What is lifetime income?
Lifetime income explained
At TIAA, lifetime income refers to the money you receive in retirement to help cover your essential living expenses.
Just as you diversify your savings, it may be wise to diversify your income sources in retirement to ensure stability and growth. Building an "income floor" can help you cover everyday bills allowing you to enjoy retirement.
Here are three common strategies for creating an income floor:
Social Security
This federal benefit can provide part of your income floor. To maximize benefits, consider waiting until your full retirement age to claim. If you're married, explore spousal benefits together.
Pensions
Traditional pensions are less common today but can provide substantial income.
Annuities
These insurance products can help bridge income gaps to cover daily expenses.
Having a reliable income stream that you can't outlive not only provides financial security in retirement, but also gives you more flexibility with the rest of your investments. That way, you have more potential to meet your needs down the road—or leave a legacy for your family.
How big should my income floor be?
Everyone's situation is different. Use a budget worksheet to estimate retirement expenses like food, housing, and healthcare. If you want your guaranteed income to cover all these expenses, calculate your expected income from Social Security and other sources.
If there's a gap, consider using annuities to fill it. You can always convert more of your savings into lifetime income-providing annuity later if needed.From 2022 to 2023, 30% more customers opted to activate lifetime income from a fixed annuity. TIAA’s fixed annuity options are unique thanks to our profit-sharing model.
Understanding annuities
Annuities help you save while working and provide income in retirement. They can be part of your workplace savings plan, an individual retirement account, or purchased separately. Besides Social Security and pensions, annuities are the only retirement solution that can provide income for life.
There are two main types of annuities: fixed and variable:
Fixed annuities
These earn a guaranteed minimum interest rate on your contributions and offer you stable income for life in retirement. With fixed annuities, the insurance company, rather than you as the contract owner, bears the risk if you outlive the annuity's value.
Variable annuities
These allow you to invest in various asset classes for diversification. In retirement, you can convert some, or all, of your savings into lifetime income, which may vary based on investment performance, helping to protect against inflation.
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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.
Investment products may be subject to market and other risk factors. See the applicable product literature or visit TIAA.org for details.
Retirement check refers to the annuity income received in retirement. Guarantees of fixed monthly payments are only associated with TIAA's fixed annuities.
Investment decisions should be made based on the investor's own objectives and circumstances. Advice is obtained using an advice methodology from an independent third-party.
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