Adding a lifetime income option can upgrade the retirement-saving machine
Time to read: 5 minutes
TIAA RetirePlus® is a QDIA-eligible default solution that allows participants to convert some assets into reliable, permanent income.
Today’s saving-centric workplace retirement plans can deliver winning outcomes for millions of Americans in large part because of the care and diligence fiduciaries put in.
They’ve set up contribution-matching and curated low-cost investment line-ups. In addition, they’ve frequently implemented plan design features that automatically enroll employees, prudently invest their money, and ratchet up contributions over time.
However, despite having built a powerful savings machine to help participants prepare for the future, plan sponsors and consultants increasingly recognize that even diligent employees may have neither a clear sense of how to manage and spend their savings when reaching retirement, nor adequate tools to help them.
One solution unites the strength of defined contribution (DC) plans in helping people save, with the best of the defined benefit (DB) plans—easy access to dependable income that lasts for life. Such next-generation target date strategies include
Upgrading plans to include lifetime retirement income
Perhaps because pensions were once more common, employees tend to believe their plans may include access to guaranteed retirement income, when in fact the plans may not—more than half of employees say they don’t know for sure.1
The lack of access to permanent income can let workers down at a vulnerable stage of life, especially given that today’s retirees are living longer and must fund their lifestyle for more years than their parents did. A 65-year-old couple has a nearly 50% chance that at least one of them will reach age 95.2
In addition to providing for spending needs, dependable annuity income can also help to address risks increasingly associated with longer lives, including cognitive decline that complicates complex financial management, and fraud that will only become more sophisticated and widespread. Furthermore, by securing a permanent income floor to cover regular expenses, retirees can opt to invest their remaining assets more aggressively with the hope that the money will grow. The net result could be that they leave a bigger estate to heirs than had they not annuitized.
More retirement spending money per dollar saved
Another benefit of guaranteed fixed annuity income: more cashflow, and more money to spend—even if a retiree hasn’t been able to save as much as they’d hoped. Why? Because lifetime fixed annuity income rates have historically been higher than 4%, which is the typical amount retirees are advised they can safely withdraw from savings in the first year of retirement.3
Consider the cashflow differences between two common retirement income strategies:
- Strategy A: The standard, 4% systematic withdrawal. This well-known approach involves withdrawing 4% of total savings in the first year, then recalibrating based on inflation in subsequent years.
- Strategy B: Annuitizing some savings + 4% withdrawal. We compare annuitizing one-third of total savings (reasonable for someone not expecting a pension) using
TIAA Traditional, our flagship fixed annuity, then applying the 4% withdrawal on their remaining portfolio balance.
In 2026, Strategy B would deliver 30% more money to a first-year retiree. With one million dollars in savings, that amounts to nearly $1,000 per month more to spend, since it provides $51,867 instead of the $40,000 of a standard 4% withdrawal.
Because TIAA aims to reward long-term contributors, many TIAA participants get even more when they annuitize, since many have been contributing to
An exclusive feature, called the TIAA Loyalty Bonus®, offers long-term contributors a higher income rate at the time of annuitization.5 Generally speaking, the longer an employee has contributed to
Bridging the income gap with TIAA RetirePlus
TIAA offers in-plan annuities in numerous ways, to allow flexibility for the unique needs and requirements of plan sponsors. One option is
Doing so provides employees with the option for lifetime income option directly in the default solution.
By evolving the default to include an income option, plan sponsors can help ensure their participants are saving and investing effectively—and well positioned for security that endures throughout their retirement years.
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1 AgingWellHub at Georgetown University & TIAA Institute. "Young Adults Personal and World Outlook Survey," June 2023.
2 Based on TIAA dividend mortality tables as of Jan. 1, 2025.
3 Historical annuity annual payout rates are from immediateannuities.com’s Comparative Annuity Reports (January 2026). The highest single premium immediate annuity (SPIA) rates for 65-year-old single male and female annuitants, with a guaranteed 10 years of payouts whether the annuitant lives or dies during that period, have ranged between 5% and 8.5% since 2002.
