TIAA Cref Accumulation = Lifetime Income?

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macher
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TIAA Cref Accumulation = Lifetime Income?

Post by macher » Mon May 04, 2020 6:34 am

Is the intent of a defined contribution into TIAA Cref to produce lifetime income from the accumulation?

For instance my base salary is $55k a year and I contribute 5% off base and employer contributes 9% of base.

The university I work for since 24 years did away with defined pension when I was hired and new employees were eligible for the 5% / 9%. I figured to match the defined pension in 35-37 years I would need $550k in TIAA Cref accumulations which would produce a lifetime income of about $26k a year with 100% joint survivor which would match the defined pension plan.

In order to acculturate $550k over a 35-37 year period starting 24 years ago with a total of 14% contributions one would need a 3.5% return at the very least. Anything above 3.5% annual returns would of course produce a larger accumulation resulting in more lifetime income. The caveat is I have to contribute 5% of my base salary vs the defined pension where there was no requirement to contribute.

I allocated my 14% total contributions to better the defined pension plan but not a lot of risk with a planed accumulation of $600k which would provide about $2k more a year vs the defined pension. I have 14 years until 67 when I plan to retire with $275k accusation currently. At a 3.5% return I should have $606k in 14 years which at current payout rate of 4.8% 100% joint survivor will produce $29k a year lifetime income.

My original intention wasn’t to do something else other than using my accumulation as a lifetime income. I see others roll over their accumulation to something else.

Am I off base with this method of a goal of an accumulation to produce lifetime income? I feel I shouldn’t get too aggressive with allocation because I’m depending on the accumulation to produce a lifetime income. And it seems like I’m on track of a $606k accumulation to produce life time income stream.

Many co workers who stared the same time as me with same base salary and about same age have $200k accumulation currently because they took more risk vs me with $275k currently. If they allocated less risky like me and continue that for another 14 years they’ll have $480k in accumulation vs $606k for me. Which would be
$23k a year lifetime income vs $29k(me).

Now the other monies I invest besides I take a lot more risk because I’m not depending on it as a lifetime income.

Thanks!

aristotelian
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Re: TIAA Cref Accumulation = Lifetime Income?

Post by aristotelian » Mon May 04, 2020 7:02 am

TIAA CREF is a custodian, not an investment. You should have many investment options each with different expected risk/return depending on your situation. TIAA CREF is somewhat confusing in that they are an insurance company rather than a brokerage, and their funds are labelled as annuity contracts rather than mutual funds. If you post your full portfolio details and employer plan fund choices you can get detailed advice.

"Defined contribution" just means you contribute a fixed amount. The final result will be up to you, depending on your investment choices. It is possible that you will invest poorly and your whole 401k will go up in smoke. Most 401k plans are defined contribution. Defined contribution contrasts to "defined benefit" like a pension where your benefit is guaranteed no matter what.

livesoft
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Re: TIAA Cref Accumulation = Lifetime Income?

Post by livesoft » Mon May 04, 2020 7:18 am

One can have as the intent "Lifetime Income" with a TIAA (nee TIAA-CREF) retirement plan, but one is not required to set up the Lifetime Income when one retires. That is, one is not required to have that intent. There are other ways to get money out of a TIAA retirement plan when one retires.

I have a TIAA-CREF 403(b). Back when I started this 403(b) only the world-famous TIAA traditional annuity and CREF stock plan were offered. While my non-profit put in 15%, then later 9%, I could put in up to the 403(b) / 401(k) limit myself. This 403(b) now gives me access to both TIAA annuity investments and to mutual funds.

When I log in to my TIAA account, it shows me near the top what my "YOUR PROJECTED INCOME" is. This number assumes one withdraws the money upon retirement with a "Lifetime Income" plan which is in effect an annuity of the good kind. Even 401(k) plans that are not from TIAA often show such a number to all their clients. That does not mean that everyone has to buy an immediate annuity for income when they retire.

Anytime dollar amount of "Lifetime Income" will depend on a number of things at the time that one retires and starts withdrawing. That is, any earlier estimates of "Lifetime Income" are just estimates and not guaranteed.

I don't think I answered your concerns though.
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nisiprius
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Re: TIAA Cref Accumulation = Lifetime Income?

Post by nisiprius » Mon May 04, 2020 7:36 am

macher wrote:
Mon May 04, 2020 6:34 am
...Is the intent of a defined contribution into TIAA Cref to produce lifetime income from the accumulation?...
I certainly think so.

Up until the 1950s, TIAA meant what is now called "TIAA Traditional." In the 1950s, the "College Retirement Equities Fund," CREF, was added. As nearly as I can remember, TIAA Traditional has always included a guaranteed income level, while the other choices have not. Furthermore, their planning tools usually have included the assumption that you would eventually convert your contract to a "lifetime" contract, and I was provided with frequent illustrations that always gave estimates of annual retirement income.

So, yes, everything about TIAA has always screamed that lifetime income was the goal. As you'd expect give their history.

"Unfortunately" for planning purposes, the estimated amounts from the TIAA Traditional were always much larger than the guaranteed amounts, so I almost couldn't stop myself from planning on the basis of something that wasn't guaranteed. Fortunately, in my case the estimates have held good.

TIAA-CREF is an example of a "variable annuity," because the actual payout varies according to the investment performance of the account, but there is the clear intent that the contract eventually be annuitized, converted to lifetime income. I'm not sure if it was the first variable annuity, but it was certainly an early and influential one.

Variable annuities, during the accumulation phase, enjoy favored tax treatment because of the assumption that they are going to provide retirement income. However--and I found this very confusing when I was shopping around before retirement--outside TIAA, many variable annuities simply use the possibility of annuitization as a fig leaf to get the tax break. That is, they are bought and sold simply as (bad) investment vehicles, with no good-faith intention of every annuitizing them. I actually talked to more than two insurance agents who literally seemed not to understand my question about how the annuitization phase worked and what the details of the (lifetime payout) annuity itself were. They were very strange conversations.

In my personal opinion there has always been something fishy and dishonest about variable annuities, for precisely that reason. They get the tax break because of a pretense that they will be annuities, but mostly aren't bought in good faith for that purpose.

Here is simply a personal story of what I actually did, I don't think it was particularly smart or terribly foolish.

Approaching retirement, approximately half of my retirement assets were in my TIAA-CREF contracts. The rest was at Fidelity and Vanguard, all in mutual funds, mostly in tax-advantaged accounts. Impelled by a desire to simplify my financial holdings, I looked to see if I could cut the number of firms down, with the intention of getting from three to, ultimately, one. I decided to try to get rid of TIAA-CREF as an investment holding. I liquidated all the non-Traditional accounts and replaced them with the closest equivalent Vanguard mutual funds, and liquidated some of my Traditional holdings via a ten-annual-payment-and-done "transfer payout annuity." Skipping some other steps, when the dust settled I had annuitized very roughly a quarter of my retirement assets, about an eighth as a TIAA lifetime payout contract and about an eighth as a private insurer's inflation-linked SPIA. Later on, I moved all my Fidelity holdings to Vanguard. So I accomplished my goal of getting down to a single firm.

Every so often I ask my wife to name, from memory, the names of every firm we have money at, including banks, (one) brokerage, and the insurance companies that have our SPIA income annuities and our long-term care insurance. She has no problem doing it. It is my belief that as long as she knows the names of the firms, with that and our social securities numbers she is not likely to overlook assets if I pass first.
Annual income twenty pounds, annual expenditure nineteen nineteen and six, result happiness; Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.

crefwatch
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Re: TIAA Cref Accumulation = Lifetime Income?

Post by crefwatch » Mon May 04, 2020 7:56 am

macher wrote:
Mon May 04, 2020 6:34 am
Is the intent of a defined contribution into TIAA Cref to produce lifetime income from the accumulation?
No, your question/premise is obsolete. Wealth level aside, people are in control of their own retirement money today.

