Wealth management
How much of your savings should you annuitize?
The right amount depends on your income needs, Social Security, pensions, and when you retire—here’s how to find your optimal amount.
We’ve told you about
Here, we explore how big that portion should be.
As a refresher, the TAPA makes a simple comparison, expressed in percentage terms.1 It compares how much money a new retiree would have to spend in their first retirement year if they withdrew 4% of their investment savings (a common guideline) versus what they would have if they converted a portion of their savings into lifetime income provided by the TIAA Traditional fixed annuity and then used a 4% withdrawal on their remaining balance.2 The conversion process is known as annuitization.
In 2026, the TAPA advantage is 30%. In other words, a 67-year-old retiree with $1 million in savings could enjoy 30% more retirement income—and retirement spending—by annuitizing one-third of their savings versus drawing it down annually using the 4% rule.
Annuitizing one-third of savings is a common choice for retirees, and it’s also the midpoint of the 25% to 40% range recommended by Benny Goodman, a veteran actuary and vice president with the TIAA Institute. It’s derived from a different retirement rule of thumb—that two-thirds of your monthly retirement expenses should be covered by Social Security, pensions, annuities, and other guaranteed sources that pay out as long you live.
Retirement income review
But not every retirement rule of thumb is right for every retiree. Individual circumstances—such as age of retirement, assets, and income needs—will influence the optimal amount of annuitization. To provide customized advice, TIAA’s team of wealth management advisors use proprietary tools to evaluate the amount of income clients may need in retirement and determine an optimal amount of annuitization for each client.
“We analyze their retirement plan, their savings, and their life goals to provide a clear idea of how much income will need to be replaced,” says Melissa Shaw, a TIAA Wealth Management advisor in Palo Alto, Calif.
Jim Schlag, a TIAA executive wealth management advisor in Roseland, N.J., says the tools allow him to tally a client’s projected monthly expenses in retirement—food, shelter, medical, taxes, and so on— then compare the sum with the monthly income clients would get by annuitizing 100% of their savings in TIAA Traditional. “If 100% would give them way more guaranteed income than they want or need, it’s very easy to then work backward and calculate the right amount,” says Schlag.
Here’s an example: Jane has a $1,000,000 portfolio and anticipates $9,000 in monthly expenses once she retires at age 67. As noted previously, a good rule of thumb is that two-thirds of your monthly retirement expenses should be covered by Social Security, annuities, and other guaranteed sources of lifetime income. In Jane’s case, that two-thirds works out to $6,000 a month.
If Jane is getting $3,500 a month from Social Security and $1,500 a month from a pension, she would need $1,000 a month from fixed annuities. But if Jane gets $3,500 a month from Social Security and doesn’t have a pension, she then needs $2,500 a month from fixed annuities. Based on
“We analyze their retirement plan, their savings, and their life goals to provide a clear idea of how much income will need to be replaced,” says Schlag.
Generally speaking, the longer you work, the less money you need to annuitize. There are two reasons for this. First, the obvious one: You’ll have fewer years of post-retirement expenses to cover (according to actuarial tables, at least). Second, TIAA may pay, and has a strong history of paying, a Loyalty Bonus® to long-time participants. This means the longer you own TIAA Traditional, the higher your monthly payments will likely be if you annuitize.4
The Lifetime Income Calculator doesn’t reflect the Loyalty Bonus, nor did the TIAA annuity advantage of 30% mentioned above. (This is why we encourage near-retirees to review their retirement income plan with their TIAA advisors.) Nevertheless, even if you work well past retirement age, and even if the vast majority of your retirement income needs will be met by Social Security and pensions, there could still be a case for annuitizing some TIAA Traditional savings.
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Loyalty pays
Goodman says he’s run calculations for clients who were TIAA Traditional participants for most of their working lives and who chose not to retire until their late 70s or early 80s. Given that they retired late, they had fewer years of post-retirement expenses to account for. So the assumption was these clients might get less benefit from annuitizing. But because the Loyalty Bonuses they earned were so large—and also because annuity payments are larger when you annuitize later in life—the initial assumptions proved incorrect. In some scenarios, clients wound up with more money by choosing an annuitization option with a 10-year guarantee than when taking a 10-year withdrawal—a surprising and counterintuitive result.
Says Goodman, “The money you get from the Loyalty Bonus is incredible.”
We’re here to help
Talk to your TIAA Wealth Management advisor if you need help understanding annuitization or determining how much lifetime income you may need. Don’t yet have an advisor?
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1 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 age 67 and had retirement savings balances of $1 million as of March 1, 2025. 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 33% 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 in lifetime income than its guaranteed minimum amount 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.
2 Annuity advantage refers to the annuity income received in retirement. Guarantees of fixed monthly payments are only associated with TIAA’s fixed annuities.
3 The Lifetime Income Calculator is an interactive educational tool intended to help you estimate the income you might expect to receive from a lifetime annuity.
IMPORTANT: The projections or other information generated by the tool are hypothetical in nature, do not reflect actual investment results, and are not guarantees of future results. Your results may vary with each use and over time.
4 Lifetime income payments from TIAA Traditional may include a TIAA Loyalty Bonus, which is discretionary and determined annually.
Any guarantees under annuities issued by TIAA are subject to TIAA’s claims-paying ability.
Investment products may be subject to market and other risk factors. See the applicable product literature or visit
The TIAA General Account is an insurance company account and is not available to investors as an investment.
Annuity contracts may contain terms for keeping them in force. We can provide you with costs and complete details. TIAA Institute is a division of TIAA.
Lifetime income payments from TIAA Traditional may include a TIAA Loyalty Bonus, which is discretionary and determined annually.