TIAA - When Lifetime Income Annuity Option May Make Sense

November 10, 2023

Greetings educators! Greg Shepard here from S&A Financial Services, your guide through the intricate landscape of higher education retirement plans, especially those under the umbrella of TIAA. Today, I want to delve into a critical aspect of retirement planning that often gets overlooked until it's too late – the consideration of TIAA lifetime income annuity options. Let's explore a real-life scenario that highlights the potential pitfalls of not opting for this strategy and understand when a lifetime income annuity might be the solution you need.

A Cautionary Tale: The Importance of Planning

Recently, I encountered a situation that struck a chord. A close client of mine, who had devoted her career to higher education, retired and, as is often advised, rolled over her TIAA funds into an IRA. Unfortunately, unforeseen circumstances arose as her husband passed away, leaving her in sole control of her finances.

Unfortunately, she found herself spending her retirement funds rapidly. The lack of a structured approach led to financial challenges, exacerbated by her children joining in on the spending spree. Despite my efforts to guide her, the accessible and liquid nature of her funds allowed her to withdraw more than necessary. This situation illuminated two crucial points: the need for a well-thought-out plan upon retirement and the potential advantages of considering a lifetime income annuity option.

The Drawbacks of Unrestricted Access

Retirement brings newfound freedom, but without proper planning, this liberty can lead to unintended consequences. In this case, the retiree had full access to her IRA funds, resulting in substantial monthly withdrawals. The lack of a predetermined strategy allowed her to deviate significantly from what might have been a more sustainable plan. This situation highlights the importance of having a structured approach to withdrawals, even if it means limiting immediate access to a portion of your retirement funds.

The Role of Lifetime Income Annuity Options

Hindsight often provides clarity, and in this case, considering a lifetime income annuity option might have been a prudent choice. A lifetime income annuity offers a fixed monthly payment, providing a level of financial stability. While it restricts immediate access to the entire sum, it guards against the risks associated with uncontrolled spending. It could have served as a safeguard against the unintended financial consequences that unfolded in this particular scenario.

When Does a Lifetime Income Annuity Make Sense?

Now, let's explore when a lifetime income annuity might be a sensible choice for higher education employees entering retirement.

  1. Tendency to Overspend: If you recognize a propensity to overspend, a lifetime income annuity can act as a financial guardrail, ensuring a steady and reliable income stream.
  2. Dependency of Adult Children: For those whose children may still be financially dependent, a lifetime income annuity can offer protection against excessive financial demands from adult children.
  3. Desire for Financial Security: If your primary concern is financial security and having a steady income throughout retirement, a lifetime income annuity can provide peace of mind.

Conclusion

In conclusion, the journey into retirement requires more than just accumulating savings. It demands thoughtful planning and consideration of the best strategies to ensure a secure and enjoyable post-career life. If you find yourself susceptible to overspending or supporting financially dependent children, a TIAA lifetime income annuity might be the solution to safeguard your financial future.

Remember, when it comes to retirement, having a plan is crucial. So, as you embark on this new phase of life, take the time to evaluate your financial needs, consider the potential benefits of a lifetime income annuity, and ensure that your retirement years are as fulfilling as your years in education.

Greg Shepard

www.safinancialservices.com

YouTube Channel - HigherEd Retire

Podcast - HigherEd Retire

greg@shepardfinancial.com

*Disclosure* S&A Financial Services, Inc. is a registered investment advisor. Content presented is for informational purposes only and should not be considered as investment advice or as an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. Always consult with your tax advisor or attorney regarding your specific situation.