Many Americans who are planning to retire view the process of managing income as complicated and cumbersome. Charles Schwab thinks it has a solution.
Schwab announced Wednesday that in January it will launch Schwab Intelligent Income, which it says is designed for people who want a straightforward way to pay themselves in retirement — or at any other time — from their investment portfolios.
The service will answer questions about how much to withdraw, how to invest based on individual goals and time horizon and how to withdraw from a combination of taxable, nontaxable and Roth accounts in a tax-smart way.
This offering comes at a time when Americans within five years of retiring said in response to a survey that they were overwhelmed by several concerns:
- 72%: running out of money in retirement
- 57%: determining how much they can spend in retirement
- 54%: managing the tax implications of withdrawing from multiple accounts
The survey found that pre-retirees were more burdened by retirement income-related concerns than by classic financial challenges such as buying a home, paying for college and losing a job.
Logica Research conducted the online poll from June 27 to July 16 among 1,000 Americans 55 and older with $100,000 or more in investable assets.
“The transition from diligent saving and investing to creating steady income from that portfolio can be overwhelming,” Jonathan Craig, head of investor services at Charles Schwab, said in a statement.
“Schwab Intelligent Income solves the complexity of doing it on your own and removes the friction inherent in other income services by providing a flexible, low cost, and smart way to generate a predictable paycheck from your portfolio.”
Schwab said Schwab Intelligent Income would use the firm’s robo-advisor for portfolio management. It will project, manage and automate multiple retirement income streams for no additional fee. Its features include the following:
- A tax-smart approach will implement a withdrawal strategy across taxable, IRA and Roth IRA accounts, required minimum distribution considerations, tax-loss harvesting, dividends and income. It will also automatically rebalance a portfolio back to the investor’s target asset allocation as money is distributed from the portfolio.
- A real-time digital dashboard will enable investors to view their portfolio, recurring withdrawal and the probability of meeting their withdrawal goals, with the flexibility to forecast and make changes based on their income needs.
- The service will provide guidance on generating a predictable monthly withdrawal based on the investor’s specific financial situation, delivered through a customized, tax-efficient and low-cost automated approach that keeps investors on track. Schwab said investment professionals would be available around the clock year-round.
- Income will be deposited automatically into a Schwab High Yield Investor Checking account (linked to a Schwab One brokerage account) or into any other external bank account.
- Investors will have flexibility to stop, start and adjust withdrawal amount, frequency and deposit location without penalty.
- The tool will provide ongoing monitoring and alerts that assess real-time portfolio performance against the plan and notify clients if their monthly withdrawal rate is at risk based on market movements or other factors.
Schwab said that on top of Intelligent Income, it will make available the premium version of the firm’s robo-advisor for investors who want a comprehensive financial plan and unlimited guidance from a certified financial planner. This would include annuities, which is not a component in Schwab Intelligent Income, according to a spokeswoman.
Fine With Digital
Tobin McDaniel, senior vice president of digital advice and innovation at Charles Schwab, noted in the statement that 73% of pre-retirees in the survey said they were comfortable using technology to manage their retirement income.