4 The 2026 Annuity Payout Advantage is hypothetical and for illustrative purposes only. The Annuity Payout Advantage calculation uses the TIAA Traditional “new money” income rate for a single life annuity (SLA) with a 10-year guarantee period at age 67 using TIAA’s standard payment method beginning income on March 1, 2026. Individual results may vary. Example: Participants A and B both are aged 67 and had retirement savings balances of $1 million as of March 1, 2026. Participant A withdrew 4% ($40,000) in year 1. Participant B made a one-time transfer to TIAA Traditional and selected an SLA with a guarantee period of 10 years, starting on March 1, 2026. Participant B received an income rate of 7.56% ($25,200) on $333,333 annuitized in year 1; Participant B also withdrew 4% ($26,667) from the $666,667 remaining savings balance in year 1. The result ($51,867) is initial income for Participant B in year 1 that is 29.7% higher than the initial income of Participant A ($40,000). Income rates for TIAA Traditional annuitizations are subject to change monthly. TIAA Traditional annuity income benefits include guaranteed amounts plus additional amounts as may be declared on a year-by-year basis by the TIAA Board of Trustees. The additional amounts, when declared, remain in effect through the "declaration year," which begins each January 1 for payout annuities. Additional amounts are not guaranteed beyond the period for which they are declared. TIAA has paid more total lifetime income benefits than it has guaranteed every year since 1949. Over the past 30 years, TIAA has given 18 income increases to existing annuitants (as of January 2026). Past performance is not a guarantee of future results.
5 Lifetime income payments from TIAA Traditional may include a TIAA Loyalty Bonus® which is discretionary and determined annually.
6 Results based on averages for retirement dates each month from 1/1/1996 to 1/1/2026. This chart compares “long-term contributors” vs. “new contributors” to highlight the difference in initial income. The “long-term contributor” represents a participant who has accumulated savings in TIAA Traditional. The “new contributor” represents a participant who has accumulated savings outside of TIAA Traditional. The new contributor annuitizes the same dollar amount as a long-term contributor when both participants reach retirement. The new contributor deposits their savings into TIAA Traditional the day before annuity payments begin, when both the new and long-term contributors are age 67. Both select a single life annuity with a 10-year guaranteed period. 361 individual retirement month cohorts were analyzed. The long-term contributor assumes level monthly premiums over the stated investment periods. Percentage represents the average difference in initial income over each of the time periods for a long-term contributor vs. a new contributor.
This material is for informational, educational or non-fiduciary sales opportunities and/or activities only and does not constitute investment advice (e.g., fiduciary advice under ERISA or otherwise), a securities recommendation under all securities laws, or an insurance product recommendation under state insurance laws or regulations to invest through a model or to purchase any security or advice about investing or managing retirement savings. It does not take into account any specific objectives or circumstances of any particular customer, or suggest any specific course of action.
No registration under the Investment Company Act, the Securities Act or state securities laws—the model is not a mutual fund or other type of security and will not be registered with the Securities and Exchange Commission as an investment company under the Investment Company Act of 1940, as amended, and no units or shares of the model will be registered under the Securities Act of 1933, as amended, nor will they be registered with any state securities regulator. Accordingly, the model is not subject to compliance with the requirements of such acts, nor may plan participants investing in underlying investments based on the model avail themselves of the protections thereunder, except to the extent that one or more underlying investments or interests therein are registered under such acts.
No guarantee – Neither the models nor any investment made pursuant to the models are deposits of, or obligations of, or guaranteed or endorsed by TIAA or their affiliates (except with respect to certain annuities sponsored by TIAA or its affiliates), or insured by the Federal Deposit Insurance Corporation, or any other agency. There is no guarantee that the underlying investments will provide adequate income at and through retirement and participants may experience losses. Participants should not allocate their retirement savings to the underlying investments unless they can readily bear the consequences of such loss.
Assets allocated to the underlying investments based on the model will be invested in underlying mutual funds and annuities that are permissible investments under the plan. Some or all of the underlying investments included in the model may be sponsored or managed by TIAA or its affiliates and pay fees to TIAA and its affiliates. In general, the value of a model-based account will fluctuate based on the performance of the underlying investments in which the account invests. For a detailed discussion of the risks applicable to an underlying investment, please see the prospectus or disclosure document for such underlying investment.
Converting some or all of your savings to income benefits is an irrevocable decision once benefit payments begin.
TIAA RetirePlus Select® and TIAA RetirePlus Pro® are administered by Teachers Insurance and Annuity Association of America (“TIAA”) as plan recordkeeper. TIAA-CREF Individual & Institutional Services, Member FINRA and SIPC distributes securities products. SIPC only protects customers' securities and cash held in brokerage accounts. TIAA and CREF annuity contracts and certificates are issued by Teachers Insurance and Annuity Association of America (TIAA) and College Retirement Equities Fund (CREF), New York, NY, respectively. Each is solely responsible for its own financial condition and contractual obligations. Transactions in the underlying investments invested in based on the models on behalf of the plan participants are executed through TIAA-CREF Individual & Institutional Services, LLC.
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TIAA Traditional is a fixed an annuity issued by Teachers Insurance and Annuity Association of America (TIAA), 730 Third Avenue, New York, NY, 10017: Form series including but not limited to: 1000.24; G-1000.4; IGRS-01-84-ACC; IGRSP-01-84-ACC; 6008.8. Not all contracts are available in all states or currently issued.