TIAA annuity income

[I was misinformed]

(There have been a few previous threads on TIAA annuity issues, but I don't
see this explicitly addressed. I expect there are folks on E-R.org with direct
experience of receiving TIAA annuity payments and will really appreciate
comments). Anyways:

I have a supplemental retirement annuity (SRA) account at TIAA
in the accumulation phase and sitting in "TIAA traditional". I am
contemplating now entering the income phase of the annuity.

When I log in and find my estimated payout from a lifetime annuity I get
"Your first estimated payment of $X/Month includes a $Y Loyalty Bonus."

I gather that this is equivalent to a regular SPIA with lifetime fixed monthly payout
of $(X-Y) PLUS a stream of monthly "bonus" payments whose amount starts
at $Y but that will be adjusted up or *down* by TIAA in some completely
opaque way. These bonus amount adjustments are likely to be
frequent throughout my lifetime as market conditions change.

Is this correct?

If long-term interest rates trend downward, then I would expect the "bonus"
to be reduced (with little lag in time.)

Is this correct?

So...if one is anticipating a reduction in interest rates over the next year, let's say,
then it might be better to purchase a regular SPIA that would effectively
"lock" the current high interest rates into the offered fixed payment for my lifetime.

Is this a correct way of looking at this issue?

Again I appreciate comments from anyone who has direct experience or other knowledge to share.

 

[TheWizard]

Wrong way.
I've been a TIAA participant since 1973 and an annuitant since 2013.

That loyalty bonus takes effect on day one and, as a practical matter, is never reduced.
Additionally, we get unscheduled increases every so often:
https://www.tiaa.org/public/about-t...YORK (December 19, 2022,, will increase by 3%.

This is because TIAA Traditional is a "participating" annuity, not an SPIA.

Practically all SPIAs pay a fixed income for life...

 

[dknighd]

Yes, TIAA can adjust $y up or down. They do this annually.
My experience, and what I've heard from others, is they they do not like to adjust $y down. But there are examples from a few decades ago where they did.


For planning purposes I assume $y will not change. So the total payment $x + $y will not change. So far it has increased, but I do not plan on that continuing.



Edit: I will add an additional thought. The fact that TIAA gives you a $x guaranteed amount, plus a $y additional amount, does make it more difficult to compare with other insurance companies who will give a guaranteed $z amount. When I did comparisons $z was always bigger than $x. But $z was smaller than $x + $y.
It does take a leap of faith, based on many years of history, to assume that $x + $y will always be bigger than $z.
$z will never change, unless the insurance company goes broke. $y gives TIAA some flexibility to avoid bankruptcy. I'm pretty sure TIAA will not decrease $y unless they really have to. They want to keep us happy. I'm also pretty sure other insurance companies will never increase the $z they promised you.

 

[TheWizard]

DK gave a good summary of TIAA's payout annuity math and philosophy.
They definitely seem to prioritize keeping current annuitant's income the same or increasing slightly year to year, never decreasing. Their 3% increase in payout to all annuitants this year is a good sign. If they were financially stressed, they could have skipped this increase.

And a note on terminology:
Additional Amounts are applicable to all annuitants, even those who held no Trad until a month ago when they did a large transfer from CREF Stock into Trad.

Loyalty Bonus is an increased payout rate on annuitized Trad held for many years, typically 17 years or more for the largest bonus.
See an example of Loyalty Bonus at Income Payout Rates at this link:
https://www.tiaa.org/public/investment-performance/investment/profile?ticker=47933633

Note that if you have a single SRA contract to which you have been contributing to TIAA Traditional for many years, then even if you choose to annuitize only half of your total accumulation, you can't choose only the oldest vintages. You get a blended payout rate proportional to the amounts in the various vintages...