Your Retirement Income Options. TIAA-CREF Financial Essentials

Transcription

1 Your Retirement Income Options TIAA-CREF Financial Essentials

2 Today we will discuss: 1. Determining your retirement income needs Income sources Covering your expenses 2. Threats to your retirement cash flow 3. Withdrawal and income options 4. Actions to take today

3 Determine Your Retirement Income Needs Review sources and expenses Evaluate your retirement income sources Calculate your anticipated expenses

4 Determine Your Retirement Income Needs Evaluate income sources Determine a salary replacement percentage goal, or retirement income Personal savings + Employer + Social = retirement plan Security Retirement income 70% 120%

5 Determine Your Retirement Income Needs Retirement income sources decide when to take Social Security Early benefits at age 62* Collect benefits longer! Helpful if you need the funds, or if you re in poor health Delaying benefits** Benefits are higher! If you are in a high tax bracket, potential benefit from delaying tax payments * Benefits are permanently reduced and the reduction will be greater in future years as you age. ** If born before 1938, you re eligible for full Social Security at age 65. If born after 1938, the eligible age for full benefits increases from age 65 to 67, depending upon your birth year.

6 Determine Your Retirement Income Needs Estimate your expenses in retirement When calculating income needs, consider: Household expenses Personal care Unexpected healthcare costs Transportation Insurance Taxes and debt payments Leisure activities Other expenses, including dues, charities

7 Determine Your Retirement Income Needs Planning your retirement Other Considerations: Providing for your partner/dependents Your health and your partner s health Availability of cash for emergency needs Threats to retirement income

8 Determine Your Retirement Income Needs Are you on target to reach your goal? Retirement income goal Review financial plans and income needs Achieved Additional flexibility

9 Threats to Your Retirement Cash Flow Outliving Your Assets Loss of Purchasing Power Returns Lower than Anticipated

10 Threats to Your Retirement Cash Flow Your income should last a lifetime Average Anticipated Years of Retirement for TIAA-CREF Participants Retirement Age Women Men Years of Retirement Source: TIAA-CREF Actuarial, 2011.

11 Threats to Your Retirement Cash Flow Unanticipated market performance Investments influence asset balances and income streams Are you comfortable with the level of risk in your portfolio? Know that equity markets are volatile Get a personal portfolio review We ll review your current holdings We ll offer model portfolios to help you reach your goal

12 Threats to Your Retirement Cash Flow Asset allocation in retirement Take a risk tolerance quiz to determine your tolerance for risk and volatility Based on your risk tolerance, what category of investor are you? Conservative Moderately Conservative Moderate Moderately Aggressive Aggressive

13 Understanding Stock Market Volatility Significant downturns are not uncommon NEXT? Period Length Decline in S&P 500 9/29 6/32 34 months % 6/46 4/47 11 months % 8/56 2/57 7 months % 8/57 12/57 5 months % 1/62 6/62 6 months % 2/66 9/66 8 months % 12/68 6/70 19 months % 1/73 9/74 21 months % 1/77 2/78 14 months % 12/80 7/82 20 months % 9/87 11/87 3 months % 6/90 10/90 5 months % 7/98 8/98 2 months % 9/00 9/02 25 months % 11/07 2/09 16 months % 5/10-6/10 2 months % 5/11-9/11 5 months % Source: Ibbotson Associates, Inc.; Final Period Source: CREF Investments. Both Sources: Large Company Stocks Standard & Poor s 500, which is an unmanaged group of securities and considered to be representative of the stock market in general. The data assumes reinvestment of all income and does not account for taxes or transaction costs. The average return represents a compound annual return. An investment cannot be made directly in an index. Past performance is not a guarantee of future results.