You are being confused by focusing on the term "defined contribution." You are lucky enough to have an employer that leverages your own contributions into a significant effort to accumulate retirement funds. But how one uses one's nest egg at the time of retirement has changed since TIAA was founded in 1918. (CREF, and the whole idea of retirement investing in equities (!) is a much younger product. Most TIAA-CREF customers today have at least ten, and often more choices for their investments.

Regulation of retirement investing has changed the way employers buy advisor services and what investment options they offer. They have had to offer a lot more choices, in order to avoid prosecution (or, at least, lawsuits) for allowing investors to make (on their own) poor choices.

What you do with your accumulation (TIAA-CREF or any other company) at retirement relates to your income, wealth, and personal needs. It is a obsolete idea that one automatically annuitizes all of their (qualified .... ?) money at the beginning of their retirement.

Some investors never annuitize any of their TIAA-CREF accumulations. They might move to a low-cost location, live off their Social Security and non-qualified nest eggs, and leave their qualified funds to their children. My mother annuitized all her TIAA and CREF (there were only two options when she began working, TIAA Traditional, and CREF Stock). She felt she was much better off than the other elementary school teachers she worked with, who had 100% TIAA Traditional. She had a very variable income, but in the years since she retired, she got much more income than they did-because of equity market returns. Past performance is not a predictor of future results, of course.

Many people, even if they sneer that an annuity is a "bet with an insurance company", have to consider an annuity because it creates a higher guaranteed level of income than they can with other uses of their limited retirement money. Other people, thinking about their chidlrens' legacy, refuse to annuitize anything. It's your decision, not TIAA's.

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CyclingDuo
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Re: TIAA Cref Accumulation = Lifetime Income?

Post by CyclingDuo » Mon May 04, 2020 8:05 am

macher wrote:
Mon May 04, 2020 6:34 am
Is the intent of a defined contribution into TIAA Cref to produce lifetime income from the accumulation?

For instance my base salary is $55k a year and I contribute 5% off base and employer contributes 9% of base.

The university I work for since 24 years did away with defined pension when I was hired and new employees were eligible for the 5% / 9%. I figured to match the defined pension in 35-37 years I would need $550k in TIAA Cref accumulations which would produce a lifetime income of about $26k a year with 100% joint survivor which would match the defined pension plan.

In order to acculturate $550k over a 35-37 year period starting 24 years ago with a total of 14% contributions one would need a 3.5% return at the very least. Anything above 3.5% annual returns would of course produce a larger accumulation resulting in more lifetime income. The caveat is I have to contribute 5% of my base salary vs the defined pension where there was no requirement to contribute.

I allocated my 14% total contributions to better the defined pension plan but not a lot of risk with a planed accumulation of $600k which would provide about $2k more a year vs the defined pension. I have 14 years until 67 when I plan to retire with $275k accusation currently. At a 3.5% return I should have $606k in 14 years which at current payout rate of 4.8% 100% joint survivor will produce $29k a year lifetime income.

My original intention wasn’t to do something else other than using my accumulation as a lifetime income. I see others roll over their accumulation to something else.

Am I off base with this method of a goal of an accumulation to produce lifetime income? I feel I shouldn’t get too aggressive with allocation because I’m depending on the accumulation to produce a lifetime income. And it seems like I’m on track of a $606k accumulation to produce life time income stream.

Many co workers who stared the same time as me with same base salary and about same age have $200k accumulation currently because they took more risk vs me with $275k currently. If they allocated less risky like me and continue that for another 14 years they’ll have $480k in accumulation vs $606k for me. Which would be
$23k a year lifetime income vs $29k(me).

Now the other monies I invest besides I take a lot more risk because I’m not depending on it as a lifetime income.
Are those other monies invested in a tIRA, Roth IRA, taxable account?

Curious why you have not been contributing more than the 5% of base salary into your TIAA 403b all these years?

If you have 14 years of employment remaining at your university, why not bump your contribution rate up to at least 15 or 20% of your salary for the rest of your years provided your household has enough cash flow to meet all of your expenses? That way, if you do choose to annuitize, you will have a larger leg for that portion of your retirement income stream.

CyclingDuo
"Everywhere is within walking distance if you have the time." ~ Steven Wright

tibbitts
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Re: TIAA Cref Accumulation = Lifetime Income?

Post by tibbitts » Mon May 04, 2020 8:12 am

crefwatch wrote:
Mon May 04, 2020 7:56 am
macher wrote:
Mon May 04, 2020 6:34 am
Is the intent of a defined contribution into TIAA Cref to produce lifetime income from the accumulation?
No, your question/premise is obsolete. Wealth level aside, people are in control of their own retirement money today.

You are being confused by focusing on the term "defined contribution." You are lucky enough to have an employer that leverages your own contributions into a significant effort to accumulate retirement funds. But how one uses one's nest egg at the time of retirement has changed since TIAA was founded in 1918. (CREF, and the whole idea of retirement investing in equities (!) is a much younger product. Most TIAA-CREF customers today have at least ten, and often more choices for their investments.

Regulation of retirement investing has changed the way employers buy advisor services and what investment options they offer. They have had to offer a lot more choices, in order to avoid prosecution (or, at least, lawsuits) for allowing investors to make (on their own) poor choices.

What you do with your accumulation (TIAA-CREF or any other company) at retirement relates to your income, wealth, and personal needs. It is a obsolete idea that one automatically annuitizes all of their (qualified .... ?) money at the beginning of their retirement.

Some investors never annuitize any of their TIAA-CREF accumulations. They might move to a low-cost location, live off their Social Security and non-qualified nest eggs, and leave their qualified funds to their children. My mother annuitized all her TIAA and CREF (there were only two options when she began working, TIAA Traditional, and CREF Stock). She felt she was much better off than the other elementary school teachers she worked with, who had 100% TIAA Traditional. She had a very variable income, but in the years since she retired, she got much more income than they did-because of equity market returns. Past performance is not a predictor of future results, of course.

Many people, even if they sneer that an annuity is a "bet with an insurance company", have to consider an annuity because it creates a higher guaranteed level of income than they can with other uses of their limited retirement money. Other people, thinking about their chidlrens' legacy, refuse to annuitize anything. It's your decision, not TIAA's.
I don't agree that the question is obsolete: the goal for almost everyone is to produce lifetime income. Only the details have changed over the years, as you have pointed out.

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macher
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Re: TIAA Cref Accumulation = Lifetime Income?

Post by macher » Mon May 04, 2020 8:31 am

CyclingDuo wrote:
Mon May 04, 2020 8:05 am
macher wrote:
Mon May 04, 2020 6:34 am
Is the intent of a defined contribution into TIAA Cref to produce lifetime income from the accumulation?

For instance my base salary is $55k a year and I contribute 5% off base and employer contributes 9% of base.

The university I work for since 24 years did away with defined pension when I was hired and new employees were eligible for the 5% / 9%. I figured to match the defined pension in 35-37 years I would need $550k in TIAA Cref accumulations which would produce a lifetime income of about $26k a year with 100% joint survivor which would match the defined pension plan.

In order to acculturate $550k over a 35-37 year period starting 24 years ago with a total of 14% contributions one would need a 3.5% return at the very least. Anything above 3.5% annual returns would of course produce a larger accumulation resulting in more lifetime income. The caveat is I have to contribute 5% of my base salary vs the defined pension where there was no requirement to contribute.

I allocated my 14% total contributions to better the defined pension plan but not a lot of risk with a planed accumulation of $600k which would provide about $2k more a year vs the defined pension. I have 14 years until 67 when I plan to retire with $275k accusation currently. At a 3.5% return I should have $606k in 14 years which at current payout rate of 4.8% 100% joint survivor will produce $29k a year lifetime income.

My original intention wasn’t to do something else other than using my accumulation as a lifetime income. I see others roll over their accumulation to something else.

Am I off base with this method of a goal of an accumulation to produce lifetime income? I feel I shouldn’t get too aggressive with allocation because I’m depending on the accumulation to produce a lifetime income. And it seems like I’m on track of a $606k accumulation to produce life time income stream.

