A banner year for retirement income
The 2025 TIAA Annuity Payout AdvantageSM shows that retirees can get more out of their retirement savings—in some cases, a lot more. That’s something to celebrate.
Time to read: 5 minutes
Key takeaways
- Market volatility is particularly problematic for people near retirement, but thanks to the TIAA Annuity Payout Advantage, there’s a lot less to worry about. If you retire this year, you could get 33% more income than if you used the 4% rule.
- For a 67-year-old with $1 million saved, that's $13,154 more income in 2025—guaranteed. That added income can mean more confidence in retirement.
- TIAA's Loyalty BonusSM can drive the advantage even higher—up to 43% more first-year income in 2025 for long-term savers.
- Want to know how much more you could get? Try our
Annuity Payout Advantage calculator .
Get more retirement income in 2025.
Recent financial news has been particularly vexing for anyone nearing or in retirement. New economic policies (and political bluster) are stoking concerns about inflation, volatility in stocks and uncertainty in bonds. None of it inspires confidence if retirement’s especially close and you’re thinking about how you’ll afford the lifestyle you hoped and planned for when you stop working.
But there are some guarantees amid the chaos: Converting even a modest portion of your retirement savings to a TIAA fixed annuity ensures guaranteed income and can deliver more spending power than savings alone.
Drumroll, please...
The 2025 TIAA Annuity Payout Advantage1 is 33%—up one percentage point from a year ago.
For a 67-year-old with $1 million in savings, 33% is the difference between getting $40,000 in first-year retirement income or $53,154.
What would you do with another $1,100 a month?
Last year we introduced the
The TIAA Annuity Payout Advantage is a metric, based on real inputs and realistic assumptions, designed to illustrate the first-year retirement income benefits available through a TIAA fixed annuity. It measures, in percentage terms, the difference between what a first-year, 67-year-old retiree can withdraw (using a popular retirement spending formula known as the 4% rule) and what they could get by converting a third of savings into lifetime income with the TIAA Traditional2 fixed annuity (using an option that guarantees payments to one person for at least 10 years).
For a 67-year-old with $1 million in total savings, 33% is the difference between being able to spend $53,154 in their first year of retirement versus having just $40,000 in spending money.
We launched the metric with a promise to update it each year, and we knew the result would fluctuate along with the economic environment. Our 2025 number is one tick higher from 32% a year ago and remains squarely within its historical range of 16% to 44% since 1994—the year research on the 4% rule was published.3
While the number will change year to year, the TIAA Annuity Payout Advantage functions as an always-on demonstration of why it pays to consider adding guaranteed income backed by TIAA as part of your retirement income plan.
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More retirement income, more spending power.
The 2025 TIAA Annuity Payout Advantage translates into real money. For a 67-year-old with $1 million in total savings (who annuitizes in the way our baseline scenario sets out), the income advantage amounts to $13,154 more in the first retirement year versus withdrawals alone—fully $1,096 more per month. That’s concert tickets, vacations or gifts for the grandkids that might otherwise be out of reach.
Haven’t managed to save a million bucks? You can still get the same 33% advantage. For a 67-year-old with $500,000 in total savings, 33% is the annual difference between $26,577 and $20,000—$548 more per month when you include annuity income. A 67-year-old with $250,000 in savings can receive $274 more per month.
What does this extra income mean overall? A lot. Consider this: TIAA generally recommends retirees cover two-thirds of their expenses with guaranteed income. Social Security isn't enough for most people. The TIAA Annuity Payout Advantage not only can give retirees more money to spend, but it covers more expenses with guaranteed income.
“A ton of information gets baked into this number,” says Benny Goodman, vice president with the TIAA Institute. “Understanding that you can get more income—guaranteed income—is a huge help when planning how to fund your future lifestyle, or even when to retire.”
How do we do it?
It might seem counterintuitive that the TIAA Annuity Payout Advantage would rise in 2025. After all, annuity payouts are loosely tied to prevailing interest rates, and the Federal Reserve lowered its short-term policy rate three times in the waning months of 2024.
