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Income Options in Retirement
Meet John … he's 10 years away from retiring and he's thinking about how much income he'll need, when he'll need it, how frequently he should get it and where that money will come from.
John has a retirement plan that offers TIAA annuities through his employer. The good news is that the options under his employer retirement plan offer John choice, confidence and flexibility to help meet his income needs.
John can choose from a spectrum of income options to create his own income plan. He can convert portions of his assets at different times — some now, some later — and has the flexibility to combine different income options to suit his financial needs.
Depending on the options he chooses, John can determine the frequency and amount of his payments. Let's take a closer look, beginning with the choice that provides the most certainty: Lifetime Income.
If John selects lifetime income, he'll receive a stream of monthly payments that he cannot outlive, much like a pension. Under the terms of his plan, John can turn a portion of his accumulation into income he can't outlive — a choice many plan investment options may not provide.
The amount of John's lifetime income payments can be steady and reliable through a fixed annuity, such as TIAA Traditional, or his lifetime income payments may vary upwards or downwards if he chooses one of TIAA's Variable Annuities.
John could also choose a combination of both fixed and variable payments. But with either choice — he'll never outlive his income!
John can use some of his retirement savings to generate guaranteed income to help cover essential or everyday expenses such as housing, food, and utility bills.
John can elect to receive payments for just himself, or for him and a loved one. It ensures they will each have income for as long as they live. He can also add a guarantee period so that payments continue to a beneficiary should he (and his loved one) die before the specified period ends.
And although John cannot change some of the choices he's made after beginning lifetime income, he can retain control and flexibility. For example, he can make transfers to other annuity accounts, with some restrictions, in response to changing market conditions or inflation.
We understand that people have diverse needs, so we offer many choices. John may want to combine lifetime income with other options to create a customized income plan. For example, if John needs income for a specific time period, say until his mortgage is paid off, he can choose to receive fixed period payments for a duration of up to 30 years.
John can also add flexibility to his income plan with systematic withdrawals to cover discretionary costs such as travel or home improvements.
With this systematic withdrawal option he can choose the amount and frequency of payments, monthly, quarterly, semiannually, or annually and also change them anytime. He can start and stop payments whenever he likes and even switch to another income choice at any time.
He can also leave a portion of his retirement savings untouched. If necessary he can take a cash withdrawal of all or a portion of his savings to cover unforeseen expenses like car repairs or large health care expenses. Whatever is left, he has the flexibility to leave it in his is account and withdraw it at whatever pace he desires, or convert it to a stream of income later.
While these options offer more control, they do not give John the certainty of lifetime income. There is a chance that he could run out of money.
John, with TIAA's help, can combine options into a plan that is tailored to his needs in retirement.
In addition to the income options we've just described, there are special rules for withdrawals from TIAA Traditional for certain plans.
A Transfer Payout Annuity allows John to access his TIAA Traditional Annuity savings over a certain number of years. However, since a Transfer Payout Annuity only provides income for a limited period of time, and because John may be giving up higher amounts of lifetime income if he contributed to TIAA Traditional throughout his career, he should speak with us before choosing this option to ensure it's right for him.
With the TIAA Interest-Only Option, John may receive payments that equal his interest earnings each month once he reaches age 55, if his plan allows it. He can then switch to another income option if his needs change, or to the Minimum Distribution Option once he reaches 70½.
Lastly, with our Minimum Distribution Option, we will calculate how much of John's plan assets he needs to receive to meet federal distribution requirements when he reaches age 70½, or retires, whichever is later. And if he doesn't need this money for income, we can help with other products that may fit his needs and preferences.
For nearly 100 years, TIAA has been committed to helping people like John and his family pursue a comfortable retirement We can help John navigate through these decisions and create a personalized income plan that is right for him — by providing choice, flexibility, and an income that cannot be outlived.
To learn more, please contact your dedicated TIAA consultant or call us at 800-842-2252.