Many co workers who stared the same time as me with same base salary and about same age have $200k accumulation currently because they took more risk vs me with $275k currently. If they allocated less risky like me and continue that for another 14 years they’ll have $480k in accumulation vs $606k for me. Which would be
$23k a year lifetime income vs $29k(me).

Now the other monies I invest besides I take a lot more risk because I’m not depending on it as a lifetime income.
Are those other monies invested in a tIRA, Roth IRA, taxable account?

Curious why you have not been contributing more than the 5% of base salary into your TIAA 403b all these years?

If you have 14 years of employment remaining at your university, why not bump your contribution rate up to at least 15 or 20% of your salary for the rest of your years provided your household has enough cash flow to meet all of your expenses? That way, if you do choose to annuitize, you will have a larger leg for that portion of your retirement income stream.

CyclingDuo
I actually can bump my contribution from 5% to 12%.

My 5% contribution @ $55k a year is $2750, employer 9% is $4950. That will increase as my salary grows.

Now since expenses are lower we can contribute $13k a year to either TIAA or a taxable account. Which do you suggest? We don’t have much savings besides and wanted to build it up.

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CyclingDuo
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Re: TIAA Cref Accumulation = Lifetime Income?

Post by CyclingDuo » Mon May 04, 2020 9:36 am

macher wrote:
Mon May 04, 2020 8:31 am
CyclingDuo wrote:
Mon May 04, 2020 8:05 am
macher wrote:
Mon May 04, 2020 6:34 am
Is the intent of a defined contribution into TIAA Cref to produce lifetime income from the accumulation?

For instance my base salary is $55k a year and I contribute 5% off base and employer contributes 9% of base.

The university I work for since 24 years did away with defined pension when I was hired and new employees were eligible for the 5% / 9%. I figured to match the defined pension in 35-37 years I would need $550k in TIAA Cref accumulations which would produce a lifetime income of about $26k a year with 100% joint survivor which would match the defined pension plan.

In order to acculturate $550k over a 35-37 year period starting 24 years ago with a total of 14% contributions one would need a 3.5% return at the very least. Anything above 3.5% annual returns would of course produce a larger accumulation resulting in more lifetime income. The caveat is I have to contribute 5% of my base salary vs the defined pension where there was no requirement to contribute.

I allocated my 14% total contributions to better the defined pension plan but not a lot of risk with a planed accumulation of $600k which would provide about $2k more a year vs the defined pension. I have 14 years until 67 when I plan to retire with $275k accusation currently. At a 3.5% return I should have $606k in 14 years which at current payout rate of 4.8% 100% joint survivor will produce $29k a year lifetime income.

My original intention wasn’t to do something else other than using my accumulation as a lifetime income. I see others roll over their accumulation to something else.

Am I off base with this method of a goal of an accumulation to produce lifetime income? I feel I shouldn’t get too aggressive with allocation because I’m depending on the accumulation to produce a lifetime income. And it seems like I’m on track of a $606k accumulation to produce life time income stream.

Many co workers who stared the same time as me with same base salary and about same age have $200k accumulation currently because they took more risk vs me with $275k currently. If they allocated less risky like me and continue that for another 14 years they’ll have $480k in accumulation vs $606k for me. Which would be
$23k a year lifetime income vs $29k(me).

Now the other monies I invest besides I take a lot more risk because I’m not depending on it as a lifetime income.
Are those other monies invested in a tIRA, Roth IRA, taxable account?

Curious why you have not been contributing more than the 5% of base salary into your TIAA 403b all these years?

If you have 14 years of employment remaining at your university, why not bump your contribution rate up to at least 15 or 20% of your salary for the rest of your years provided your household has enough cash flow to meet all of your expenses? That way, if you do choose to annuitize, you will have a larger leg for that portion of your retirement income stream.

CyclingDuo
I actually can bump my contribution from 5% to 12%.

My 5% contribution @ $55k a year is $2750, employer 9% is $4950. That will increase as my salary grows.

Now since expenses are lower we can contribute $13k a year to either TIAA or a taxable account. Which do you suggest? We don’t have much savings besides and wanted to build it up.
Assuming you are both paying into Social Security, it sounds like you are trying to build the traditional three legged stool of retirement income: pension, SS, risk portfolio/savings. In your case, you were focused on utilizing the funds within your TIAA account to be able to annuitize all or a portion of them in retirement to act as having created your own pension. That's a strategy that some college/university professors/staff use come retirement, but it's not the only path. If, however, you stick with it - my suggestion was that you contribute more than 5% (in spite of employer contributions). Most who have an actual pension that teach, have mandatory contributions of 6 - 7% from the employee and the employer contributes the remainder. On top of that mandatory contribution, teachers have voluntary 403b and 457b plans where they can contribute a portion of their salary (no match from the employer for those). That's an excellent way for a teacher to contribute to the pension leg, and the risk portfolio/savings leg. Unless a teacher lives in a state where they do not pay into Social Security (yes there are about 15 of them), then they also have the Social Security leg in retirement. The same can apply for various state university employees in some of those states.

We don't know your situation for SS as you didn't mention it.

Assuming you are using pre-tax deductions into your TIAA 403b, you get the immediate tax benefit now during your working years with the more you contribute into your 403b account. Taxable account investing is after tax contributions, and the interest, dividends, or capital gains are taxed along the way - so you want to use the most tax efficient method of choosing your investments for a taxable account.

https://www.bogleheads.org/wiki/Tax-eff ... _placement

Most here at Bogleheads would suggest funding priorities which you can view at the Wiki here:

https://www.bogleheads.org/wiki/Priorit ... nvestments

We are an education household (one teaching in academia the other in public schools), so we will have one pension between the two of us, and of course the TIAA account (invested in the Boglehead Three Fund Portfolio at 70/30) which I will most likely roll over into an IRA. Regardless, we focus on building all three legs of our retirement income stool: pension by working long enough to qualify for the maximum benefit, both of us working long enough to qualify for as high of a SS benefit that we can both achieve within reason, and working long enough to contribute to our 403b/457b/401k accounts and Roth IRA accounts so that all three legs of our retirement income streams are built as solidly as we can make them within our control.

The limiting factor is always the amount of household income and expenses you have to work with to be able to direct as much as possible to retirement savings - be they employer sponsored, or your own Roth IRA or tIRA as well as taxable account investing. You mention you are in your mid 50's, so I am guessing or assuming the empty nest years have arrived? Those are good years to do what is called the starve and stack method. For a dual income household, that means living off of the equivalent of one salary and saving the equivalent of the other (or just combine all of the household income and live off of 50% while saving the other 50% - or as high of a savings rate that one can muster while living below their means). For a single income household, the starve and stack method means one seeks out a side hustle or gig to bring additional income that can be stacked (saved).

Starve and stack links:

https://grow.acorns.com/how-the-starve- ... ls-faster/
https://www.businessinsider.com/how-to- ... kly-2017-7
https://www.thepennyhoarder.com/save-mo ... and-stack/

None of us know your entire portfolio, income, tax situation to offer a total advice view, but the traditional method to ask questions here at Bogleheads is to use this format: viewtopic.php?f=1&t=6212

It's hard to offer much more advice without knowing more. Regardless, a saving rate of only 5% is not going to do much for establishing a secure retirement stream of income. Percentages are all over the map depending on when one starts and what the rate of return is, but we've always been an advocate of at least 15-20% going into retirement savings as a base. If you can bump up your savings rate to 12%, that would certainly be a step in the right direction. Then saving more when the opportunities present themselves (in our case, the empty nest is one of those opportunities - just as it was before we had children).

CyclingDuo
"Everywhere is within walking distance if you have the time." ~ Steven Wright

Topic Author
macher
Posts: 212
Joined: Tue Apr 14, 2020 5:21 pm

Re: TIAA Cref Accumulation = Lifetime Income?

Post by macher » Mon May 04, 2020 10:01 am

CyclingDuo wrote:
Mon May 04, 2020 9:36 am
macher wrote:
Mon May 04, 2020 8:31 am
CyclingDuo wrote:
Mon May 04, 2020 8:05 am
macher wrote:
Mon May 04, 2020 6:34 am
Is the intent of a defined contribution into TIAA Cref to produce lifetime income from the accumulation?

