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5 year CD ladder of TIAA annuity
Old 11-16-2008, 03:42 PM   #1
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5 year CD ladder of TIAA annuity

This is a philosophical as well as financial question. Would you put money into a 5 year CD ladder and live of the 4% it would throw off or take half the money and buy a TIAA fixed annuity that would produce similar income, but reduce your capital.
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Old 11-16-2008, 04:30 PM   #2
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I wouldn't because we're at historically low interest rates. With a CD ladder, you'll be able to roll over to the higher rates and you're only at the lower rates for the CD period. With the annuity you get (at best) the rate at the time of purchase.
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Old 11-16-2008, 05:20 PM   #3
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The OP says "half the money" and "produce similar income" which means the annuity must pay about double CD rates. But I guess if you die, the money in the annuity is all gone and not part of your estate.
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Old 11-16-2008, 07:47 PM   #4
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I wouldn't because we're at historically low interest rates. With a CD ladder, you'll be able to roll over to the higher rates and you're only at the lower rates for the CD period. With the annuity you get (at best) the rate at the time of purchase.
Ah, but TIAA is a participating annuity, so your payment is not set in stone. If interest rates rise a lot, the payout from the TIAA immediate annuity may also rise. See TIAA the CPI.

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Old 11-16-2008, 08:08 PM   #5
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OP mentions the fixed annuity, not the "graded" option
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Old 11-17-2008, 06:13 AM   #6
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This is a philosophical as well as financial question. Would you put money into a 5 year CD ladder and live of the 4% it would throw off or take half the money and buy a TIAA fixed annuity that would produce similar income, but reduce your capital.
You ask a lot of Annuity questions. However, to answer this one I say go with the CD Ladder (FDIC=Government backed). I currently have a 7 year CD Ladder (and have stretched it, in the past, as long as 10 years) that is paying a consolidated 5.69% interest rate. Just added a bit ($15K) to the 7th year rung at 5.5% APY (5.35% APR). To me it is totally a financial question, and I can not see where philosophy enters into the equation. After all, it is my money not TIAA's. Here we go again on the annuity/CD questions.
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Old 11-17-2008, 12:31 PM   #7
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OP mentions the fixed annuity, not the "graded" option
And? The standard payment option from TIAA is not exactly "fixed." It can increase and decrease, although not all that much.
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