14 Threats to Your Retirement Cash Flow Expenses come out of cash flow $10,000 invested over 30 years earning 6% $60,000 $50,000 $49,416 $40,000 $30,000 $31,330 $36,497 $20,000 $10,000 $0 2.00% 1.50% 0.50% $10,000 $10,000 $10,000 Higher Moderate Lower Expenses This chart assumes expenses are withdrawn from the account at year-end, based on year-end assets. It is presented for illustrative purposes only and does not reflect actual performance, deduction of taxes or predict future results of any TIAA-CREF account. Before committing money to an account, be sure to check its expenses. Refer to the prospectuses available at this seminar for current expenses. However, lower expenses do not mean higher returns.

15 Withdrawal and Income Options Taking income with TIAA-CREF An Array of Flexibility and Choice* Life Annuity Cash Or Systematic Withdrawals** TIAA Interest Only Fixed Period Annuities*** Minimum Distribution Option * Income option availability is subject to your institution s plan provisions and contract type. ** If you have an RA contract, the TIAA annuity contract does not allow lump-sum cash withdrawals from the TIAA. If you have an RA contract, the TIAA annuity contract does not allow lump-sum cash withdrawals from the TIAA Traditional Annuity and transfers must be spread over a ten-year period. If you have a GRA contract, lump-sum withdrawals are available from the TIAA Traditional Annuity only within 120 days after termination of employment and are subject to a surrender charge. All other withdrawals and all transfers to the Real Estate Account or to CREF must be spread over a ten-year period (five years for withdrawals after termination of employment). *** Traditional Annuity and transfers must be spread out in ten payments over a nine-year period. If you have a GRA or Retirement Choice (RC) contract, lump-sum withdrawals are available from the TIAA Traditional Annuity only within 120 days after termination of employment and are subject to a surrender charge. All other withdrawals and all transfers to the Real Estate Account or to CREF must be spread over a ten-year period (five years for withdrawals after termination of employment) for GRA and an 84-month (7 year) period for RC.

16 Withdrawal and Income Options Lifetime Annuity Lifetime Annuities: An arrangement which provides fixed or variable income payments for life or for a specified number of years. Income You Can t Outlive* * Guarantees are based on the claims-paying ability of the issuer.

17 Withdrawal and Income Options Life Annuity options One- and Two-Life Annuities* One-Life Annuity Provides lifetime income to the annuitant only Two-Life Annuity Provides lifetime income to the annuitant and a second person * Annuity account options are available through contracts issued by TIAA or CREF. These contracts are designed for retirement or other long-term goals, and offer a variety of income options, including lifetime income.

18 Withdrawal and Income Options Life Annuity beneficiaries Planning for loved ones is an option Beneficiary An individual or organization that inherits payments following your death

19 Withdrawal and Income Options Life Annuity beneficiaries Guaranteed Period* Outlines the number of years your beneficiaries can collect income payments after your death Guaranteed period begins when your annuity income contract is opened Options: 10, 15 or 20 years Beneficiary can collect payments for the remainder of the guaranteed period Assumes you and your annuity partner die within the time frame * The guaranteed period cannot exceed life expectancy.

20 Withdrawal and Income Options Life Annuity example Hypothetical initial monthly income comparison* One-Life Options at Age 65 Initial Payment to Annuitant At Death of 1 st Annuitant after 13 Years At Death of 2 nd Annuitant after 13 Years Single-Life Annuity $1, year guaranteed period $ year guaranteed period $914 $914*** Two-Life Options at Age 65** 75% Benefit To Annuity Partner $890 $668**** $890*** Two-Thirds Benefit to Survivor $943 $629**** $629*** Half Benefit to Second Annuitant $924 $462**** $924*** Full Benefit to Survivor $858 $858**** $858*** * Assumes accumulation of $159,307, 5% interest rate, Mortality A2000 (2.25). ** TIAA Traditional Annuity with 20-year guaranteed period, both annuitants age 65. *** Funds will be distributed to the beneficiary for the remainder of the guarantee period. **** Funds will be distributed to the annuity partner for the remainder of the guarantee period. This scenario is hypothetical in nature and for illustrative purposes only. Actual results will vary.

