What I learned from my mom...
about guaranteed income in retirement

By Kelly Greene, TIAA Senior Director and co-author of the New York Times best-seller The Wall Street Journal Complete Retirement Guidebook
My mom taught me to write, read music, and bake chocolate-chip cookies—along with teaching me money lessons like the importance of tracking cash flow: I watched her balance her checkbook to the penny every month. Then she forgave me when I bounced checks while learning to balance my own account the hard way.
And the lesson that will probably have the biggest impact on my own financial future? The value of annuities.
You see, my mother finished college when I was in sixth grade and soon started work as a laboratory technician at an academic medical center. At the time, I thought it was “so cool” that she got to help run a mammoth electron microscope advancing cardiovascular research.
Today I’m still talking about how cool my mom’s job was—but now it’s because she was offered annuities as part of her workplace savings plan and plowed as much into them as she could. Having that guaranteed income throughout retirement has meant all the difference for my parents, providing income they rely on in their late 80s to pay fixed costs like the property taxes and utility bills that persist even after the mortgage has long been paid off.
My mother’s decision to choose annuities back in the early 1980s came up recently while we were talking about market volatility and the COVID-19 pandemic. Not only does she remember a few summers as a child growing up on a Michigan farm during the Great Depression when her parents lured her indoors with new chemistry sets during polio outbreaks, but she also remembers men coming to the barn, hat in hand, offering to work for food.
With those experiences in mind, she immediately understood and appreciated the guarantees offered by saving through annuities in her employer plan, she recalled. Plus, my father is an insurance underwriter by training, so he sees annuities as “insurance” for income in retirement—a concept that’s easier to grasp than a four-syllable word.
And she’s far from alone. Among 1,718 adults with annuities surveyed this summer for TIAA by research firm Greenwald & Associates, 71% of those with annuities said that knowing they will have a source of guaranteed lifetime income has made them feel more financially resilient through the Covid-19 pandemic.
Maybe your employer retirement plan offers annuities, but you feel you need to learn more about them. I’m a mom myself now, so here’s what helped my own children understand them better:
  1. Don’t let the name distract you.
    Many surveys have found that when people are asked if they would like to invest in annuities, most say no—but they also want guaranteed income, and that’s what annuities are designed to provide. For example, TIAA’s 2019 Lifetime Income Survey found that 69% of working Americans said that having an that is to be paid for as long as they live is one of their top two goals for their retirement plan. 1
  2. You don’t automatically get a pension with a job. 
    Employers have been phasing out traditional pension plans for decades, and many workers think that funds in their workplace savings plans will provide guaranteed income, when that’s not necessarily the case.  But some employers do offer fixed or variable annuities in their retirement savings plans that can provide guaranteed income in retirement. Others are adding annuities as one piece of the investments they automatically select for employees who don’t make their own choices.

    When you’re deciding whether or not to put some of your savings into annuities, it’s important to focus on the outcome you’re trying to achieve while understanding that they’re the  only investment option available in retirement plans that can provide guaranteed income for life in retirement. One note: Annuities offered in workplace plans typically have relatively low costs, so if you consider saving with them outside a plan, it’s also important to take a close look at the cost.
  3. What about Social Security?
    Social Security is only one of three sources of income many people rely on in retirement:
    • Social Security, the federal government’s inflation-adjusted retirement program
    • Pensions and annuities
    • Other investments, often funds made up of stocks and bonds

    In retirement, during times of volatility like we’ve experienced recently, you want to give battered investments time to recover, rather than selling them and locking in losses. If you can generate enough income from Social Security and pensions or annuities to cover your basic living expenses, you may be able to give your other investments time to potentially recover.
The numbers say it all: 92% of TIAA retirees with annuities are satisfied with their decision to use them to provide guaranteed income in retirement, according to a 2016 survey). 2 The big lesson I've learned is that saving through an annuity in your retirement plan can increase your confidence—and people who use their annuity as guaranteed income in retirement are happy they’ve done so.
This material is for informational or educational purposes only and does not constitute fiduciary investment advice under ERISA, a securities recommendation under all securities laws, or an insurance product recommendation under state insurance laws or regulations. This material does not take into account any specific objectives or circumstances of any particular investor, or suggest any specific course of action. Investment decisions should be made based on the investor’s own objectives and circumstances.
1 https://www.tiaa.org/public/about-tiaa/news-press/press-releases/pressrelease766.html
2 https://www.tiaa.org/public/about-tiaa/news-press/press-releases/pressrelease641.html