Seeking advice on handling TIAA After Tax Annuity

Have a question about your personal investments? No matter how simple or complex, you can ask it here.
Post Reply
User avatar
Topic Author
CULater
Posts: 2323
Joined: Sun Nov 13, 2016 10:59 am

Seeking advice on handling TIAA After Tax Annuity

Post by CULater » Sat Nov 16, 2019 12:23 pm

I have a significant sum in an after-tax annuity with TIAA-CREF. All is invested in the fixed account which pays about 4% interest annually. The only options for withdrawing the funds from this account are either a (1) life annuity, or (2) a 10-year transfer payout annuity on which the interest would be locked up at 2.5% for the payout period.

I don't need income from this account currently, so I'd let it ride in the fixed account paying 4%; however, not sure that the limitations on withdrawals will become a problem when I'm in my eighties and might want more flexibility in accessing funds. I'm considering starting a transfer payout annuity now, but with payments directed to the TIAA real estate account instead of being paid out to me. Taxes would not be assessed on internal transfers; only when funds are actually paid out at my discretion. Once funds are transferred out of the TIAA fixed account into TREA they then become available for on-demand withdrawals.

Is starting the 10-year TPA at 2.5% with amounts transferred to TREA a good idea? Once I've made that decision I'm locked in until all the funds have been transferred over the 10-year period into TREA. I want to make sure I"m not overlooking some important considerations and would appreciate any input.
On the internet, nobody knows you're a dog.

User avatar
ResearchMed
Posts: 9372
Joined: Fri Dec 26, 2008 11:25 pm

Re: Seeking advice on handling TIAA After Tax Annuity

Post by ResearchMed » Sat Nov 16, 2019 12:35 pm

CULater wrote:
Sat Nov 16, 2019 12:23 pm
I have a significant sum in an after-tax annuity with TIAA-CREF. All is invested in the fixed account which pays about 4% interest annually. The only options for withdrawing the funds from this account are either a (1) life annuity, or (2) a 10-year transfer payout annuity on which the interest would be locked up at 2.5% for the payout period.

I don't need income from this account currently, so I'd let it ride in the fixed account paying 4%; however, not sure that the limitations on withdrawals will become a problem when I'm in my eighties and might want more flexibility in accessing funds. I'm considering starting a transfer payout annuity now, but with payments directed to the TIAA real estate account instead of being paid out to me. Taxes would not be assessed on internal transfers; only when funds are actually paid out at my discretion. Once funds are transferred out of the TIAA fixed account into TREA they then become available for on-demand withdrawals.

Is starting the 10-year TPA at 2.5% with amounts transferred to TREA a good idea? Once I've made that decision I'm locked in until all the funds have been transferred over the 10-year period into TREA. I want to make sure I"m not overlooking some important considerations and would appreciate any input.
How far away from your "eighties" are you?

Are you able to TPA part of the total, perhaps half - or any other fraction?
I assume that the reason you are reluctant to TPA is that nice 4%. (Is that 4% guaranteed, or some smaller percentage plus that somewhat mysterious "extra" that TIAA usually adds?)
You could then start another TPA later, if that would work for you.

Do you have any other choices besides Trad Ann and TREA? As I'm sure you know, TREA has no type of guarantee, and if there is some other mini-2008 situation (or worse, not so "mini"), then TREA could lose money.
But in 2008/2009, it did bounce back. And there were leading indicators that some used for timing. That won't work as well now, but is likely still to be somewhat helpful - but NO "guarantees", unlike whatever baseline percentage you have in your Trad Ann.

RM
This signature is a placebo. You are in the control group.

User avatar
Topic Author
CULater
Posts: 2323
Joined: Sun Nov 13, 2016 10:59 am

Re: Seeking advice on handling TIAA After Tax Annuity

Post by CULater » Sat Nov 16, 2019 4:05 pm

ResearchMed wrote:
Sat Nov 16, 2019 12:35 pm
CULater wrote:
Sat Nov 16, 2019 12:23 pm
I have a significant sum in an after-tax annuity with TIAA-CREF. All is invested in the fixed account which pays about 4% interest annually. The only options for withdrawing the funds from this account are either a (1) life annuity, or (2) a 10-year transfer payout annuity on which the interest would be locked up at 2.5% for the payout period.

I don't need income from this account currently, so I'd let it ride in the fixed account paying 4%; however, not sure that the limitations on withdrawals will become a problem when I'm in my eighties and might want more flexibility in accessing funds. I'm considering starting a transfer payout annuity now, but with payments directed to the TIAA real estate account instead of being paid out to me. Taxes would not be assessed on internal transfers; only when funds are actually paid out at my discretion. Once funds are transferred out of the TIAA fixed account into TREA they then become available for on-demand withdrawals.

Is starting the 10-year TPA at 2.5% with amounts transferred to TREA a good idea? Once I've made that decision I'm locked in until all the funds have been transferred over the 10-year period into TREA. I want to make sure I"m not overlooking some important considerations and would appreciate any input.
How far away from your "eighties" are you?

Are you able to TPA part of the total, perhaps half - or any other fraction?
I assume that the reason you are reluctant to TPA is that nice 4%. (Is that 4% guaranteed, or some smaller percentage plus that somewhat mysterious "extra" that TIAA usually adds?)
You could then start another TPA later, if that would work for you.

Do you have any other choices besides Trad Ann and TREA? As I'm sure you know, TREA has no type of guarantee, and if there is some other mini-2008 situation (or worse, not so "mini"), then TREA could lose money.
But in 2008/2009, it did bounce back. And there were leading indicators that some used for timing. That won't work as well now, but is likely still to be somewhat helpful - but NO "guarantees", unlike whatever baseline percentage you have in your Trad Ann.