21 Withdrawal and Income Options Withdrawal Weighing and Income the Options options Life Annuity Investments Fixed Variable

22 Withdrawal and Income Options Life Annuity: TIAA Traditional Guaranteed Annuity Base income is part principal, part guaranteed amount * Additional amounts can be paid when earned and declared Provides for stable portion of income stream Standard or Graded payment options * Any guarantees under annuities issued by TIAA are subject to TIAA's claims-paying ability. These additional amounts are not guaranteed but, when declared, remain in effect for the declaration year which begins each January 1st for payout and March 1st for accumulating annuities.

23 Withdrawal and Income Options Monthly annuity income: TIAA Traditional Standard Payment Method $751 $758 $760 $760 $760 $760 $760 $767 $767 $767 $767 $ Graded Payment Method $566 $584 $608 $628 $648 $668 $698 $711 $740 $763 $787 $

24 Withdrawal and Income Options Lifetime Income CREF Variable and TIAA Real Estate Accounts Base income is part principal, part earnings assumption percentage Income adjustments are directly related to the performance of each account Payments can fluctuate significantly each year May complement income from TIAA Traditional Used to add inflation adjustment component

25 Withdrawal and Income Options Monthly annuity income: CREF Stock variable annuity account $700 $600 $500 $574 $504 $494 $513 $576 $627 $576 $490 $550 $550 $400 $300 $200 $359 $320 $100 $ Assumptions: $100,000 accumulation in CREF Stock Account starting as of 5/1/2001, age 65. Single Life Annuity with a 10-Year Guaranteed Period at age 65. Income revaluation period is for May 1st of each year. Monthly income shown for each year is as of May 1 st of that year. The chart is hypothetical and for illustrative purposes only and does not reflect deduction of taxes or predict future results of any TIAA-CREF account.

26 Withdrawal and Income Options Cash withdrawals,* lump sum or systematic Cash withdrawals Distribute according to your needs May allow for distribution of significant assets to beneficiaries Available from TIAA Traditional in 10 annual installments** Available from the CREF accounts and the TIAA Real Estate account * Income option availability is subject to your institution s plan provisions and contract type. ** If you have an RA contract, the TIAA annuity contract does not allow lump-sum cash withdrawals from the TIAA Traditional Annuity and transfers must be spread over a ten-year period. If you have a GRA contract, lump-sum withdrawals are available from the TIAA Traditional Annuity only within 120 days after termination of employment and are subject to a surrender charge. All other withdrawals and all transfers to the Real Estate Account or to CREF must be spread over a ten-year period (five years for withdrawals after termination of employment).

27 Withdrawal and Income Options Cash withdrawals,* lump sum or systematic Systematic withdrawals Distribute according to your needs Residual assets will be available to beneficiaries Risk of outliving principal Visit tiaa-cref.org for a systematic withdrawal illustration! * Income option availability is subject to your institution s plan provisions and contract type.

28 Withdrawal and Income Options Cash withdrawals,* lump sum or systematic Cash withdrawal considerations Tax implications Loss of professional management Dissipation of future retirement funds * Income option availability is subject to your institution s plan provisions and contract type. Neither TIAA-CREF nor its affiliates offer legal or tax advice. Please consult your advisors regarding your particular situation.

29 Withdrawal and Income Options TIAA interest only Income Receive monthly interest payments from your TIAA Traditional annuity Your principal remains intact Available for Retirement Annuity (RA) or Group Retirement Annuity (GRA) contracts

30 Withdrawal and Income Options Fixed-period annuities* TIAA-CREF fixed-period income Income for specified number of years Benefits cease at the end of the period Fixed period may not exceed life expectancy If under age 59½, income from fixed period may be subject to tax penalties FPO * Subject to employer s plan rules.

