Retirement income: TIAA-CREF has it all figured out

Posted on 03 June 2011

By Mark Miller

Permanent URL of this article: http://retirementrevised.com/money/retirement-income-tiaa-cref-has-it-all-figured-out

How to generate reliable income in retirement? It’s becoming the new holy grail for the financial services industry in the wake of the 2008 crash.

But if your workplace retirement plan is handled through a mutual fund, brokerage firm or bank, the retirement income solutions offered most often are simply strategies for decumulation of your savings. They’re not designed to provide lifetime income, which is the only way to protect yourself from longevity risk – the risk of outliving your money.

In order to get lifetime income, you need the benefits of annuitization, which can be found only via a defined benefit pension or insurance product – both of which pool mortality risk. Many of the big retirement platform companies are starting to partner with insurance companies to sell income annuities to workers upon retirement, and industry initiatives have proposed ways to make defined contribution plans more like pensions. But the role model for success actually has been around since 1918.

That would be the TIAA Traditional Annuity, which is offered by TIAA-CREF, the nonprofit retirement solutions provider that serves academic, medical, cultural and research institutions. TIAA is the insurance side of the company; Traditional is a guaranteed fixed annuity product offered through workplace plans and or a retail IRA.

Learn how TIAA Traditional does it in my column this week at Reuters Wealth.

Tags | annuities, retirement income

4 Comments For This Post

Dangerman Says:
June 3rd, 2011 at 10:07 am
The issue of annuitization at retirement is completely different from whether a worker should invest in a variable annuity type product during the accumulation phase. The former is a good idea, the latter a bad idea.

Insurance products like TIAA’s Traditional annuity are overpriced, under-perform an equivalent low cost indexing strategy, and the tax deferment features are very often redundant because it is held inside a 403(b). TIAA isn’t the worst of the VA sellers, but there’s no need to promote investing in VAs: just promote SPIAs at retirement.
Mark Miller Says:
June 3rd, 2011 at 10:15 am
I’m not a fan of variable, either. TIAA Traditional is a guaranteed fixed income product, not variable.
brucebenson Says:
June 4th, 2011 at 2:56 pm
I’m helping sort out my in-laws finances as they hit their 90s and all of their investments are inside insurance vehicles. My father in-law said his “broker” quit calling him or taking his calls once he retired and didn’t have any more money to “invest.” The VAs were “magic” and would just provide them what they needed – at least that is how they saw it. I thought of this when the article title said “TIAA has it all figured out.”

I listened to an interview where a book author on health reform tried to explain how the country would pay for the coverage she advocated. She kept saying “it is just like my insurance company, I pay so much and then I get a guarantee ….” I, and the panelist, didn’t think she had a clue as to risks/cycles/investments. They were very polite to her but she seemed perplexed at the repeated questions on finance as she repeated, “you know, like my insurance company.”

“Guaranteed” is based upon certain assumptions/risks and if they are not met then there are things like bankruptcy or changes in laws to adjust for economic reality. I think we need to ban that word in financial discussions and maybe add (fast talking small print) “income is based upon risks and assumptions that may not come to pass in the future and you may get less income or none at all. Check with your certified independent financial advisor before purchasing any financial products.”
Mark Miller Says:
June 4th, 2011 at 3:44 pm
Bruce, the article is not a defense of variable annuities. And, while your comment about the word “guaranteed” is fair enough, frankly – I am baffled at the number of people who worry about insurance products like TIAA Traditional . . . or, a social insurance platform such as Social Security. TIAA Traditional has been providing a guaranteed floor since 1948; Social Security has never failed to pay a single dime of benefits. Can we say the same about stock market portfolios?

Dangerman Says:
June 3rd, 2011 at 10:07 am

The issue of annuitization at retirement is completely different from whether a worker should invest in a variable annuity type product during the accumulation phase. The former is a good idea, the latter a bad idea.

Insurance products like TIAA’s Traditional annuity are overpriced, under-perform an equivalent low cost indexing strategy, and the tax deferment features are very often redundant because it is held inside a 403(b). TIAA isn’t the worst of the VA sellers, but there’s no need to promote investing in VAs: just promote SPIAs at retirement.

Mark Miller Says:
June 3rd, 2011 at 10:15 am

I’m not a fan of variable, either. TIAA Traditional is a guaranteed fixed income product, not variable.

brucebenson Says:
June 4th, 2011 at 2:56 pm

I’m helping sort out my in-laws finances as they hit their 90s and all of their investments are inside insurance vehicles. My father in-law said his “broker” quit calling him or taking his calls once he retired and didn’t have any more money to “invest.” The VAs were “magic” and would just provide them what they needed – at least that is how they saw it. I thought of this when the article title said “TIAA has it all figured out.”

I listened to an interview where a book author on health reform tried to explain how the country would pay for the coverage she advocated. She kept saying “it is just like my insurance company, I pay so much and then I get a guarantee ….” I, and the panelist, didn’t think she had a clue as to risks/cycles/investments. They were very polite to her but she seemed perplexed at the repeated questions on finance as she repeated, “you know, like my insurance company.”

“Guaranteed” is based upon certain assumptions/risks and if they are not met then there are things like bankruptcy or changes in laws to adjust for economic reality. I think we need to ban that word in financial discussions and maybe add (fast talking small print) “income is based upon risks and assumptions that may not come to pass in the future and you may get less income or none at all. Check with your certified independent financial advisor before purchasing any financial products.”

Mark Miller Says:
June 4th, 2011 at 3:44 pm

Bruce, the article is not a defense of variable annuities. And, while your comment about the word “guaranteed” is fair enough, frankly – I am baffled at the number of people who worry about insurance products like TIAA Traditional . . . or, a social insurance platform such as Social Security. TIAA Traditional has been providing a guaranteed floor since 1948; Social Security has never failed to pay a single dime of benefits. Can we say the same about stock market portfolios?

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