Give employees financial confidence and a clear path to retirement
64% of workers identify saving for retirement as one of their major goals – no goal ranks higher.1
Income strategy
A diversified income strategy today could help make a clear path to retirement in the future
A recent Morningstar study shows including lifetime income from both fixed and variable annuities has the potential to increase income by up to 20% on average.2
Resources
Have you designed your plan menu to help your employees both invest for, and live comfortably in retirement?
Income Options
Options to help generate income
TIAA Traditional
Help generate guaranteed lifetime income
A TIAA Traditional fixed annuity guarantees that your employees’ money will grow at a set rate and provide a consistent lifetime income stream.*
CREF Variable Annuities
A smart way to prepare for retirement
A range of investment options from global equity to fixed income, designed to provide long-term performance and growth potential during the working years and in retirement.
Custom default solutions
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Help to ensure your plan is designed to offer lifetime income options to your employees.
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1 Source: TIAA Financial Resiliency Survey, October 2020
2 Source: Morningstar, “The Benefit of Diversified Income for Retirees: Combining Fixed and Variable Annuities, November 2019. The “certainty equivalent” income calculation incorporates an individual’s preference for risk and uncertainty when it comes to funding retirement.
- The potential benefits of developing a retirement income strategy considering both immediate fixed annuities (IFA) and immediate variable annuities (IVA) using a stochastic utility model using a Monte Carlo approach combined with a scenario framework.
- Households that should consider annuitization are generally those with conservative portfolios, lower levels of existing guaranteed income (i.e., Social Security benefits), higher initial withdrawal rates, higher subjective life expectancies, higher levels of shortfall risk aversion, and lower liquidity preferences.
- “Certainty-equivalent” retirement income increases by 20%, on average, when incorporating annuities, although the gains differ significantly across households.
- Withdrawals are always assumed to take place at the beginning of the year. Taxes are ignored for the analysis.
- The discount rate for the IFA pricing calculation is constant and assumed to be 5%.
- The discount rate for the IVA pricing calculation is also constant for the pricing calculation and is based on the assumed interest rate (AIR) of 4%
- The pricing model for the analysis intended to target the average annuity payout, not the best possible payout available.
- For each of the 22 variables we allow for a low, moderate, and high values. Examples of the variables included were retirement age, portfolio equity allocation. Social Security retirement benefits, etc.
- With 31 billion different potential combinations across these 22 different assumptions, the authors ran 10,000 different scenarios generated from the three values randomly selected for each variable.
- The annuity allocation is assumed to never exceed 50% of the portfolio.
- Every retiree household is different. The greater the range of potential products and solutions a financial advisor has available to recommend to the household the better the retirement income strategy is likely to be. In this paper we explore the potential benefits associated with using immediate fixed annuities (IFAs) and immediate variable annuities (IVAs), with a particular focus on when each is the best fit. The analysis suggests there is considerable benefit to not only incorporating additional guaranteed income into retirement income strategies (consistent with past research), but also in helping retirees determine which form of guaranteed income is optimal. While many financial advisors often talk about the benefits of diversification from a portfolio perspective, the same concepts also apply to retirement income products.
*Any guarantees under annuities issued by TIAA are subject to TIAA’s claims-paying ability.
Annuity account options are available through contracts issued by TIAA or CREF. These contracts are designed for retirement or other long-term goals, and offer a variety of income options, including lifetime income. Payments from the variable annuity accounts are not guaranteed and will rise or fall based on investment performance.
There are inherent risks in investing in securities. Investment products may be subject to market and other risk factors. See the applicable product literature, or visit TIAA.org for details. It is possible to lose money by investing in securities.
TIAA Traditional is a guaranteed insurance contract and not an investment for federal securities law purposes.
Past performance is not a guarantee of future results.
This material is for informational or educational purposes only and does not constitute investment advice under ERISA. 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.
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