For instance my base salary is $55k a year and I contribute 5% off base and employer contributes 9% of base.

The university I work for since 24 years did away with defined pension when I was hired and new employees were eligible for the 5% / 9%. I figured to match the defined pension in 35-37 years I would need $550k in TIAA Cref accumulations which would produce a lifetime income of about $26k a year with 100% joint survivor which would match the defined pension plan.

In order to acculturate $550k over a 35-37 year period starting 24 years ago with a total of 14% contributions one would need a 3.5% return at the very least. Anything above 3.5% annual returns would of course produce a larger accumulation resulting in more lifetime income. The caveat is I have to contribute 5% of my base salary vs the defined pension where there was no requirement to contribute.

I allocated my 14% total contributions to better the defined pension plan but not a lot of risk with a planed accumulation of $600k which would provide about $2k more a year vs the defined pension. I have 14 years until 67 when I plan to retire with $275k accusation currently. At a 3.5% return I should have $606k in 14 years which at current payout rate of 4.8% 100% joint survivor will produce $29k a year lifetime income.

My original intention wasn’t to do something else other than using my accumulation as a lifetime income. I see others roll over their accumulation to something else.

Am I off base with this method of a goal of an accumulation to produce lifetime income? I feel I shouldn’t get too aggressive with allocation because I’m depending on the accumulation to produce a lifetime income. And it seems like I’m on track of a $606k accumulation to produce life time income stream.

Many co workers who stared the same time as me with same base salary and about same age have $200k accumulation currently because they took more risk vs me with $275k currently. If they allocated less risky like me and continue that for another 14 years they’ll have $480k in accumulation vs $606k for me. Which would be
$23k a year lifetime income vs $29k(me).

Now the other monies I invest besides I take a lot more risk because I’m not depending on it as a lifetime income.
Are those other monies invested in a tIRA, Roth IRA, taxable account?

Curious why you have not been contributing more than the 5% of base salary into your TIAA 403b all these years?

If you have 14 years of employment remaining at your university, why not bump your contribution rate up to at least 15 or 20% of your salary for the rest of your years provided your household has enough cash flow to meet all of your expenses? That way, if you do choose to annuitize, you will have a larger leg for that portion of your retirement income stream.

CyclingDuo
I actually can bump my contribution from 5% to 12%.

My 5% contribution @ $55k a year is $2750, employer 9% is $4950. That will increase as my salary grows.

Now since expenses are lower we can contribute $13k a year to either TIAA or a taxable account. Which do you suggest? We don’t have much savings besides and wanted to build it up.
Assuming you are both paying into Social Security, it sounds like you are trying to build the traditional three legged stool of retirement income: pension, SS, risk portfolio/savings. In your case, you were focused on utilizing the funds within your TIAA account to be able to annuitize all or a portion of them in retirement to act as having created your own pension. That's a strategy that some college/university professors/staff use come retirement, but it's not the only path. If, however, you stick with it - my suggestion was that you contribute more than 5% (in spite of employer contributions). Most who have an actual pension that teach, have mandatory contributions of 6 - 7% from the employee and the employer contributes the remainder. On top of that mandatory contribution, teachers have voluntary 403b and 457b plans where they can contribute a portion of their salary (no match from the employer for those). That's an excellent way for a teacher to contribute to the pension leg, and the risk portfolio/savings leg. Unless a teacher lives in a state where they do not pay into Social Security (yes there are about 15 of them), then they also have the Social Security leg in retirement. The same can apply for various state university employees in some of those states.

We don't know your situation for SS as you didn't mention it.

Assuming you are using pre-tax deductions into your TIAA 403b, you get the immediate tax benefit now during your working years with the more you contribute into your 403b account. Taxable account investing is after tax contributions, and the interest, dividends, or capital gains are taxed along the way - so you want to use the most tax efficient method of choosing your investments for a taxable account.

https://www.bogleheads.org/wiki/Tax-eff ... _placement

Most here at Bogleheads would suggest funding priorities which you can view at the Wiki here:

https://www.bogleheads.org/wiki/Priorit ... nvestments

We are an education household (one teaching in academia the other in public schools), so we will have one pension between the two of us, and of course the TIAA account (invested in the Boglehead Three Fund Portfolio at 70/30) which I will most likely roll over into an IRA. Regardless, we focus on building all three legs of our retirement income stool: pension by working long enough to qualify for the maximum benefit, both of us working long enough to qualify for as high of a SS benefit that we can both achieve within reason, and working long enough to contribute to our 403b/457b/401k accounts and Roth IRA accounts so that all three legs of our retirement income streams are built as solidly as we can make them within our control.

The limiting factor is always the amount of household income and expenses you have to work with to be able to direct as much as possible to retirement savings - be they employer sponsored, or your own Roth IRA or tIRA as well as taxable account investing. You mention you are in your mid 50's, so I am guessing or assuming the empty nest years have arrived? Those are good years to do what is called the starve and stack method. For a dual income household, that means living off of the equivalent of one salary and saving the equivalent of the other (or just combine all of the household income and live off of 50% while saving the other 50% - or as high of a savings rate that one can muster while living below their means). For a single income household, the starve and stack method means one seeks out a side hustle or gig to bring additional income that can be stacked (saved).

Starve and stack links:

https://grow.acorns.com/how-the-starve- ... ls-faster/
https://www.businessinsider.com/how-to- ... kly-2017-7
https://www.thepennyhoarder.com/save-mo ... and-stack/

None of us know your entire portfolio, income, tax situation to offer a total advice view, but the traditional method to ask questions here at Bogleheads is to use this format: viewtopic.php?f=1&t=6212

It's hard to offer much more advice without knowing more. Regardless, a saving rate of only 5% is not going to do much for establishing a secure retirement stream of income. Percentages are all over the map depending on when one starts and what the rate of return is, but we've always been an advocate of at least 15-20% going into retirement savings as a base. If you can bump up your savings rate to 12%, that would certainly be a step in the right direction. Then saving more when the opportunities present themselves (in our case, the empty nest is one of those opportunities - just as it was before we had children).

CyclingDuo
To start I’m going to start contributing 17% Just got off the phone with Human Resources and my 17% contribution will start next week.

Secondly our SS situation is according to our SS statement today.

Me: $2316 month / $27,792 year
Wife: $1536 month / $18,432

Forgot to mention my wife works at same university but has been working permanent part time by choice. She started before me and stayed in the defined pension. At age 65 her projected pension will be $23,500 a year single / $19,975 100% joint survivor.

Hope it’s not too late that I’m contributing more than the 5%. Probably could have done it 7-10 years ago. Luckily have 14 years to go.

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Re: TIAA Cref Accumulation = Lifetime Income?

Post by livesoft » Mon May 04, 2020 10:12 am

By contributing more to your tax-deferred plan, your taxable income will go down and save you some on your income taxes. If/when your income taxes get to zero, then you should probably contribute to a Roth IRA because there will be almost no tax-advantages to contribute to a tax-deferred account. Some folks like the tax-diversification of having some retirement assets in Roth IRAs.
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Re: TIAA Cref Accumulation = Lifetime Income?

Post by 22twain » Mon May 04, 2020 11:03 am

macher wrote:
Mon May 04, 2020 10:01 am
Secondly our SS situation is according to our SS statement today.

Me: $2316 month / $27,792 year
Wife: $1536 month / $18,432
I suppose those figures are for claiming benefits at age 67 which is probably your SS "normal retirement age." You should at least consider waiting until age 70, which will increase your benefits by about 24%, at the cost of drawing down some of your savings/investments from TIAA or elsewhere.

Similarly, if you choose to annuitize part or all of your TIAA accumulation, the payout rate will be higher if you delay. Unlike SS, you can delay annuitizing TIAA beyond age 70, up to age 80 I think, again with an increasing payout rate. You do have to at least take RMDs like from an IRA or 401(k), after age 72.

