
  7. Same as above.
  8. Roth IRA owners may defer start of distributions past age 70½.
  9. The strength of the guaranteed death benefit depends on the claims paying ability of the issuing insurance companies. Death Benefit features may vary among variable annuity contracts and may be subject to an additional cost. 
  10. Assumes the IRA, Roth IRA, Keogh, or 401(k) is not funded with a variable annuity contract.
  11. Living Benefit features may vary among variable annuity contracts and may be subject to an additional cost.
  12. Assumes the IRA, Roth IRA, Keogh, or 401(k) is not funded with a variable annuity contract.
  13. Section 1035 of the Internal Revenue Service code allows for the tax-free exchange of one annuity contract for another. Before initiating exchange of an existing annuity, there are a number of important factors to consider which could reduce or eliminate the benefit of the exchange. These include surrender charges on the existing contract, loss of guaranteed benefits, and differences in features, costs, services, and company strength. Consider surrender charges that may apply upon terminating an annuity contract. These charges may reduce or eliminate the benefits of a transfer.

Pacific Life refers to Pacific Life Insurance Company and its affiliates, including Pacific Life & Annuity Company. Insurance products are issued by Pacific Life Insurance Company in all states except New York and in New York by Pacific Life & Annuity Company. Product availability and features may vary by state. Each insurance company is solely responsible for the financial obligations accruing under the products it issues. Insurance product and guarantees, including optional benefits and any fixed subaccount crediting rates or annuity payout rates, are backed by the financial strength and claims-paying ability of the issuing insurance company and do not protect the value of the variable investment options. They are not backed by the broker/dealer from which this annuity is purchased, the insurance agency from which this annuity is purchased, or any affiliates of those entities, and none makes any representations or guarantees regarding the claims-paying ability of the issuing insurance company.

Pacific Life variable insurance products are distributed by Pacific Select Distributors, LLC (member FINRA & SIPC), a subsidiary of Pacific Life Insurance Company (Newport Beach, CA), and an affiliate of Pacific Life & Annuity Company, and are available through licensed third parties.

Pacific Life Contract Form Series: 10-17800, 10-178OR (state variations may apply). Rider Series: 20-13500 (state variations may apply), ICC18:20-1425, ICC18:20-1426 (state variations may apply)

Effective as of June 1, 2019, Great-West reinsured a block of its individual life insurance and annuity non-NY business to Protective Life Insurance Company ("PLICO") and its individual life insurance and annuity NY business to Protective Life and Annuity Insurance Company ("PLAIC"). Both PLAIC and PLICO are subsidiaries of Protective Life Corporation. After a transition period where Great-West will continue to service this business, each of PLAIC and PLICO have agreed to provide, on behalf of Great-West, administration and policyholder servicing of the reinsured business. PLAIC will provide such service for the New York business and PLICO will provide such service for the non-New York business.

GWFS Equities, Inc., Member FINRA/SIPC, is the principal underwriter for the Schwab Advisor Choice Variable AnnuityTM (Form ICC14-J466-J466 Series), flexible premium variable annuity contracts issued by Great-West Life & Annuity Insurance Company (GWL&A). GWL&A is not authorized to transact the business of insurance in New York. These variable annuity contracts are not available in all states. GWFS Equities, Inc. is a subsidiary of GWL&A. In New York, the Schwab Advisor Choice Variable AnnuityTM (Form J466ny Series) is issued by GWL&A of NY. GWFS Equities, Inc. is an affiliate of GWL&A of NY. Charles Schwab & Co., Inc. is the selling broker-dealer and insurance agency and is not affiliated with GWL&A, GWL&A of NY or GWFS Equities, Inc. Great-West Financial® is a marketing name of Great-West Life & Annuity Insurance Company, Great-West Life & Annuity Insurance Company of New York and their subsidiaries and affiliates. RO943422-0919

Charles Schwab & Co., Inc. is the selling broker-dealer and insurance agency and is not affiliated with GWL&A, GWL&A of NY, GWFS Equities, Inc. (collectively "Great-West Financial®"), Pacific Life Insurance Company or Pacific Life & Annuity Company. The contracts are sold exclusively by Charles Schwab & Co., Inc. ("Schwab") through its representatives. All individuals selling this product must be licensed insurance agents and registered representatives. 

Charles Schwab & Co., Inc. is a licensed insurance agency and distributes annuity contracts and other insurance products that are issued by leading insurance companies that are not affiliated with Schwab. Not all products are available in all states.

Because a variable annuity's value will fluctuate depending on the performance of the underlying portfolios, an investor's units, when redeemed, may be more or less than the original amount invested. 

Annuities may be subject to insurance company limitations as referenced in the prospectus. Some annuities can be purchased as an individual retirement account and are therefore subject to IRS limitations. 

When your clients invest in an annuity, they do not invest directly in the annuity portfolios. Your clients invest in subaccounts of the life insurance company that, in turn, invest in the portfolios they've selected. Their account is then credited with variable accumulation units in that subaccount. The fees and charges associated with the subaccounts and the terms and conditions of the investment are detailed in the prospectus for the annuity. Your clients should read the prospectus carefully before investing. 

Fixed interest choices offer a fixed rate of return if held to maturity. If surrendered early, the original fixed account value may increase or decrease depending upon whether any fees or penalties apply.