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TIAA Traditional Income Options for Higher Ed Employees

September 19, 2023

Hello, fellow educators! It's Greg Shepard from S&A Financial Services, your trusted partner in unraveling the complexities of higher education retirement plans. Today, we're diving into a topic that's occasionally shrouded in mystery: income options within the TIAA Traditional retirement plan.

Understanding your income options is crucial, as they play a pivotal role in shaping your financial future during retirement. In this comprehensive guide, we'll demystify the TIAA Traditional income choices, ensuring you have the knowledge needed to make informed decisions tailored to your unique circumstances.

Unpacking TIAA Traditional Income Options

TIAA Traditional is a popular choice among university employees for its reliability and steady returns. However, the intricacies of income options can sometimes lead to confusion. Greg is here to simplify these options:

1. Single Life Annuity: As the name implies, this option provides income for a single life (typically yours). Once that person's life journey ends, the payments cease. This option offers the highest monthly payouts, as there are no additional beneficiaries to consider.

2. Joint Life Annuity: In this case, you name a joint annuity option, often your spouse. If you pass away first, your spouse continues to receive payments for their lifetime. However, there's a caveat: if you designate a beneficiary other than your spouse who is more than ten years younger than you, joint annuity options are not available.

3. Beneficiary Protection: To ensure your loved ones are financially protected, you can opt for a 10, 15, or 20-year guarantee period. For example, if you select the 10-year option and both you and your spouse pass away within eight years of starting payments, your chosen beneficiary (e.g., your child) will receive payments for the remaining two years of the guarantee period.

Illustrating Income Differences

Let's break down the numbers with a hypothetical scenario: a $200,000+ balance in your TIAA Traditional account, with a 4% settlement interest rate. Greg emphasizes that this illustration serves educational purposes and should not be considered investment advice. Your situation, most likely, will be different.

Single Life Annuity: This option provides monthly payments of approximately $1,186 with no beneficiary.
Single Life Annuity with a 20-year guarantee period: Adding a beneficiary reduces the monthly payout to about $1,066.
Joint Life Annuity: If you opt for a joint life annuity with no guarantee period, you'll receive around $1,019 per month.
Joint Life Annuity with a 10-year guarantee period: Designating a beneficiary with a 10-year guarantee period decreases the monthly payout to $1,018.
Joint Life Annuity with a 20-year guarantee period: Extending the guarantee period to 20 years results in the same monthly payment of approximately $1,018.

Clearing Up Misconceptions

One common misunderstanding is that the 10, 15, or 20-year guarantee period implies your spouse or chosen beneficiary will only receive payments for that duration. This isn't accurate. The joint life annuity option provides payments for your joint lives, and the guarantee period is for the remaining time if both annuitants pass away.

Conclusion

In conclusion, comprehending the income options within your TIAA Traditional retirement plan is fundamental to your financial well-being in retirement. These options offer flexibility and security, ensuring you can tailor your plan to meet your specific needs and safeguard your loved ones.

Always remember that the information provided here is for educational purposes only. Your unique situation may require a different approach. If you have questions or need personalized guidance regarding TIAA Traditional income options or any aspect of your retirement plan, don't hesitate to reach out to me or TIAA directly.

By making informed decisions and understanding the nuances of your retirement plan, you're taking a significant step toward maximizing your financial stability and enjoying a prosperous retirement as a valued member of the higher education community.

Contact Information: If you have questions or need assistance with your retirement plan choices, you can reach out to Greg Shepard at greg@shepardfiancial.com

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*Nothing discussed in this blog post should be construed as investment advice. Each situation is unique and you need to receive professional advice from independent fee-only financial advisor that's familiar with higher ed retirement plans prior to implementing any strategies discussed or thought of on your own.

**S&A Financial Services, Inc. is a registered investment advisor. Content presented is for informational purposes only and should not be considered as investment advice or as an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. Always consult with your tax advisor or attorney regarding your specific situation.

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