But the payout rate we use to calculate our baseline TIAA Annuity Payout Advantage rose one-tenth of one percent, from 7.8% to 7.9%. This has everything to do with the workings of the
TIAA’s nearly $300 billion general account portfolio contains a highly diversified, global mix of mostly fixed income investments as well as select alternative assets.
TIAA’s nearly $300 billion4 GA portfolio is a highly diversified, global mix of mostly fixed income investments (bonds and the like). Interest rates on longer-term Treasury bonds have risen since September 2024, when the Fed cut its key short-term interest rate target for the first time in more than four years, so the GA portfolio has generally been able to invest on relatively favorable terms.5 And, as an extremely long-term investor with strong capital reserves, the GA can seek higher returns beyond conventional bond markets while maintaining high credit ratings.6 About 15% of TIAA’s GA is invested in alternative investments such as private equity, real estate and real assets such as almond groves and vineyards.
But wait: there’s more.
This year’s 33% Annuity Payout Advantage is the baseline: It would be available to any 67-year-old retiree who transferred money into TIAA Traditional and began taking payments in March 2025, either within a workplace retirement account or an IRA offered through TIAA. This action is akin to purchasing a single premium immediate annuity (SPIA) outside your retirement plan. But 33% is only the starting payout. For employees who have contributed to TIAA Traditional inside their retirement plan over their working years, the payout rate can be significantly higher. We call this exclusive feature the TIAA Loyalty Bonus.
Historically, the longer someone has saved in TIAA Traditional, the larger their Loyalty Bonus, and the more income they could get when lifetime income payments begin. The Loyalty Bonus isn’t guaranteed but, historically, a plan participant who contributed for the previous 30 years received a 15% larger payout upon annuitizing.7
This can be significant: Applying the historical average for the long-term Loyalty Bonus to the March 2025 payout rate, a 67-year-old annuitant with $1 million in savings could receive $57,127 per year compared with the $40,000 they would get by making 4% withdrawals alone. Instead of a 33% Annuity Payout Advantage, they’re getting 43% more first-year income.
Getting a higher annuity payout in retirement through our Loyalty Bonus has major implications for savers, namely that someone could still meet an ambitious retirement income goal even if they haven’t saved as much as they’d hoped.
Consider a 67-year-old targeting $40,000 in first-year retirement income (not counting Social Security). Using the 4% rule, they’d need $1 million in savings (since 4% of $1 million is $40,000). But if the same person annuitized one-third of their savings and received the historical 30-year Loyalty Bonus, they'd need only $700,200 in savings to generate the same $40,000 in the first year.
“It might sound like alchemy but it’s simple math,” says TIAA’s Goodman. “Earning more retirement income means you can potentially still afford the lifestyle you wanted even if you finish working with less savings than you planned on.”
Next article: Retirement plan annuities vs. retail annuities
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1 The 2025 Annuity Payout Advantage is hypothetical and for illustrative purposes only. The Annuity Payout Advantage calculation uses the TIAA Traditional “new money” income rate for a single life annuity (SLA) with a 10-year guarantee period at age 67 using TIAA’s standard payment method beginning income on March 1, 2025. Individual results may vary. Example: Participants A and B both are aged 67 and had retirement savings balances of $1 million as of March 1, 2025. Participant A withdrew 4% ($40,000) in year 1. Participant B made a one-time transfer to TIAA Traditional and selected an SLA with a guarantee period of 10 years, starting on March 1, 2025. Participant B received an income rate of 7.9462% ($26,487) on $333,333 annuitized in year 1; Participant B also withdrew 4% ($26,667) from the $666,667 remaining savings balance in year 1. The result ($53,154) is initial income for Participant B in year 1 that is 33% higher than the initial income of Participant A ($40,000). Income rates for TIAA Traditional annuitizations are subject to change monthly. TIAA Traditional Annuity income benefits include guaranteed amounts plus additional amounts as may be declared on a year-by-year basis by the TIAA Board of Trustees. The additional amounts, when declared, remain in effect through the "declaration year," which begins each January 1 for payout annuities. Additional amounts are not guaranteed beyond the period for which they are declared. TIAA has paid more total lifetime income benefits than it has guaranteed every year since 1949. Over the past 30 years, TIAA has given 18 income increases to existing annuitants (as of January 2025). Past performance is not a guarantee of future results.