My wife and I both postponed SS until 70; she started collecting last year, and I still have a few years to go. After we're both collecting SS, it will cover our current expenses. Therefore, we're not annuitizing any of our TIAA accumulations for now, because we don't need the additional guaranteed income. If our essential expenses increase significantly, we'll re-evaluate this. In the meantime we'll simply take RMDs; DW started hers last year. It should be noted that we both also have assets in taxable accounts, mostly from inheritances. Also, DW continued to teach part-time as an adjunct after officially retiring, so we've had some (not much :wink:) income from that.
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Re: TIAA Cref Accumulation = Lifetime Income?

Post by CyclingDuo » Mon May 04, 2020 11:05 am

macher wrote:
Mon May 04, 2020 10:01 am

To start I’m going to start contributing 17% Just got off the phone with Human Resources and my 17% contribution will start next week.

Secondly our SS situation is according to our SS statement today.

Me: $2316 month / $27,792 year
Wife: $1536 month / $18,432

Forgot to mention my wife works at same university but has been working permanent part time by choice. She started before me and stayed in the defined pension. At age 65 her projected pension will be $23,500 a year single / $19,975 100% joint survivor.

Hope it’s not too late that I’m contributing more than the 5%. Probably could have done it 7-10 years ago. Luckily have 14 years to go.
Yes, 14 years is plenty of time to build up the nest egg!

This gives a much better picture for your retirement! Her pension, your combined Social Security benefits, and your risk portfolio all combined will provide the three legged stool of income in retirement! None of any individual part was designed to cover all of one's retirement needs, but in aggregate - they will work together to cover your retirement.

This is the graphic used in our state by the state pension fund to illustrate the need for all three income streams as they help each of us address the three legs of the income stream stool and develop a workable plan:

Image

In your case - assuming these SS amounts are what SS says they would be if you keep working and take the benefit at FRA of 66 and change or age 67.

Husband SS: $27,792 year
Wife SS: $18,432
Wife Pension: $23,500

That is a total of $69,724 total from pension and SS (obviously it is all according to when you take the SS benefits). Is her pension with or without a COLA? More powerful if it has a COLA, if not - you can offset a non-COLA pension by having more in your savings/risk portfolio as well as delaying Social Security so it starts at a higher level.

If you know your current annual expenses for the household, you can start to dial in how much you will need to come from the risk portfolio (TIAA) and any other investments in Roth IRA or taxable accounts to fill the gap, or to cover any gap years before taking SS say at age 70. That helps you build the size of your risk portfolio/savings to have all of your bases covered in retirement - including any transition years from when those other income streams start coming in. Pension at age 65, SS at FRA or delay one or both until age 70.

You are in good shape with both of you qualifying for SS and your wife's pension, but now that you have increased your TIAA contributions - you will have much more flexibility and financial freedom in retirement for travel, home maintenance, vehicles, etc... . You already have $275K built up in your TIAA thus far which could support an $11K annual withdrawal for 25 years. The larger you build it, the larger the annual withdrawal amount it could support (using the 4% SWR from the Trinity Study). It also adds the benefit that if one of the other legs weakens (pension or SS due to circumstances outside of your control), you can offset that with your own savings/investments.

So right now, before any additional contributions to your TIAA, your retirement income stream at FRA looks to be...

Husband SS: $27,792 year
Wife SS: $18,432
Wife Pension: $23,500
TIAA 4% SWR: $11,000
Total: $80,724 pre-tax

How does that align with your current average annual spend? What does SS say it would be if you both delayed until age 70?

Of course, there will be changes due to no longer saving for retirement, health insurance will have switched to Medicare, potential for no mortgage payment if that is already paid off by retirement, commuting costs will be gone, etc... . And your risk portfolio will have grown from the current $275K to hopefully at least twice that amount so the SWR could be $22K+ on an annual basis.

CyclingDuo
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Re: TIAA Cref Accumulation = Lifetime Income?

Post by CyclingDuo » Mon May 04, 2020 11:26 am

22twain wrote:
Mon May 04, 2020 11:03 am
Also, DW continued to teach part-time as an adjunct after officially retiring, so we've had some (not much :wink:) income from that.
The adjunct work is what all of us semi-retired professors and teachers call financially independent, recreationally employed for our version of FIRE. :mrgreen: :beer

As you mention - beyond the pension, SS, and savings/investments - part-time work is a great way to bring in some income during the transition years to full retirement to avoid spending down too much of the portfolio in those early years.

It's one path that many of our colleagues have entered into in the past few years (social circle reaching that age and point in their careers). I am there as well in terms of the teaching portion of my income. However I combine my adjunct work with another part-time job with full benefits to equate to still being a full time worker - at least income and time wise. Down the road at some point, I could see just doing one or the other to keep some income coming in while transitioning to full retirement.

CyclingDuo
"Everywhere is within walking distance if you have the time." ~ Steven Wright

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macher
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Re: TIAA Cref Accumulation = Lifetime Income?

Post by macher » Mon May 04, 2020 11:59 am

CyclingDuo wrote:
Mon May 04, 2020 11:05 am
macher wrote:
Mon May 04, 2020 10:01 am

To start I’m going to start contributing 17% Just got off the phone with Human Resources and my 17% contribution will start next week.

Secondly our SS situation is according to our SS statement today.

Me: $2316 month / $27,792 year
Wife: $1536 month / $18,432

Forgot to mention my wife works at same university but has been working permanent part time by choice. She started before me and stayed in the defined pension. At age 65 her projected pension will be $23,500 a year single / $19,975 100% joint survivor.

Hope it’s not too late that I’m contributing more than the 5%. Probably could have done it 7-10 years ago. Luckily have 14 years to go.
Yes, 14 years is plenty of time to build up the nest egg!

This gives a much better picture for your retirement! Her pension, your combined Social Security benefits, and your risk portfolio all combined will provide the three legged stool of income in retirement! None of any individual part was designed to cover all of one's retirement needs, but in aggregate - they will work together to cover your retirement.

This is the graphic used in our state by the state pension fund to illustrate the need for all three income streams as they help each of us address the three legs of the income stream stool and develop a workable plan:

Image

In your case - assuming these SS amounts are what SS says they would be if you keep working and take the benefit at FRA of 66 and change or age 67.

Husband SS: $27,792 year
Wife SS: $18,432
Wife Pension: $23,500

That is a total of $69,724 total from pension and SS (obviously it is all according to when you take the SS benefits). Is her pension with or without a COLA? More powerful if it has a COLA, if not - you can offset a non-COLA pension by having more in your savings/risk portfolio as well as delaying Social Security so it starts at a higher level.

If you know your current annual expenses for the household, you can start to dial in how much you will need to come from the risk portfolio (TIAA) and any other investments in Roth IRA or taxable accounts to fill the gap, or to cover any gap years before taking SS say at age 70. That helps you build the size of your risk portfolio/savings to have all of your bases covered in retirement - including any transition years from when those other income streams start coming in. Pension at age 65, SS at FRA or delay one or both until age 70.

You are in good shape with both of you qualifying for SS and your wife's pension, but now that you have increased your TIAA contributions - you will have much more flexibility and financial freedom in retirement for travel, home maintenance, vehicles, etc... . You already have $275K built up in your TIAA thus far which could support an $11K annual withdrawal for 25 years. The larger you build it, the larger the annual withdrawal amount it could support (using the 4% SWR from the Trinity Study). It also adds the benefit that if one of the other legs weakens (pension or SS due to circumstances outside of your control), you can offset that with your own savings/investments.

So right now, before any additional contributions to your TIAA, your retirement income stream at FRA looks to be...

Husband SS: $27,792 year
Wife SS: $18,432
Wife Pension: $23,500
TIAA 4% SWR: $11,000
Total: $80,724 pre-tax

How does that align with your current average annual spend? What does SS say it would be if you both delayed until age 70?

Of course, there will be changes due to no longer saving for retirement, health insurance will have switched to Medicare, potential for no mortgage payment if that is already paid off by retirement, commuting costs will be gone, etc... . And your risk portfolio will have grown from the current $275K to hopefully at least twice that amount so the SWR could be $22K+ on an annual basis.

