A guide to your retirement income options with TIAA-CREF

Transcription

1 A guide to your retirement income options with TIAA-CREF Helping you make important decisions about your retirement How will I know when the time is right to retire? Making the decision to retire is no small effort, but you have taken an important step. There are many things to think about, many specific decisions that must be made, and any number of actions to take that can impact the very expectations you (and a spouse or partner) have about retirement. Much of the focus of whether you are ready to retire or not revolves around financial preparedness and how to turn your hard-earned assets into a reliable income payout. But an equally important focus revolves around your personal well-being and what you really want to do with your time and energy in the life stage we typically call retirement. It s when these two components (financial and personal well-being) come together to your satisfaction that you ll know it s the right time to retire. You re clearly already thinking about the financial aspects of retiring, as you ve received this report from an analysis on the TIAA-CREF Retirement Income Planner. You ve perhaps had a conversation about your retirement ideas with a TIAA-CREF Financial Consultant. If you haven t yet had a chance to discuss your options, just give us a call. This guide, along with the printed illustration report(s) you ve received, will help you get a good look at how much income you might receive from the assets you hold in your retirement plan and what your next steps toward retirement should be. Guaranteed retirement income for basic expenses Here at TIAA-CREF, we believe that it is extremely important for each plan participant to create a retirement income payout that they cannot outlive. A key component to ensuring lifetime income is establishing basic coverage for essential, must-have-no-matter-what expenses. We call it the guaranteed floor and the fixed-income portion of a lifetime income annuity may be the solution to meeting your basic needs throughout retirement. Regardless of how much you have saved for retirement, securing your guaranteed floor to meet your unique needs is the first step. We suggest that you consider the benefits of a low-cost, fixed-income annuity as a part of your retirement portfolio. Your personalized results are presented in the enclosed report for your review. 5 key questions Ask yourself (and your spouse or partner) these five questions to help you make the right decision if it is time to retire: W W Am I prepared for the financial realities of leaving my paycheck behind? W W Do I fully understand where my income will come from each year in retirement? W W Have I considered all of my resources for creating income in retirement? W W Have I accounted for the financial impact of not being covered by my employer s healthcare plan? W W Is my budget in place to ensure my expenses do not exceed my income? Continued next page

2 About the report The enclosed report contains detailed information about the option you selected for creating income from your TIAA-CREF Retirement Plan. This report may be the result of a recent discussion with a Financial Consultant or from an online session you ran yourself. Either way, you ll see a simulation of income for the portion of your nest egg that is held in your retirement plan. About our methodology: As with any tool or calculator, the output relies on a combination of specific input, accurate and up-todate underlying assumptions and calculations that estimate the outcome to the closest degree of accuracy. In the TIAA-CREF Retirement Income Planner, we use a deterministic methodology to estimate the dollar amount of income you can expect based on a single rate of return and the inputs you ve provided. The income amounts will not be the exact amount of money you will receive initially or throughout your lifetime, but are an illustration that includes certain assumptions. Rates of return may be higher or lower than the rate used for the estimate. However, the numbers represent the closest value we can calculate as of the running of the report. Full details on the methodology are available on the secure site at tiaa-cref.org, under the Advice & Guidance tab. How the TIAA-CREF Retirement Income Planner works In general, the estimates are based on key information that you provided about when you want to retire and how you want to receive income. You may have made changes to the set of assumptions that were included in the planner, such as inflation factor, rates of return and if Social Security would be included. There are additional underlying assumptions in the calculator that are applied to run the estimates and generate the tables and graphs that you see. If you selected a lifetime annuity option, it is important to understand that all of your investments not already in an annuity were first converted to a variable annuity for the purpose of the model. The amount of income shown in the illustration may not reflect the income that you will ultimately receive. Rather, it is a model of an income amount you could receive if you were to convert all of your equity and fixed-income investments to a variable annuity. You can change this assumption by using the Advanced Worksheet in the planner and removing your non-annuity investments from the model. The estimates of income are shown as gross income amounts. Your actual income will be reduced by the amount you will owe in taxes, and you are responsible for making timely tax payments. All of your data is stored in a highly secure area that only you can access with a login identifier and password. To run additional scenarios, simply go to tiaa-cref.org and log in to your secure account or give us a call at , Monday to Friday, 8 a.m. to 10 p.m. (ET), and Saturday, 9 a.m. to 6 p.m. (ET). What to look for in the report Carefully read the report and spend some time reviewing the tables and charts. In the end, you ll want to understand exactly how much money you will be receiving as income from the accounts and assets included in the analysis. Remember that some of your investments may have been converted to an annuity for the purposes of the model and may not reflect your actual income amount. Next steps 1. Review the information carefully and note any changes to further refine your estimates. 2. Consider all your options, amount of income and implications to the guaranteed floor. 3. Consult with your TIAA-CREF Financial Consultant to finalize your estimates and prepare to make your decisions (some of which are irrevocable). 2 Run additional reports at tiaa-cref.org or call us at

