TIAA Traditional annuity vs. SPIA (Single Premium Immediate Annuity)

[psychopengy]

Hello everyone,
I’d like to understand the contractual differences between the TIAA Traditional annuity and a regular SPIA. I’m considering purchasing one or the other. I haven’t been contributing to a TIAA Traditional annuity through an employer. I would be transferring traditional IRA funds from a different brokerage to the TIAA Traditional and converting it to lifetime income almost immediately, or within a few months. I’ve spoken to a TIAA advisor numerous times about their Traditional product, and what I understand about it so far is:
- It is a qualified retirement plan
- It is a fixed annuity
- The monthly payment is composed of two parts; a Guaranteed amount, and an “Additional” amount, which is smaller, but can vary, and, according to the TIAA advisor, has a history of always increasing.
- TIAA also is a top-rated insurer

Mostly what I’m wondering is what the differences are between the TIAA Traditional and a “retail” (non-qualified, i.e. after tax) SPIA from a top-rated insurance company.
Many thanks for your time.

[JayB]

Hello everyone,
I’d like to understand the contractual differences between the TIAA Traditional annuity and a regular SPIA. I’m considering purchasing one or the other. I haven’t been contributing to a TIAA Traditional annuity through an employer. I would be transferring traditional IRA funds from a different brokerage to the TIAA Traditional and converting it to lifetime income almost immediately, or within a few months. I’ve spoken to a TIAA advisor numerous times about their Traditional product, and what I understand about it so far is:
- It is a qualified retirement plan
- It is a fixed annuity
- The monthly payment is composed of two parts; a Guaranteed amount, and an “Additional” amount, which is smaller, but can vary, and, according to the TIAA advisor, has a history of always increasing.
- TIAA also is a top-rated insurer

Mostly what I’m wondering is what the differences are between the TIAA Traditional and a “retail” (non-qualified, i.e. after tax) SPIA from a top-rated insurance company.
Many thanks for your time.

If you annuitize a trad IRA -- either inside or outside of TIAA -- then this would be a qualified annuity and you would pay taxes on each payment the annuity generates. Basically, check the lifetime annuity rates that TIAA is offering for lifetime annuities against lifetime annuity rates offered by other top-rated insurers. TIAA is often able to offer very attractive rates because they are only contractually obligated to pay the Guaranteed rate; this gives them a financial fallback to avert insolvency in times of extreme economic stress. With that said, TIAA has a history of increasing their payouts, but by no means every year. And they have been known to lower their payout toward the Guaranteed rate, although this is very rare.

For non-qualified lifetime annuities, each payment through your life expectancy would be partially taxable because each of these payments is partially a return of premium/investment. Beyond your life expectancy, the payments would be totally taxable. Also, payments from non-qualified annuities are usually subject to state income tax whereas payments from a qualified annuity are not in many states.

[crefwatch]

Although it's risky and confusing to compare two products that are taxed differently, your real problem is that your needs (I mean, your plan) is not comparable to 99.0% of the actual, current customers of the TIAA Traditional [Payout] Annuity. I question whether this is a good use of your time.

This product is deliberately designed to "favor" long-term investors in the product. In the last decade, TIAA has begun to use the marketing term "Loyalty Bonus" to describe the actuarial features that create this favoritism. For example, unlike an SPIA, TIAA does not care how long you live. They have ZERO Mortality Risk. If you die "early", the left over money does not go to TIAA, it goes to the other, living annuitants. This also has the result of making the Mortality and Expense Risk expense charges fall to nearly zero, quite unlike the vast majority of SPIA's.

I don't even want to direct you to the many threads here where people have found that a TIAA Annuity is more favorable to them than any of the much-touted SPIA research sites, or even individual insurance companies, offer them. That's because YOU are not like (as I just wrote) 99.9% of those long-term employees who have been paying into TIAA Traditional for 20 to 40 years.

Have a look at this data sheet:
https://www.tiaa.org/public/investment- ... r=47933634

Page down to the section headed "Income Payout Rates." This will begin to give you some idea of how disadvantageously you are placed compared to that majority of customers. (It happens that, currently, this chart is the same for all new annuitants, not just those in IRAs.) This chart is not precise. TIAA regularly prepares formal annuity payout ESTIMATES, that are binding on TIAA for a month or two, but that do not require the applicant to accept the proposal.

It is unclear to me whether TIAA offers IRAs to people who do not already have a (likely, employer-plan) relationship with TIAA. But because TIAA products are complex and confusing, and their web interface tends to be inferior to places like Fidelity and Vanguard, I question whether you will be pleased to select an additional financial services provider going forward.

It happens that CREF (as in TIAA-CREF) offers a VARIABLE payout annuity series that DOES NOT discriminate against late adopters. And it also has zero mortality risk for TIAA and CREF. But you have not expressed ANY interest in a (wildly ... ) varying payout amount, marked to various market options, and carrying a 4% A.I.R. for calculation of the next year's payout.

TIAA Trad White Paper
www.tiaa.org/public/pdf/compliance/tiaa ... -paper.pdf
https://www.tiaa.org/public/pdf/TT_FAQ.pdf

Loyalty Bonus:
viewtopic.php?t=382600
viewtopic.php?p=7409350#p7409350 (Actual numbers)
viewtopic.php?t=413328 (IRR calculations made)
viewtopic.php?t=422613
https://www.tiaa.org/public/pdf/t/tiaa- ... -bonus.pdf

Why Should I use TIAA Traditional?
viewtopic.php?f=1&t=318503
viewtopic.php?t=315414
www.tiaa.org/public/pdf/compliance/tiaa ... -paper.pdf
https://www.tiaa.org/public/pdf/making- ... rement.pdf

Can TIAA Traditional payouts decrease?
viewtopic.php?t=431760

Can TIAA Traditional payouts increase?
https://www.tiaa.org/public/pdf/2022_tr ... l_faqs.pdf
https://www.tiaa.org/public/about-tiaa/ ... 2021/12-16
https://www.tiaa.org/public/retire/fina ... three-ways

[tibbitts]

Hello everyone,
I’d like to understand the contractual differences between the TIAA Traditional annuity and a regular SPIA. I’m considering purchasing one or the other. I haven’t been contributing to a TIAA Traditional annuity through an employer. I would be transferring traditional IRA funds from a different brokerage to the TIAA Traditional and converting it to lifetime income almost immediately, or within a few months. I’ve spoken to a TIAA advisor numerous times about their Traditional product, and what I understand about it so far is:
- It is a qualified retirement plan
- It is a fixed annuity
- The monthly payment is composed of two parts; a Guaranteed amount, and an “Additional” amount, which is smaller, but can vary, and, according to the TIAA advisor, has a history of always increasing.
- TIAA also is a top-rated insurer

Mostly what I’m wondering is what the differences are between the TIAA Traditional and a “retail” (non-qualified, i.e. after tax) SPIA from a top-rated insurance company.
Many thanks for your time.

I don't understand why you're comparing an annuity bought with deferred income to one bought with taxable. Why not get quotes for annuitizing the same deferred money from both TIAA and other sources and compare?