CyclingDuo
The mortgage which was used to renovate our house will be paid off in 10 years. Other than that no other debt. Assuming mortgage is paid off our expenses today would if we were to retire today would be...

Expenses(property tax, home and car insurance, gas and electric, water, cable internet, cell phones, food, gas for car, personal care, house maintenance, car maintenance)
TOTAL: $28000

Health Insurance Retirement(the nominal university increase for retirement health insurance has never exceeded 3% a year, lots of years no increase)

TOTAL(for 2): $4500

Discretionary spending don’t know yet

My wife’s pension doesn’t have a COLA.

Social Security at age 70
Me $35,100
Wife $23,961

Topic Author
macher
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Re: TIAA Cref Accumulation = Lifetime Income?

Post by macher » Mon May 04, 2020 2:18 pm

CyclingDuo wrote:
Mon May 04, 2020 11:05 am
macher wrote:
Mon May 04, 2020 10:01 am

To start I’m going to start contributing 17% Just got off the phone with Human Resources and my 17% contribution will start next week.

Secondly our SS situation is according to our SS statement today.

Me: $2316 month / $27,792 year
Wife: $1536 month / $18,432

Forgot to mention my wife works at same university but has been working permanent part time by choice. She started before me and stayed in the defined pension. At age 65 her projected pension will be $23,500 a year single / $19,975 100% joint survivor.

Hope it’s not too late that I’m contributing more than the 5%. Probably could have done it 7-10 years ago. Luckily have 14 years to go.
Yes, 14 years is plenty of time to build up the nest egg!

This gives a much better picture for your retirement! Her pension, your combined Social Security benefits, and your risk portfolio all combined will provide the three legged stool of income in retirement! None of any individual part was designed to cover all of one's retirement needs, but in aggregate - they will work together to cover your retirement.

This is the graphic used in our state by the state pension fund to illustrate the need for all three income streams as they help each of us address the three legs of the income stream stool and develop a workable plan:

Image

In your case - assuming these SS amounts are what SS says they would be if you keep working and take the benefit at FRA of 66 and change or age 67.

Husband SS: $27,792 year
Wife SS: $18,432
Wife Pension: $23,500

That is a total of $69,724 total from pension and SS (obviously it is all according to when you take the SS benefits). Is her pension with or without a COLA? More powerful if it has a COLA, if not - you can offset a non-COLA pension by having more in your savings/risk portfolio as well as delaying Social Security so it starts at a higher level.

If you know your current annual expenses for the household, you can start to dial in how much you will need to come from the risk portfolio (TIAA) and any other investments in Roth IRA or taxable accounts to fill the gap, or to cover any gap years before taking SS say at age 70. That helps you build the size of your risk portfolio/savings to have all of your bases covered in retirement - including any transition years from when those other income streams start coming in. Pension at age 65, SS at FRA or delay one or both until age 70.

You are in good shape with both of you qualifying for SS and your wife's pension, but now that you have increased your TIAA contributions - you will have much more flexibility and financial freedom in retirement for travel, home maintenance, vehicles, etc... . You already have $275K built up in your TIAA thus far which could support an $11K annual withdrawal for 25 years. The larger you build it, the larger the annual withdrawal amount it could support (using the 4% SWR from the Trinity Study). It also adds the benefit that if one of the other legs weakens (pension or SS due to circumstances outside of your control), you can offset that with your own savings/investments.

So right now, before any additional contributions to your TIAA, your retirement income stream at FRA looks to be...

Husband SS: $27,792 year
Wife SS: $18,432
Wife Pension: $23,500
TIAA 4% SWR: $11,000
Total: $80,724 pre-tax

How does that align with your current average annual spend? What does SS say it would be if you both delayed until age 70?

Of course, there will be changes due to no longer saving for retirement, health insurance will have switched to Medicare, potential for no mortgage payment if that is already paid off by retirement, commuting costs will be gone, etc... . And your risk portfolio will have grown from the current $275K to hopefully at least twice that amount so the SWR could be $22K+ on an annual basis.

CyclingDuo
What I see on our SS statements as of today will that amount be higher when we reach 67?

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Re: TIAA Cref Accumulation = Lifetime Income?

Post by CyclingDuo » Mon May 04, 2020 2:40 pm

macher wrote:
Mon May 04, 2020 2:18 pm
What I see on our SS statements as of today will that amount be higher when we reach 67?
It is based on your current or latest IRS reported income from the latest year you filed your taxes with the intent that you will continue at that income level and retire at FRA (which is probably 67 in your cases). We no longer get the printed SS statement, but do it all online at the website so we can see what our benefits would be if we took it at age 62, our FRA (67 for me, a bit less for my spouse), or if we delayed until age 70. Pretty much the same thing you see on a printed statement.

The amount shown gets recalculated each year based on your income and the number of years recorded of you paying into the system (does your income go up, stay the same, or go down, etc...). This usually happens from the information submitted by your employers on your W-2's every year and actually gets updated quicker than it used to in prior years in January/February on the SS website.

One also should factor for planning purposes - at least for now - a reduction in benefits come the year 2035. I believe the most recent report at the end of April shows that if some sort of funding legislation is not introduced between now and 2035, benefits will be cut by around 21%. We are not allowed to speculate here at Bogleheads on whether or not legislation will be enacted between now and then to fund SS so that benefits are not cut, so the prudent planning for retirement should - at this point - at least include the scenario that a reduction of benefits of 21% will impact everyone. For those of us who use i-ORP to run our retirement funding calculations, that benefit reduction assumption is by default included (he actually uses a 25% reduction figure): https://www.i-orp.com/Inflate/index.html

Again, that all helps with retirement planning purposes and helps emphasize the importance of building up the legs of the retirement income stream stool that you have more control over (savings/investments) by saving and investing a higher percentage than you have in prior years. At least that is our plan and we are sticking with it.

:sharebeer
"Everywhere is within walking distance if you have the time." ~ Steven Wright

Topic Author
macher
Posts: 212
Joined: Tue Apr 14, 2020 5:21 pm

Re: TIAA Cref Accumulation = Lifetime Income?

Post by macher » Mon May 04, 2020 3:01 pm

CyclingDuo wrote:
Mon May 04, 2020 2:40 pm
macher wrote:
Mon May 04, 2020 2:18 pm
What I see on our SS statements as of today will that amount be higher when we reach 67?
It is based on your current or latest IRS reported income from the latest year you filed your taxes with the intent that you will continue at that income level and retire at FRA (which is probably 67 in your cases). We no longer get the printed SS statement, but do it all online at the website so we can see what our benefits would be if we took it at age 62, our FRA (67 for me, a bit less for my spouse), or if we delayed until age 70. Pretty much the same thing you see on a printed statement.

The amount shown gets recalculated each year based on your income and the number of years recorded of you paying into the system (does your income go up, stay the same, or go down, etc...). This usually happens from the information submitted by your employers on your W-2's every year and actually gets updated quicker than it used to in prior years in January/February on the SS website.

One also should factor for planning purposes - at least for now - a reduction in benefits come the year 2035. I believe the most recent report at the end of April shows that if some sort of funding legislation is not introduced between now and 2035, benefits will be cut by around 21%. We are not allowed to speculate here at Bogleheads on whether or not legislation will be enacted between now and then to fund SS so that benefits are not cut, so the prudent planning for retirement should - at this point - at least include the scenario that a reduction of benefits of 21% will impact everyone. For those of us who use i-ORP to run our retirement funding calculations, that benefit reduction assumption is by default included (he actually uses a 25% reduction figure): https://www.i-orp.com/Inflate/index.html

Again, that all helps with retirement planning purposes and helps emphasize the importance of building up the legs of the retirement income stream stool that you have more control over (savings/investments) by saving and investing a higher percentage than you have in prior years. At least that is our plan and we are sticking with it.

:sharebeer
Ok thanks! I just calculated our expenses and healthcare 14 years from. I used inflation. From Googling it seems it’s suggested to use 3%.

So our expenses in year 2034 will be:

Expenses:
$43,250

Healthcare:
$6800

Discretionary spending ?