3 TIAA-CREF Retirement Income Planner Designed for those closest to retirement This powerful resource was designed to help you assess your options for retirement income based on the options available in your employer s plan. You may see some other options indicated in the planner, which may or may not be available for your plan. It is important for you to know that this planner provides estimates and information most accurately for those closest to retirement generally, 10 years or less from the target retirement date. Otherwise, consider the information educational. Once you are within one year of retiring, call TIAA-CREF to consult with a representative before you make your final income decisions. Find yourself in the chart below to understand how the report should be interpreted and used. If you are: Close to retiring (0 2 years): You want to interpret the report as follows: W W The value of your retirement plan assets can be used to approximate an amount of guaranteed income or other payout amounts. And, should be ready to make the following decisions: W W How much of your plan assets will be used to create your guaranteed income floor with a fixed-income annuity (usually between 0% and 50%) W W Which income option balances the maximum income with the least amount of risk to running out of money How you will provide for your beneficiaries Between 2 and 5 years from retirement: Within 6 10 years of retirement: Living in retirement: Too young to retire, but interested in learning more: W W The estimates in the report illustrate a close approximation of the amount of income you are on track to receive. The estimates in the report reflect an approximate income value assuming that: W W You continue your contributions W W Market performance and inflation remain constant between now and retirement W W The value of your retirement plan assets can be used to approximate a near-final amount of guaranteed income or other payout amounts. W W The estimates are not intended to project your future income, but can give you an idea of future income your assets could represent many years from now if rates of return hold at your target assumption. W W Approximate the guaranteed income you will need from your retirement plan after Social Security (if eligible) and other income sources W W Close any gaps in your plan and budget by saving more, paying off debt, or downsizing before reaching retirement. W W If you should increase your contributions for potentially more guaranteed income once in retirement W W How consolidating your assets in one place will give you a more complete picture of your future W W If you should strategically reallocate assets to prepare for income payouts W W Determine the exact amount of your plan assets that you want to convert to guaranteed income to cover your essential expenses. W W Fill out the appropriate paperwork to start your income payments. W W See how much more you should increase your contributions to help you reach your retirement goals. W W Look at how you might create income many years in the future. W W Use other more appropriate tools for helping you determine how much to save to reach your goals at tiaa-cref.org, under the Advice & Guidance tab s Tools & Calculators section. Run additional reports at tiaa-cref.org or call us at

4 Creating your income for retirement For most of us, we spend the majority of our careers working for an organization that provides us with a steady paycheck, takes care of our employment tax obligations, routes a portion of our pay to our retirement savings plan and so on. When we receive our check, the net amount is what we use to run our daily lives. The issue for many when they get ready to retire is that they must now take on the role of employer, meaning that each individual must now: Figure out how, where and when to generate gross wages; Pay quarterly taxes in the correct amount; Receive income from new sources such as Social Security and pensions; and Never run out of money as long as they are alive. It can be a complicated situation, but if you approach creating your personal income stream in a series of steps, the process is not quite so daunting! You ve already seen that working with TIAA-CREF gets you started on figuring out how to create your income in retirement. Completing the process should help you get ready to enter retirement confidently. There are five action steps to take and you are already at number three! Evaluate Estimate Meet Simplify Optimize 1. Evaluate all of your resources that you might use for income in retirement, including your full retirement plan assets held at TIAA-CREF, any other former employer plans you or your spouse or partner have in other locations, all IRAs and taxable accounts. 2. Estimate your retirement budget just how much will you need to live comfortably? If you haven t yet set up a budget, use the next page to think about your expenses. 3. Meet with or call a TIAA-CREF Financial Consultant to discuss what retirement means to you and to assess your financial resources. The Consultant can help you calculate just how much you will need to create a steady, reliable, predictable income floor that you cannot outlive. 4. Simplify your financial picture by consolidating accounts,* organizing your finances across your household and setting up accounts as needed. Ideally, you d like your retirement income to be as simple and streamlined as you have it now with your employer paycheck. Set up a process that allows you to meet your income needs reliably each and every month so you can focus on making retirement everything you want it to be! 5. Optimize your income stream making sure you can take advantage of the best income options available to you. There are many choices for converting your hard-earned savings into income. Make sure you are getting the most out of every dollar while minimizing risks and ensuring that your beneficiaries have sufficient future income. 4 Run additional reports at tiaa-cref.org or call us at * Before transferring assets or replacing an existing annuity, be sure to carefully consider the benefits of both the existing and new product. There will likely be differences in features, costs, surrender charges, services, company strength and other important aspects. There may also be tax consequences associated with the transfer of assets. Indirect transfers may be subject to taxation and penalties. Consult with your own advisors regarding your particular situation.