2 TIAA Traditional is issued by Teachers Insurance and Annuity Association of America (TIAA), New York, NY.
3 Bengen, William P. 1994. “Determining Withdrawal Rates Using Historical Data.” Journal of Financial Planning 7, 4 (October): 171-180.
4 As of Dec. 31, 2024.
5 See U.S. Department of the Treasury’s listing of daily Treasury Long-Term rates: Sept. 18, 2024 long-term composite at 4.06% versus Feb. 6, 2025 at 4.68%.
6 For its stability, claims-paying ability and overall financial strength, TIAA is one of only three insurance groups in the United States to currently hold the highest rating available to U.S. insurers from three of the four leading insurance company rating agencies: A.M. Best (A++ as of 7/24), Fitch (AAA as of 8/24) and Standard & Poor’s (AA+ as of 5/24), and the second highest possible rating from Moody’s Investors Service (Aa1 as of 10/24). There is no guarantee that current ratings will be maintained. The financial strength ratings represent a company’s ability to meet policyholders’ obligations and do not apply to variable annuities or any other product or service not fully backed by TIAA’s claims-paying ability. The ratings also do not apply to the safety or the performance of the variable accounts, which will fluctuate in value.
7 Results based on averages for retirement dates each month from 1/1/1995 to 1/1/2025, comparing “long-term contributors” vs. “new contributors” to highlight the difference in initial income. The long-term contributor represents a participant who has accumulated savings in TIAA Traditional. The new contributor represents a participant who has accumulated savings outside of TIAA Traditional. The new contributor annuitizes the same dollar amount as a long-term contributor when both participants reach retirement. The new contributor deposits their savings into TIAA Traditional the day before annuity payments begin, when both the new and long-term contributors are age 67. Both select a single life annuity with a 10-year guaranteed period. 361 individual retirement month cohorts were analyzed. The long-term contributor assumes level monthly premiums over the stated investment periods. Percentage represents the average difference in initial income over each of the time periods for a long-term contributor vs. a new contributor.
Any guarantees under annuities issued by TIAA are subject to TIAA’s claims-paying ability.
This material is for informational or educational purposes only and is not fiduciary investment advice, or a securities, investment strategy, or insurance product recommendation. This material does not consider an individual’s own objectives or circumstances which should be the basis of any investment decision.
Annuity contracts may contain terms for keeping them in force. We can provide you with costs and complete details.
TIAA Traditional is a fixed annuity issued by TIAA, New York, NY: Form series including but not limited to: 1000.24; G-1000.4; IGRS-01-84-ACC; IGRSP-01-84-ACC; 6008.8.
Lifetime income payments from TIAA Traditional may include a TIAA Loyalty BonusSM which is discretionary and determined annually.
Converting some or all of your savings to income benefits (referred to as "annuitization") is a permanent decision. Once income benefit payments have begun, you are unable to change to another option.
Pension-like refers to the income received from a guaranteed-interest annuity contract, not income provided by a defined benefit pension plan.
Any guarantees under annuities issued by TIAA are subject to TIAA’s claims-paying ability.
TIAA may share profits with TIAA Traditional Annuity owners through declared additional amounts of interest during accumulation, higher initial annuity income, and through further increases in annuity income benefits during retirement. These additional amounts are not guaranteed beyond the period for which they were declared.
Payments from variable annuity accounts are not guaranteed and will rise or fall based on investment performance.
TIAA Institute is a division of TIAA.