How much more could you get?
The Annuity Payout AdvantageSM,1 shows how much more money you’d have in the first year of retirement by annuitizing a portion of your savings with TIAA Traditional versus just withdrawing 4%—a well-known rule of thumb for new retirees.
When you annuitize, you’d get:
more,
or more, per month, in your first year of retirement.
TIAA Traditional is a fixed annuity issued by Teachers Insurance and Annuity Association of America (TIAA), 730 3rd Ave, New York, NY 10017.
TIAA Traditional is a fixed annuity issued by Teachers Insurance and Annuity Association of America (TIAA), 730 3rd Ave, New York, NY 10017.
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Tiaa annuity payout advantage
Key facts and definitions
What’s an annuity?
An annuity is a financial product issued by an insurance company. It is an agreement that comes with a contract outlining certain guarantees.
Fixed annuities—including TIAA Traditional, TIAA’s flagship annuity—guarantee a minimum rate of interest while you save. If you choose to receive lifetime income, a minimum monthly amount throughout retirement is also guaranteed.
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.
What’s the 4% rule?
The 4% rule states that new retirees who want a reasonable chance to make their savings last their lifetime withdraw no more than 4% in the first year they retire. In subsequent years, retirees should withdraw the same dollar amount, adjusted for inflation. Over three decades, the 4% rule has become a go-to rule of thumb for many people to estimate how much they can safely spend in retirement.
What does the Annuity Payout Advantage show?
The Annuity Payout Advantage makes a simple comparison, expressed in percentage terms. It compares how much income a new retiree would have available to spend in the first retirement year if they withdrew 4% of their investment savings versus how much they would have available to spend if they converted a portion of their savings into income provided by the TIAA Traditional fixed annuity, then used the 4% rule on their remaining balance.
The result is a snapshot of the potential income benefits associated with annuitization.
For example, a retiree with $1 million in savings could spend $40,000 in their first year of retirement using the 4% rule. But a 67-year-old who annuitized one-third of their savings and began receiving payouts on March 1, 2025, (and withdrew 4% of the remaining two-thirds) would get $53,154 to spend in their first year of retirement—fully 33% more income in their first year.
How do you calculate the Annuity Payout Advantage?
The Annuity Payout Advantage calculations use the TIAA Traditional “new money” income rate for a single-life annuity (SLA) with a 10-year guarantee period and TIAA’s current income rate beginning on March 1, 2025. It then projects that rate forward for the next 12 months to approximate the income an annuitant could expect to receive in their first year of retirement.
TIAA income rates are subject to change monthly. Generally speaking, the older the annuitant, the higher the income rate and the higher the Annuity Payout Advantage.
The TIAA Annuity Payout Advantage is a hypothetical illustration and not a recommendation. Keep in mind that the exact amount of income available to both a retiree who uses a withdrawal strategy and one who combines that with a stream of guaranteed income payments from an annuity may rise or fall in subsequent years based on the performance of financial markets and annuity income rates.
How much should I annuitize?
How much to annuitize is a highly personal decision, and every retiree’s situation is different. You may want to consider a range of 10% to 40% of savings depending on your income needs and desire for potential growth in the rest of your investment portfolio. As a starting point, TIAA generally recommends covering two-thirds of a retiree’s income needs with lifetime income sources (through some combination of fixed and variable annuity payments, Social Security, and pension payouts), while using an investment portfolio of stocks and bonds to cover the remaining third.2 Talk to a financial advisor about a comprehensive financial plan before annuitizing.
Why can I only select retirement ages between 59 to 73?
Workers can retire at any age, of course, but we limited the age range in our Annuity Payout Advantage calculation to line up with the ages at which many people consider the tax implications of retirement and retirement saving account withdrawals. The IRS allows penalty-free withdrawals from tax-deferred retirement accounts after age 59½ and requires minimum withdrawals at age 73.
What do you mean by total retirement savings?
We consider total savings to be the amount accumulated across traditional retirement savings accounts (such as 401(k)s, 403(b)s and IRAs), regular brokerage or investment accounts, and traditional bank accounts. This is the money that people can most readily transfer to a TIAA Traditional annuity and later annuitize. We don’t consider Social Security or pension payments when thinking about savings, though they are important factors when considering your retirement income.
1 Annuity Payout refers to the annuity income received in retirement. Guarantees of fixed monthly payments are only associated with TIAA’s fixed annuities.
2 This point of view is designed to be a starting point for the retirement income conversation. It is not a recommendation.
Methodology: The 2025 Annuity Payout Advantage is hypothetical and for illustrative purposes only. The Annuity Payout Advantage calculations use the TIAA Traditional “new money” income rate for a single-life annuity (SLA) with a 10-year guarantee period and TIAA’s current income rate beginning on March 1, 2025. Individual results may vary.
Example: Participants A and B both 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 at age 67, 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).
TIAA income rates 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.
This experience is educational
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.
This tool is intended to provide you with information to help you make informed decisions. You should not view or construe the availability of this tool as a suggestion that you take or refrain from taking a particular course of action, as the advice of an impartial fiduciary, as an offer to sell or a solicitation to buy or hold any securities, as a recommendation of any securities transactions or investment strategy involving securities (including account recommendations), a recommendation to rollover or transfer assets to TIAA or a recommendation to purchase an insurance product. In making this tool and information available to you, TIAA assumes that you are capable of evaluating the information and exercising independent judgment. As such, you should consider your other assets, income and investments and you should not rely on the information as the primary basis for making investment or insurance product purchase or contribution decisions.
The information that you may derive from this tool is for illustrative purposes only and is not individualized or based on your particular needs. This material does not take into account your specific objectives or circumstances, or suggest any specific course of action. Investment, insurance product purchase or contribution decisions should be made based on your own objectives and circumstances. The purpose of the tool is not to predict future returns, but to be used as education only. The assumptions underlying this tool are provided here and will change over time and from time to time. Contact your tax advisor regarding the tax implications. You should read all associated disclosures.
The TIAA group of companies does not provide legal or tax advice. Please consult your legal or tax advisor.
Any guarantees under annuities issued by TIAA are subject to TIAA’s claims-paying ability. TIAA Traditional is a guaranteed insurance contract and not an investment for federal securities law purposes.
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.
Investment, insurance and annuity products are not FDIC insured, are not bank guaranteed, are not deposits, are not insured by any federal government agency, are not a condition to any banking service or activity and may lose value.
Investment products may be subject to market and other risk factors. See the applicable product literature or visit TIAA.org for details.
Annuities are designed for retirement or other long-term goals, and offer a variety of income options, including lifetime income. Past performance is no guarantee of future results.
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 product issued through these contracts by Teachers Insurance and Annuity Association of America (TIAA), 730 Third Avenue, New York, NY, 10017: Form series including but not limited to: 1000.24; G-1000.4; IGRS-01-84-ACC; IGRSP-01-84-ACC; 6008.8. Not all contracts are available in all states or currently issued.
TIAA-CREF Individual & Institutional Services, LLC, Member FINRA, distributes securities products. Annuity contracts and certificates are issued by Teachers Insurance and Annuity Association of America (TIAA) and College Retirement Equities Fund (CREF), New York, NY. Each is solely responsible for its own financial condition and contractual obligations.
c2025 Teachers Insurance and Annuity Association of America-College Retirement Equities Fund, New York, NY.