31 Withdrawal and Income Options Minimum Distribution Option Pays IRS required minimum distribution Maximizes income tax deferral and preserves accumulation Delays deciding on lifetime income FPO

32 Withdrawal and Income Options How will your retirement income be affected by taxes? $ 28% 25% 15% TIAA-CREF does not provide tax advice. Please consult your own tax advisors.

33 Withdrawal and Income Options Remember: Eligible rollover distributions are subject to a mandatory 20% withholding* tax, including: Cash Systematic withdrawals TIAA interest-only option Fixed-period annuities under 10 years Transfer payout annuity * The requirement applies unless the money is rolled over directly to an eligible retirement plan, such as an IRA.

34 Steps to Take Today Additional helpful planning pointers No need to choose a withdrawal solution yet Check beneficiaries/estate needs Look at insurance needs Consolidate assets* * Be sure to carefully consider differences in features, costs, charges and expenses, services, company strength and other important aspects. There may also be surrender charges and tax consequences associated with the transfer. Indirect transfers may be subject to taxation and penalties. Consult with your own advisors regarding your particular situation.

35 Steps to Take Today Simplify your retirement Consolidate your assets! Reducing the number of retirement accounts you own may reduce your overall expenses Make recordkeeping easier Be sure to check the terms of your existing investments as certain surrender and other charges may apply There may be tax consequences associated with the transfer of assets. Indirect transfers may be subject to taxation, surrender charges and penalties. You should carefully consider potential differences in features, costs, expenses, and other important factors and consult your tax advisor regarding your particular situation.

36 Steps to Take Today Action steps to take today Determine your retirement income sources Estimate your retirement expenses Review your investment strategy Save more, there s still time!

37 Take the next step Call us at Visit us at: tiaa-cref.org/mnscu

38 TIAA-CREF is here for you tiaa-cref.org Life Insurance College savings and other priorities Brokerage Services Tax-advantaged saving Mutual Funds No-fee IRAs* The products and services referenced above are offered by various entities within the TIAA-CREF group of companies. * There is no account fee to own a TIAA-CREF IRA; however, brokerage transaction fees may apply. In addition, investors are subject to the underlying funds portfolio management fees and expenses.

39 Annuity contracts and certificates are issued by Teachers Insurance and Annuity Association (TIAA) and College Retirement Equities Fund (CREF), New York, NY.TIAA-CREF Individual & Institutional Services, LLC and Teachers Personal Investors Services, Inc., members FINRA, distribute securities products. Investment, insurance and annuity products are not FDIC insured, are not bank guaranteed, are not deposits, are not insured by any federal government agency, are not a condition to any banking service or activity, and may lose value. Retirement Annuity (RA) TIAA Contract form series , CREF Certificate series C STD.1; Group Retirement Annuity (GRA) TIAA Contract form series G or G1000.5, G or G (not available in all states), CREF Certificate series CG ; Supplemental Retirement Annuity (SRA) TIAA Contract form series /CREF Certificate series C1200.4; Group Supplemental Retirement Annuity (GSRA) TIAA Contract form series G (GSRAs are not available in all states)/cref Certificate series CG The tax information contained herein is not intended to be used, and cannot be used by any taxpayer, for the purpose of avoiding tax penalties that may be imposed on the taxpayer. It was written to support the promotion of the products and services addressed herein. Taxpayers should seek advice based on their own particular circumstances from an independent tax advisor. tiaa-cref.org 2013 Teachers Insurance and Annuity Association College Retirement Equities Fund (TIAA-CREF), 730 Third Avenue, New York, NY C4106

40 You should consider the investment objectives, risks, charges and expenses carefully before investing. Please call or visit for a prospectus that contains this and other information. Please read the prospectus carefully before investing. TIAA-CREF products may be subject to market and other risk factors. See the applicable product literature, or visit tiaa-cref.org for details. tiaa-cref.org 2013 Teachers Insurance and Annuity Association College Retirement Equities Fund (TIAA-CREF), 730 Third Avenue, New York, NY C4106