Frequently Asked Questions about Guaranteed Lifetime Income

The following are commonly asked questions about generating lifetime income in retirement and how TIAA-CREF can help you achieve that goal.

How much income will I need in retirement?

Determining how much income you will need in retirement is important. Remember, your expenses in retirement will probably be different than when you were working. The rule of thumb is that you'll need 70% to 90% of your current working income, adjusted for inflation, to maintain your current lifestyle when you retire. Our Retirement Budget Worksheet, available in this pamphlet (PDF), can help you estimate your monthly expenses and income.

What is a guaranteed stream of income?

You can choose to "annuitize" all or some of your retirement savings to generate lifetime income. A lifetime annuity is the only income option that ensures you'll never outlive your retirement savings. There are a variety of TIAA-CREF annuity accounts to choose from:

Launched with the founding of TIAA in 1918, TIAA Traditional is a guaranteed fixed annuity. If you choose to receive income from TIAA Traditional, your income is based on guaranteed mortality tables and a guaranteed interest rate (2 1/2% for most contracts), as specified in your original contract, plus additional amounts. Your periodic payments can never be less than the guaranteed amount, which represents your contractual payment. But, TIAA Traditional can provide more income through additional amounts above and beyond the contractual rate and has done so each year since 1948.¹

You can also receive lifetime income from any or all of the TIAA and CREF variable annuity accounts. Lifetime income from the variable accounts continues to receive the investment experience of the underlying investment accounts. The amount of income received can change annually (on May 1) or every month (depending on which option you choose) to reflect the underlying market performance of the equity, fixed income or other securities in which they invest, as well as the mortality and expense experience of the account.

What is a one-life annuity? A two-life annuity? What annuity option should I consider that will also provide lifetime income to my spouse/partner?

There are two types of lifetime options: one-life and two-life annuities. Both provide lifetime income to you. They vary based on how you may choose to provide for your beneficiaries. Your choice of options(s) should usually depend on whether someone else might be dependent on your income. If you're married, you'll probably want to provide for your spouse in the event you die first by choosing a two-life annuity.
One-life options provide lifetime income to you, and you can choose a one-life annuity without a guaranteed period, or with guaranteed periods of 10, 15 or 20 years. By adding a guaranteed period, you ensure that payments will be made for a minimum of 10, 15 or 20 years to your beneficiaries even if you were to die within that period. You may be interested in guaranteed periods if you have children or grandchildren to consider, or perhaps dependent parents.

Two-life income options guarantee to pay income for as long as either you or your annuity partner is alive. Your annuity partner is the person you name to receive lifetime income upon your death, and can be a spouse or other person dependent on the income. TIAA-CREF offers four kinds of two-life annuities. The best type for a particular couple depends on any difference in their ages, their level of financial dependence, and their health. More information is available here (PDF).

When is a good time to annuitize my retirement savings?

The recent market turmoil has led many to reexamine their investment portfolios. You may consider delaying any choice about receiving retirement income until you are more comfortable with the direction of the financial markets and interest rates.

If you annuitize with the TIAA Traditional Annuity, the initial income you would receive depends, in large part, on prevailing interest rates in the marketplace. Rates from the long-term investments that back the TIAA Traditional Annuity guarantees may not change over time, and thus lower rates in the marketplace at the time of annuitization can mean lower income for years — since increases in interest rates may not affect the long-term investments that are held to support these payments.

It's important to note that TIAA Traditional will help stabilize your retirement income through the guaranteed monthly income it provides, which is paid regardless of how the financial markets are performing. Participants may also receive additional amounts, which are determined by the TIAA Board of Trustees each year and aren't guaranteed for future years. These additional amounts have been paid for over 50 years. In December, the Board voted to keep TIAA Traditional lifetime income steady for 2009; meaning that the additional amounts for 2009 will be equal to the additional amounts paid in 2008.

I've heard annuities charge high fees. What sort of costs and fees will I incur with a TIAA-CREF annuity?

The fees TIAA-CREF charges for its annuity accounts are generally half the industry average², so more of your money is being invested to work harder for you. The expense ratio for each of our annuity accounts can be found on the fund research tab of tiaa-cref.org, then clicking on the annuity you're interested in.

Where can I get more information about annuities and my retirement income options in general?

We're here to help. You can call us at 1 800 842-2776 to speak with a retirement specialist, or email us to get a personalized advice consultation. Our advisors receive no commissions. They are compensated through a salary plus incentive program that focuses on client service excellence.

This message is informational only and not intended to solicit any TIAA-CREF product or promote any contract transaction.

All TIAA-CREF variable investment vehicles are subject to market and other risk factors, which could result in loss of principal. You should consider the investment objectives, risks, charges and expenses carefully before investing. Please call 1 877 518-9161, or go to www.tiaa-cref.org for a current prospectus that contains this and other information. Please read the prospectus carefully before investing.

TIAA Traditional is a guaranteed insurance contract and not an investment for Federal Securities Law purposes. All guarantees are based on the claims-paying ability of TIAA.

Interest credited to TIAA Traditional Annuity accumulations includes a guaranteed rate, plus additional amounts that are established on a year-by-year basis. The guaranteed annual interest rate is 3% for all premiums remitted since 1979 under all TIAA Traditional Annuity accumulating contracts, except that for Retirement Choice and Retirement Choice Plus Annuities the guaranteed rate is between 1% and 3%, as specified in the contract. The additional amounts, when declared, remain in effect through the $#34;declaration year" which begins each March 1.

Please note the declaration year for the payout of income begins on January 1.

You can receive TIAA Traditional income under two methods, the Standard Payment Method and the Graded Payment Method. Both guarantee a minimum interest rate that is generally 2 1/2%. The total amount you receive as current income is different under the two methods.

Retirement Annuity (RA) contract form series 1000.24; Group Retirement Annuity (GRA) contract form series G-1000.4 or G-1000.5; G1000.6 or G1000.7 (not available in all states); Retirement Choice Contract form Series IGRS-01-5-ACC, IGRS-01-60-ACC, and IGRS-01-84-ACC; Retirement Choice Certificate Series IGRS-CERT1-5-ACC, IGRS-CERT1-60-ACC, IGRS-CERT1-84-ACC; Retirement Select Contract form Series GRS-MC; Retirement Select Certificate Series GRS-02.

CREF Certificate series C1000.11 STD.1 (RA), CG-1000.1, C1200.4 (SRA), CG1250.1 (GSRA), CIGRS-CERT1 (Retirement Choice).