I am 53yo and newly ER'ed, and I'm trying to figure out the best way
to start receiving income. I have pondered immediate annuity (SPIA)
long and hard - let's NOT discuss that here (it's been thoroughly debated
on another, massive, thread).
I have about 20% of my nest-egg in a TIAA-CREF Retirement Account -
it's a 403(a), which I think is quite similar to a 403(b) - bonus points
to whoever can explain the difference !
I'm wondering if I want to annuitize my TIAA-CREF moneys, or just take
it as a lump sum and invest it elsewhere. Given my sore temptation by a
SPIA, I like the idea of putting some chunk of my nest-egg into a lifetime
annuity. Of course, although the TIAA-CREF annuity IS guaranteed for
life, the amount is NOT (like any variable annuity, I suppose) depending
instead on portfolio performance.
Unfortunately, noone at TIAA-CREF can really explain to me how the annuity
payments are determined. Apparently there is some "secret formula" that
transforms "accumulation units" into payout. The best one can do is to run
the spastic little calculator at their website. Doing that, the returns look ok.
For example, if I leave my allocation as it is (about 1/3 in TIAA and 2/3
in the CREF variable annuities), and assume modest RORs of 5% and 7.5%
respectively, I get a WR (with payout beginning NOW) of about 5.5%,
increasing at a rate that about matches 2.6% inflation.
On the other hand, if I do a spreadsheet with the lump-sum payout invested
at the same ROR and giving the same payout, it's exhausted in my late 80s,
well past my life expectancy.
So I'm tempted to do it. But I'm not sure how to think about whether it's a
good deal or not. It's complicated by the fact that there is what seems to be a
fairly amazing benefit, which is that if I'm receiving a monthly annuity, I get
free health insurance (same as offered to state employees), even NOW, well
in advance of "typical" retirement age, thus saving the costs of high-deductible
health insurance with an HSA, although eliminating the option of growing a
tax-deductible HSA to pay for future medical expenses. However, I believe
I can still take the 2/3 in CREF and run, and use an annuity from the TIAA
portion to qualify for health insurance.
Anyhow, I hope someone out there is in a similar boat and has pondered this -
thanks !
to start receiving income. I have pondered immediate annuity (SPIA)
long and hard - let's NOT discuss that here (it's been thoroughly debated
on another, massive, thread).
I have about 20% of my nest-egg in a TIAA-CREF Retirement Account -
it's a 403(a), which I think is quite similar to a 403(b) - bonus points
to whoever can explain the difference !
I'm wondering if I want to annuitize my TIAA-CREF moneys, or just take
it as a lump sum and invest it elsewhere. Given my sore temptation by a
SPIA, I like the idea of putting some chunk of my nest-egg into a lifetime
annuity. Of course, although the TIAA-CREF annuity IS guaranteed for
life, the amount is NOT (like any variable annuity, I suppose) depending
instead on portfolio performance.
Unfortunately, noone at TIAA-CREF can really explain to me how the annuity
payments are determined. Apparently there is some "secret formula" that
transforms "accumulation units" into payout. The best one can do is to run
the spastic little calculator at their website. Doing that, the returns look ok.
For example, if I leave my allocation as it is (about 1/3 in TIAA and 2/3
in the CREF variable annuities), and assume modest RORs of 5% and 7.5%
respectively, I get a WR (with payout beginning NOW) of about 5.5%,
increasing at a rate that about matches 2.6% inflation.
On the other hand, if I do a spreadsheet with the lump-sum payout invested
at the same ROR and giving the same payout, it's exhausted in my late 80s,
well past my life expectancy.
So I'm tempted to do it. But I'm not sure how to think about whether it's a
good deal or not. It's complicated by the fact that there is what seems to be a
fairly amazing benefit, which is that if I'm receiving a monthly annuity, I get
free health insurance (same as offered to state employees), even NOW, well
in advance of "typical" retirement age, thus saving the costs of high-deductible
health insurance with an HSA, although eliminating the option of growing a
tax-deductible HSA to pay for future medical expenses. However, I believe
I can still take the 2/3 in CREF and run, and use an annuity from the TIAA
portion to qualify for health insurance.
Anyhow, I hope someone out there is in a similar boat and has pondered this -
thanks !