TOTAL: $51,000

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Re: TIAA Cref Accumulation = Lifetime Income?

Post by CyclingDuo » Mon May 04, 2020 4:14 pm

macher wrote:
Mon May 04, 2020 3:01 pm
CyclingDuo wrote:
Mon May 04, 2020 2:40 pm
macher wrote:
Mon May 04, 2020 2:18 pm
What I see on our SS statements as of today will that amount be higher when we reach 67?
It is based on your current or latest IRS reported income from the latest year you filed your taxes with the intent that you will continue at that income level and retire at FRA (which is probably 67 in your cases). We no longer get the printed SS statement, but do it all online at the website so we can see what our benefits would be if we took it at age 62, our FRA (67 for me, a bit less for my spouse), or if we delayed until age 70. Pretty much the same thing you see on a printed statement.

The amount shown gets recalculated each year based on your income and the number of years recorded of you paying into the system (does your income go up, stay the same, or go down, etc...). This usually happens from the information submitted by your employers on your W-2's every year and actually gets updated quicker than it used to in prior years in January/February on the SS website.

One also should factor for planning purposes - at least for now - a reduction in benefits come the year 2035. I believe the most recent report at the end of April shows that if some sort of funding legislation is not introduced between now and 2035, benefits will be cut by around 21%. We are not allowed to speculate here at Bogleheads on whether or not legislation will be enacted between now and then to fund SS so that benefits are not cut, so the prudent planning for retirement should - at this point - at least include the scenario that a reduction of benefits of 21% will impact everyone. For those of us who use i-ORP to run our retirement funding calculations, that benefit reduction assumption is by default included (he actually uses a 25% reduction figure): https://www.i-orp.com/Inflate/index.html

Again, that all helps with retirement planning purposes and helps emphasize the importance of building up the legs of the retirement income stream stool that you have more control over (savings/investments) by saving and investing a higher percentage than you have in prior years. At least that is our plan and we are sticking with it.

:sharebeer
Ok thanks! I just calculated our expenses and healthcare 14 years from. I used inflation. From Googling it seems it’s suggested to use 3%.

So our expenses in year 2034 will be:

Expenses:
$43,250

Healthcare:
$6800

Discretionary spending ?

TOTAL: $51,000
Typically when running calculations for retirement, we do everything in today's dollars (expenses and income). There are some excellent calculators that are favorites here at Bogleheads such as FIREcalc, i-ORP, and many other websites.

Here's a quick and easy one at Vanguard where you can plug in your information in today's dollars.

https://retirementplans.vanguard.com/VG ... meCalc.jsf
"Everywhere is within walking distance if you have the time." ~ Steven Wright

Topic Author
macher
Posts: 212
Joined: Tue Apr 14, 2020 5:21 pm

Re: TIAA Cref Accumulation = Lifetime Income?

Post by macher » Tue May 05, 2020 5:30 am

CyclingDuo wrote:
Mon May 04, 2020 4:14 pm
macher wrote:
Mon May 04, 2020 3:01 pm
CyclingDuo wrote:
Mon May 04, 2020 2:40 pm
macher wrote:
Mon May 04, 2020 2:18 pm
What I see on our SS statements as of today will that amount be higher when we reach 67?
It is based on your current or latest IRS reported income from the latest year you filed your taxes with the intent that you will continue at that income level and retire at FRA (which is probably 67 in your cases). We no longer get the printed SS statement, but do it all online at the website so we can see what our benefits would be if we took it at age 62, our FRA (67 for me, a bit less for my spouse), or if we delayed until age 70. Pretty much the same thing you see on a printed statement.

The amount shown gets recalculated each year based on your income and the number of years recorded of you paying into the system (does your income go up, stay the same, or go down, etc...). This usually happens from the information submitted by your employers on your W-2's every year and actually gets updated quicker than it used to in prior years in January/February on the SS website.

One also should factor for planning purposes - at least for now - a reduction in benefits come the year 2035. I believe the most recent report at the end of April shows that if some sort of funding legislation is not introduced between now and 2035, benefits will be cut by around 21%. We are not allowed to speculate here at Bogleheads on whether or not legislation will be enacted between now and then to fund SS so that benefits are not cut, so the prudent planning for retirement should - at this point - at least include the scenario that a reduction of benefits of 21% will impact everyone. For those of us who use i-ORP to run our retirement funding calculations, that benefit reduction assumption is by default included (he actually uses a 25% reduction figure): https://www.i-orp.com/Inflate/index.html

Again, that all helps with retirement planning purposes and helps emphasize the importance of building up the legs of the retirement income stream stool that you have more control over (savings/investments) by saving and investing a higher percentage than you have in prior years. At least that is our plan and we are sticking with it.

:sharebeer
Ok thanks! I just calculated our expenses and healthcare 14 years from. I used inflation. From Googling it seems it’s suggested to use 3%.

So our expenses in year 2034 will be:

Expenses:
$43,250

Healthcare:
$6800

Discretionary spending ?

TOTAL: $51,000
Typically when running calculations for retirement, we do everything in today's dollars (expenses and income). There are some excellent calculators that are favorites here at Bogleheads such as FIREcalc, i-ORP, and many other websites.

Here's a quick and easy one at Vanguard where you can plug in your information in today's dollars.

https://retirementplans.vanguard.com/VG ... meCalc.jsf
Thanks for the Vanguard calculator suggestion. Interesting that Vanguard is saying we need 75% of our income. When I figured it out if we were to retire today we would need 58% of our income and that includes $20k a year discretionary spending. I also used 3.5% expected annual return which from what I see is low. If I remember I think TIAA expects a 6% annual return. Like I said I use 3.5% because I don’t want to be risky with my lifetime income and since TIAA Trad guarantees 3%, 3.5% isn’t much over that with some stocks in the mix. I think I have TIAA Trad getting 3.5+.

I don’t like risk. Like I said before co-workers that started same time and same age as me and invested same amount have like $65k-$75k less than me. Now they may recover and end up with more accumulation than me in the long run of 14 years. So I’m not sure if I should take more risk. Maybe 80% Cref Stock / 20% TIAA Trad. However I’m comfortable with the 3.5% mark because according to Vanguard calc we are good. Anything more than 3.5% is a bonus is how I look at it.
Last edited by macher on Tue May 05, 2020 6:07 am, edited 2 times in total.

ponyboy
Posts: 920
Joined: Fri Feb 06, 2015 10:39 am

Re: TIAA Cref Accumulation = Lifetime Income?

Post by ponyboy » Tue May 05, 2020 5:56 am

Is TIAA a 457b plan? I didnt realize you can withdraw from a 457b plan without the typical 10% penalty like you would experience from a 401k.

Topic Author
macher
Posts: 212
Joined: Tue Apr 14, 2020 5:21 pm

Re: TIAA Cref Accumulation = Lifetime Income?

Post by macher » Tue May 05, 2020 5:59 am

ponyboy wrote:
Tue May 05, 2020 5:56 am
Is TIAA a 457b plan? I didnt realize you can withdraw from a 457b plan without the typical 10% penalty like you would experience from a 401k.
No ours isn’t. It’s a 403b. I work for the University of PA.

ponyboy
Posts: 920
Joined: Fri Feb 06, 2015 10:39 am

Re: TIAA Cref Accumulation = Lifetime Income?

Post by ponyboy » Tue May 05, 2020 7:35 am

macher wrote:
Tue May 05, 2020 5:59 am
ponyboy wrote:
Tue May 05, 2020 5:56 am
Is TIAA a 457b plan? I didnt realize you can withdraw from a 457b plan without the typical 10% penalty like you would experience from a 401k.
No ours isn’t. It’s a 403b. I work for the University of PA.
Ok. Mine probably isnt either since I work at a university too.

student
Posts: 4893
Joined: Fri Apr 03, 2015 6:58 am

Re: TIAA Cref Accumulation = Lifetime Income?

