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Annuity Basics

This section provides answers to participant questions about how annuities work and how they can help diversify an individual's retirement savings.

Note: Additional support is always available to you and the participant if you need it. Call 844-7-INCOME (746-2663)  to have a TIAA Lifetime Income Consultant join your conversation.


An annuity is a contract issued by an insurance company where the insurance company agrees to make regular payments to someone for life or for a fixed period. You can use an annuity to save for and receive lifetime income in retirement. There are different types of annuities.

  • Guaranteed/fixed annuities. While you're saving (that is, making contributions into an account), you earn a minimum guaranteed interest rate on your contributions, plus the potential for additional amounts of interest. When you retire, guaranteed annuities can offer you income for life that will never fall below a certain guaranteed level and can provide income that is guaranteed to last for your lifetime, similar to income that's typically available from pension plans. The TIAA Secure Income Account is a fixed annuity.
  • Variable annuities. While you're saving (that is, making contributions into an account), invest in a variety of asset classes; account values will fluctuate based on the performance of the investments in the accounts. It is possible to lose money in variable annuities. When you retire, variable annuities can provide an income stream that is guaranteed to last for your lifetime, but the actual amount will rise or fall based on investment performance.

The insurance company that issues the annuity backs the guarantee. For this reason, an important indicator of an insurance company's current financial health is its "claims-paying ability." 

This is expressed as the financial strength rating assigned by independent rating agencies: Standard and Poor's, A.M. Best, Fitch, and Moody's. You can usually find an insurance company's financial strength ratings on their website.

Additional information:

You can use fixed annuities and mutual funds together as part of an integrated retirement savings and income strategy. A fixed annuity can provide a safe foundation along with the option to receive guaranteed income for life. Mutual funds can complement this by offering the opportunity for additional growth.

Like most financial products, there are different types of annuities.

With some, you contribute one amount and then you receive guaranteed income payments for life. You can begin receiving income right away or sometime later, depending on the type of annuity.

The TIAA Secure Income Account is designed to allow for multiple contributions while you're saving for retirement along with the opportunity for lifetime income. While you're saving, it protects your principal and credits a guaranteed rate of return to your account balance. When you retire, you can choose to convert some or all of your account balance to income payments you can’t outlive.

If you choose to take lifetime income, you have the flexibility to continue your payments to a loved one if you pass away before them.

Whatever amount you don't convert to lifetime income will continue to earn interest. You can withdraw at whatever pace suits your needs, depending on the rules of your employer's plan. Keep in mind that withdrawals made prior to age 59½ may be subject to a 10% federal tax penalty, in addition to ordinary income taxes.

If you have questions or need additional information, please contact TIAA_DCIO_Support@tiaa.orgOpens Email. TIAA will be happy to help you.

1 Guarantees provided under fixed annuities are subject to the issuing company's claims-paying ability.

2 Keep in mind, there are risks associated with investing in securities, including possible loss of principal.

3 Withdrawal/Transfer charges may apply based on the type of annuity contract.

4 Dependent on annuity contract.

There are material differences between mutual funds and annuities. Mutual fund capital-gain distributions or dividends paid are added to the number of shares owned (number of shares increase). Mutual funds are subject to various fees and expenses, including but not limited to management, administrative, and distribution fees.

A fixed annuity is an insurance product designed to guarantee returns that are announced in advance. It provides principal protection and steady, guaranteed growth over time. A fixed annuity can help retirement plan participants save for retirement and offers the opportunity for guaranteed income for life in retirement.

A mutual fund pools money from many investors to purchase a collection of stocks, bonds or other securities which are managed in one fund. When markets are up, participants can capture the gains, but they may also experience losses when markets are down. Some or all of their assets can be transferred among funds or converted to cash at retirement with ease.