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SCHWAB ANNOUNCES NO-ANNUAL FEE INDIVIDUAL RETIREMENT ACCOUNT AND LIFETIME GUARANTEE FOR QUALIFYING INVESTORS

 SCHWAB ANNOUNCES NO-ANNUAL FEE INDIVIDUAL RETIREMENT ACCOUNT
 AND LIFETIME GUARANTEE FOR QUALIFYING INVESTORS
 SAN FRANCISCO, April 2 /PRNewswire/ -- Charles Schwab & Co., Inc. today announced changes in its Individual Retirement Account fee schedule designed to make it easier for individuals -- irrespective of income level -- to take advantage of tax-deferred compounding as they save for retirement.
 Effective immediately, the company is:
 -- removing its $22 annual maintenance fee on new and existing Individual Retirement Accounts (IRAs) with at least $10,000 in assets by Sept. 30, 1992, and
 -- offering customers who qualify for the no-fee account a lifetime guarantee that they never again will have to pay a maintenance fee on a Schwab IRA.
 Schwab is instituting the new no-fee schedule as part of its ongoing commitment to offer its customers the broadest possible product line at affordable rates.
 "Retirement planning and the future viability of the Social Security system are two great concerns for millions of American workers," stated Charles R. Schwab, chairman and chief executive officer of the Charles Schwab Corporation. "As a result, IRAs continue to be favored as an attractive saving vehicle -- both for the millions of Americans who can deduct their contribution as well as those who cannot.
 "An important element in asset-building is the tax-deferred compounding that IRAs provide. Washington lawmakers recognize that fact and have made several attempts in the past few years to enact changes in the tax law aimed at liberalizing IRA rules. We believe our action will highlight the attractive investment opportunities that IRAs still represent for millions of Americans even those not eligible for full deductibility of contributions."
 The company pointed out that although the significant growth in IRAs from 1981 to 1986 was attributed to individual contributions, growth from 1986 to present has been the result of rollovers from employee benefit plans.
 Schwab expects strong future growth because IRAs are one of the only ways for many Americans to maintain the tax-deferred growth of payments received from employee benefit plans -- as a result of changing jobs, layoffs, a merger or changed ownership, or even termination of the plan. According to the IRA Reporter, most of 1990s IRA contributions reflect rollovers from employee benefit plans. The Investment Company Institute estimates that 7 million Americans are expected to receive $86 billion in lump-sum payments during 1992 that could be reinvested into IRA rollover accounts.
 Jeffrey Lyons, vice president of marketing, expects rollover IRAs to continue to provide a large pool of new business. "Rollover IRAs enable investors to preserve tax-free compounding and avoid current taxation on the distribution," he says. "We expect to see a significant number of rollovers from bank IRAS, as individuals seek access to a wider range of investment vehicles that have historically earned higher rates of return than traditional savings instruments like CDs. Our new no-annual fee policy will give qualifying investors a greater potential return."
 Lyons cites the growth that can be achieved by an individual who receives a $100,000 lump-sum distribution compared with a person who rolls the same sum into an IRA:
 -- An individual younger than 59-1/2 who takes the distribution - Ineligible for forward averaging, this person pays an initial federal tax of 41 percent, leaving $59,000 to invest, and faces an ongoing federal marginal tax rate of 31 percent on earnings. Assuming a 10 percent annual return, compounded monthly, the person would have $117,397 in 10 years or $233,594 in 20 years -- without additional contributions.
 -- An individual over 59-1/2 who takes the distribution and applies forward averaging - This person is left with $85,000 after paying an initial averaging tax of 15 percent, and faces the same 31 percent federal marginal tax rate on earnings. The same 10 percent annual return would provide $169,131 in 10 years or $336,534 in 20 years.
 -- An individual who rolls the distribution into an IRA - Because there is no initial tax rate and no ongoing federal tax rate, the individual continues to have $100,000 to invest. A federal marginal tax rate of 31 percent is in effect at withdrawal. The 10 percent annual growth results in total assets after 10 years of $186,786 and after 20 years of $505,637.
 "Given the question marks that exist today, it is essential that Americans preserve the tax-favored status of their retirement savings through rollovers." Lyons says, "The benefits of compounding are much more pronounced over time."
 Schwab is one of the nation's largest brokerage firms with 162 offices in 43 states and over $51 billion in customer assets.
 -0- 4/2/92
 /CONTACT: Caroline Luz or Benjamin Cheney of Ogilvy Adams & Rinehart, 212-557-0100, for Charles Schwab/ CO: Charles Schwab & Co., Inc. ST: California IN: FIN SU:


PS -- NY008 -- 4210 04/02/92 09:01 EST
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Publication:PR Newswire
Date:Apr 2, 1992
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