Posted on 03 June 2011
By Mark Miller
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.