RM
Have to TPA the entire amount. Yes, you're right that I hate to give up the nice, safe 4% interest in Traditional. I'm getting that because of the "vintages" held; I've had this account for many years. I can TPA to some CREF funds as well as TREA, but not get anything like a safe 4% return. Would have to select either stock fund or bond fund. Figured that TREA would provide a better return with less volatility.
On the internet, nobody knows you're a dog.

student
Posts: 4141
Joined: Fri Apr 03, 2015 6:58 am

Re: Seeking advice on handling TIAA After Tax Annuity

Post by student » Sat Nov 16, 2019 4:09 pm

What percent of the portfolio is this?

jane8
Posts: 17
Joined: Sun Mar 10, 2019 2:10 pm

Re: Seeking advice on handling TIAA After Tax Annuity

Post by jane8 » Sat Nov 16, 2019 4:36 pm

I think the questions previously asked, “what percentage of the portfolio?” and “how far away from your eighties are you?” are important. On that note, I think the idea with TIAA Traditional is that, as you got closer to your eighties, you would turn it into an annuity with a guaranteed lifetime income, rather than worrying about initiating a TPA at that point. That’s the concept and seems like it’s the whole point of the vintages etc., to help you accumulate a really nice annuity.

Full disclosure, I have a (very, very tiny) TIAA Traditional allocation that I’m in the process of rolling over to a Vanguard IRA (the amount is small enough that no TPA is required), along with the rest of my TIAA variable annuities and funds. (My thread: viewtopic.php?f=1&t=294096). However, if I were older, and had committed to larger percentage allocation of TIAA Trad earlier, and especially if they were old vintages with awesome, long-standing interest rates, I might choose differently and just say, ok this is my fixed income portion and I’m just going to hold onto it and turn it into a lifetime annuity in the future.
Last edited by jane8 on Sat Nov 16, 2019 6:37 pm, edited 1 time in total.

bikechuck
Posts: 564
Joined: Sun Aug 16, 2015 9:22 pm

Re: Seeking advice on handling TIAA After Tax Annuity

Post by bikechuck » Sat Nov 16, 2019 5:13 pm

I am in a similar situation to the OP with a TIAA Traditional account yielding 4%. In my case it is approximately 14% of my portfoilio.

I intend to withdraw interest only from the age of 68 until RMDs kick in and then take RMDs until I am in my mid to late 70s. If and when I reach that age I will consider annuitizing depending on my health, how well my portfolio is holding up and interest rates at that time.

For now I am just sitting back and enjoying the relentless growth at a rate greater than my bond funds. I feel so fortunate to have this and I doubt that I would ever consider the TPA alternative.

User avatar
Topic Author
CULater
Posts: 2323
Joined: Sun Nov 13, 2016 10:59 am

Re: Seeking advice on handling TIAA After Tax Annuity

Post by CULater » Mon Nov 18, 2019 11:26 am

Here's an interesting factoid that I just became aware of as I was running single premium annuity estimates. It appears to me that the monthly payouts from a 10-year TPA are matched by the monthly payouts from a single life annuity at about age 80. In other words you'd be getting the same income payments from either if you start at age 80 (male). The advantage of the TPA is that, if you didn't need the income, you could have those payments reinvested into the tax-sheltered account and take withdrawals from that on an as-needed basis. Otherwise, it seems to me that if you reach age 80 and the only options for withdrawal are a TPA or a single life annuity you're probably better off with the single life annuity unless you have a bequest motive. The payouts would, of course, continue beyond the 10 year period if you're still around. If you were to die before the 10-year TPA payout period is up, the balance goes to your beneficiaries; the single life annuity pays nothing to your beneficiaries. Check me on this please, because it would seem that my best option might be to wait until I"m 80 and then begin a SPIA with this account.
On the internet, nobody knows you're a dog.

User avatar
Topic Author
CULater
Posts: 2323
Joined: Sun Nov 13, 2016 10:59 am

Re: Seeking advice on handling TIAA After Tax Annuity

Post by CULater » Mon Nov 18, 2019 5:04 pm

Actually, it looks like age 82 would be the breakeven point where the annual payment from an SPIA would be equal to the annual payment from a 10-year TPA. The TIAA website offers a calculator which can be used to estimate the income from both, and for me an SPIA with no guaranteed period matches the 10-year TPA annual payout amount if the SPIA is started at age 82. Beyond age 82, it would not seem to make much sense to do a TPA in lieu of an SPIA as the income distribution choice, since the SPIA would continue to pay out beyond the 10-year window.
On the internet, nobody knows you're a dog.

jane8
Posts: 17
Joined: Sun Mar 10, 2019 2:10 pm

Re: Seeking advice on handling TIAA After Tax Annuity

Post by jane8 » Tue Nov 19, 2019 12:55 pm

I'm not an expert but if you've done your research and figured out a breakeven point I'll bet you're right and it sounds like a plan. However, maybe it would be worth checking your calculations with a TIAA Weath Management Advisor. My understanding is that you can have a meeting or phone call with them at no cost to you and it is part of the service that comes with being a TIAA client. If you're still employed and in a major city, they may even have a rep who can meet you on campus. You could show them your research and they could confirm or correct your calculations, and give more info. Beware of "upselling" which some but not all WMAs have been anecdotally reported to do (see thread: viewtopic.php?t=264939) but if you can keep control of the conversation and focus it on answering your specific questions and confirming your calculations, that should be helpful. Good luck!

Post Reply