Post by student » Tue May 05, 2020 7:39 am

ponyboy wrote:
Tue May 05, 2020 7:35 am
macher wrote:
Tue May 05, 2020 5:59 am
ponyboy wrote:
Tue May 05, 2020 5:56 am
Is TIAA a 457b plan? I didnt realize you can withdraw from a 457b plan without the typical 10% penalty like you would experience from a 401k.
No ours isn’t. It’s a 403b. I work for the University of PA.
Ok. Mine probably isnt either since I work at a university too.
Many universities offer both 403b and 457b. At my public university, you can contribute to both.

Topic Author
macher
Posts: 212
Joined: Tue Apr 14, 2020 5:21 pm

Re: TIAA Cref Accumulation = Lifetime Income?

Post by macher » Tue May 05, 2020 8:07 am

student wrote:
Tue May 05, 2020 7:39 am
ponyboy wrote:
Tue May 05, 2020 7:35 am
macher wrote:
Tue May 05, 2020 5:59 am
ponyboy wrote:
Tue May 05, 2020 5:56 am
Is TIAA a 457b plan? I didnt realize you can withdraw from a 457b plan without the typical 10% penalty like you would experience from a 401k.
No ours isn’t. It’s a 403b. I work for the University of PA.
Ok. Mine probably isnt either since I work at a university too.
Many universities offer both 403b and 457b. At my public university, you can contribute to both.
Never looked into it. If my university does offer 457b as well as 403b what advantage is contributing to the 457b?

student
Posts: 4893
Joined: Fri Apr 03, 2015 6:58 am

Re: TIAA Cref Accumulation = Lifetime Income?

Post by student » Tue May 05, 2020 8:26 am

macher wrote:
Tue May 05, 2020 8:07 am
student wrote:
Tue May 05, 2020 7:39 am
ponyboy wrote:
Tue May 05, 2020 7:35 am
macher wrote:
Tue May 05, 2020 5:59 am
ponyboy wrote:
Tue May 05, 2020 5:56 am
Is TIAA a 457b plan? I didnt realize you can withdraw from a 457b plan without the typical 10% penalty like you would experience from a 401k.
No ours isn’t. It’s a 403b. I work for the University of PA.
Ok. Mine probably isnt either since I work at a university too.
Many universities offer both 403b and 457b. At my public university, you can contribute to both.
Never looked into it. If my university does offer 457b as well as 403b what advantage is contributing to the 457b?
403b and 457b have different advantages and disadvantages. See https://www.investopedia.com/articles/p ... arison.asp and https://www.weareteachers.com/403b-or-457b/ Since you work for University of Pennsylvania, a private institution, the 457b will be non-governmental, so there are additional disadvantages.

SGM
Posts: 3083
Joined: Wed Mar 23, 2011 4:46 am

Re: TIAA Cref Accumulation = Lifetime Income?

Post by SGM » Tue May 05, 2020 8:50 am

DW spent 4 years as a professor at one university that had TIAA-CREF. After so many years she was allowed to transfer some of the TIAA to CREF. With an initial investment of $8000 over 4 years including matching by the university She now received up to $19000 yearly. Most of that is from CREF. Since the market has dropped she will be getting $16000 yearly. We expect it will move back up as the economy recovers in a few years. It is not bad for a contribution of $1000 a year for 4 years.

We don't depend on it. I insisted that it be paid for her lifetime only as I expect she will live much longer than I will. We have rental, annuity, pension, delayed SS and portfolio income. No RMDs here as we converted before taking delayed until 70 SS. I imagine her cohort that stayed at that university are receiving rather large checks on a monthly basis.

A second university position did not have TIAA-CREF and that 403b or 401k was put into an IRA and eventually converted to Roth accounts with the other 401ks and IRAs.

User avatar
CyclingDuo
Posts: 3289
Joined: Fri Jan 06, 2017 9:07 am

Re: TIAA Cref Accumulation = Lifetime Income?

Post by CyclingDuo » Tue May 05, 2020 9:26 am

macher wrote:
Tue May 05, 2020 5:30 am
CyclingDuo wrote:
Mon May 04, 2020 4:14 pm
macher wrote:
Mon May 04, 2020 3:01 pm
CyclingDuo wrote:
Mon May 04, 2020 2:40 pm
macher wrote:
Mon May 04, 2020 2:18 pm
What I see on our SS statements as of today will that amount be higher when we reach 67?
It is based on your current or latest IRS reported income from the latest year you filed your taxes with the intent that you will continue at that income level and retire at FRA (which is probably 67 in your cases). We no longer get the printed SS statement, but do it all online at the website so we can see what our benefits would be if we took it at age 62, our FRA (67 for me, a bit less for my spouse), or if we delayed until age 70. Pretty much the same thing you see on a printed statement.

The amount shown gets recalculated each year based on your income and the number of years recorded of you paying into the system (does your income go up, stay the same, or go down, etc...). This usually happens from the information submitted by your employers on your W-2's every year and actually gets updated quicker than it used to in prior years in January/February on the SS website.

One also should factor for planning purposes - at least for now - a reduction in benefits come the year 2035. I believe the most recent report at the end of April shows that if some sort of funding legislation is not introduced between now and 2035, benefits will be cut by around 21%. We are not allowed to speculate here at Bogleheads on whether or not legislation will be enacted between now and then to fund SS so that benefits are not cut, so the prudent planning for retirement should - at this point - at least include the scenario that a reduction of benefits of 21% will impact everyone. For those of us who use i-ORP to run our retirement funding calculations, that benefit reduction assumption is by default included (he actually uses a 25% reduction figure): https://www.i-orp.com/Inflate/index.html

Again, that all helps with retirement planning purposes and helps emphasize the importance of building up the legs of the retirement income stream stool that you have more control over (savings/investments) by saving and investing a higher percentage than you have in prior years. At least that is our plan and we are sticking with it.

:sharebeer
Ok thanks! I just calculated our expenses and healthcare 14 years from. I used inflation. From Googling it seems it’s suggested to use 3%.

So our expenses in year 2034 will be:

Expenses:
$43,250

Healthcare:
$6800

Discretionary spending ?

TOTAL: $51,000
Typically when running calculations for retirement, we do everything in today's dollars (expenses and income). There are some excellent calculators that are favorites here at Bogleheads such as FIREcalc, i-ORP, and many other websites.

Here's a quick and easy one at Vanguard where you can plug in your information in today's dollars.

https://retirementplans.vanguard.com/VG ... meCalc.jsf
Thanks for the Vanguard calculator suggestion. Interesting that Vanguard is saying we need 75% of our income. When I figured it out if we were to retire today we would need 58% of our income and that includes $20k a year discretionary spending. I also used 3.5% expected annual return which from what I see is low. If I remember I think TIAA expects a 6% annual return. Like I said I use 3.5% because I don’t want to be risky with my lifetime income and since TIAA Trad guarantees 3%, 3.5% isn’t much over that with some stocks in the mix. I think I have TIAA Trad getting 3.5+.

I don’t like risk. Like I said before co-workers that started same time and same age as me and invested same amount have like $65k-$75k less than me. Now they may recover and end up with more accumulation than me in the long run of 14 years. So I’m not sure if I should take more risk. Maybe 80% Cref Stock / 20% TIAA Trad. However I’m comfortable with the 3.5% mark because according to Vanguard calc we are good. Anything more than 3.5% is a bonus is how I look at it.
You are able to adjust the calculator settings even though, by default, the Vanguard link is set at 75% of your current income. If you follow these boards long enough, you will find a wide range of that percentage for retirees. Some are at 85%, 90%, 100%, 105%, etc... . Some have a goal of saving and saving and saving for decades, then spending much more in retirement than they did during their earning years due to pent up travel desires, spending on grandchildren, lifestyle changes, etc... in what is known as the go-go years (early years of retirement). Those are followed by the slow-go years. And finally, the no-go years arrive where one's age and health combined result in staying close to home and spending less than in the go-go and slow-go years. Most of us get a first hand view of this by close observation of what our own parents did during those phases of their retirement.

When calculating returns, make sure the difference between real vs. nominal is stated and what a particular calculator is using.

CyclingDuo
"Everywhere is within walking distance if you have the time." ~ Steven Wright

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