5 Building a confident retirement income plan begins with a budget If you haven t yet had the time to look closely at the expenses that you will need to live comfortably in retirement, now is a good time to do so. A detailed budget worksheet is available to download at tiaa-cref.org, under the Advice & Guidance tab s Tools & Calculators section. To get started with budgeting, you may find it helpful to have a basic framework for estimating expenses you expect to have in retirement and all of the resources you will have available to create your retirement income. Think about your expenses in terms of must-haves or essential needs, and nice-to-haves or discretionary wants. Your sources of income should be coordinated across your household and may include those you will receive monthly to those you will derive from investment opportunities to one-time cash amounts. Expense categories for building a retirement budget Essential expenses Those items such as food, shelter, healthcare, taxes, etc. that you must have to live each month Protection expenses Products and services that ensure that you will always have at least some amount of money in your retirement, such as life insurance, long-term care insurance, guaranteed fixed-income annuities, etc. Discretionary expenses Those optional items that you would like to have in retirement, but can forgo if your assets are running low Unique expenses Consider additional costs that you may need to incur to support adult children who have returned home, grandchildren, special needs children, your plans for a financial legacy, etc. Many retirees find that their essential expenses in retirement take up the majority of their spending. If you are uncertain where to begin, you might consider using a rough estimate of 70% essential and 30% discretionary if you are looking for a target starting point. Of course, your actual budget will vary based on your lifestyle and personal situation. A complete planning guide for budgeting is available at tiaa-cref.org, under the Advice & Guidance tab s Tools & Calculators section. Types of income sources for building retirement income Government benefits Social Security, Medicare, Medicaid Personal sources Work in retirement, investment portfolios, rental income, savings accounts, IRAs, annuities, etc. Employer sources Defined Benefit pension plans, Thrift Savings Plans, 401(k), 403(b), 457(b), SIMPLE-IRA, Profit Sharing, etc. One-time sources Inheritances, proceeds from the sale of a property or home, life insurance, etc. Use the categories listed in the tables above to think about where you will be spending your money in retirement and where your income will come from. Map out your personal situation; then review your final budget against the income estimates on the enclosed report. You ll see how much of your budget can be covered by your TIAA-CREF income options. Run additional reports at tiaa-cref.org or call us at

6 Creating income from your TIAA-CREF retirement plan assets Compare a variety of income options before choosing the one or ones that will help you meet your income needs. Keep in mind that you may be able to use more than one income option (not all options may be available in your plan). A TIAA-CREF Financial Consultant can help you determine your optimal solutions. Income Option Description Benefits Lifetime Annuity Systematic Withdrawals This option allows you to convert your retirement plan savings into a stream of income guaranteed to last as long as you live. This option allows you to draw cash out of your retirement plan on a schedule that you choose. W W Income is guaranteed to last a lifetime, no matter how long you live. W W You can choose from a range of payment options, including fixed and variable life annuities. W W No need to monitor or manage W W With a guaranteed period, you are assured that your beneficiaries will receive a minimum number of periodic payments, if you pass away during the guaranteed period. W W You control your assets and select the investment strategy that you prefer. W W Payments will be sent to you on the timetable you have selected. W W Allows for maximum flexibility with your retirement plan assets Interest-Only Payments Transfer Payout Annuity This option allows you to receive a stream of income from a TIAA Traditional balance without tapping into the principal. This option allows you to access and reallocate TIAA Traditional over a set number of years. W W You receive income without dipping into principal until required minimum distributions begin. W W The income you receive includes a guaranteed rate of 1% 3% (for most contracts) and any additional amounts declared above the guaranteed rate. W W May supplement part-time work or cover expenses if your spouse or partner retires first W W You have access to the full amount of your annuity account balance over a shorter time period. W W You will receive more income for a set period of time than if you chose a lifetime payout. W W May use as an income bridge until you reach full Social Security age or until another key source of income becomes available Fixed-Period Annuity This option allows you to set a specific number of years over which you will receive income from one or more retirement plans. W W Control how long a portion of your assets may last W W May receive a higher amount of monthly income than if you spread out income over your life using one of the lifetime options W W Prefer the flexibility of utilizing a certain portion of your overall portfolio to create income while keeping the balance invested Required Minimum Distributions This option ensures you meet the IRS rules by calculating the minimum amount you re required to receive once you reach age 70 ½, and sending that amount to you at least annually. W W Prefer that TIAA-CREF calculates your required amount and automatically sends the payment to you W W You want just the minimum amount taken from this retirement plan. W W You have other sources of income and want to invest these assets as long as possible. 6 Run additional reports at tiaa-cref.org or call us at

7 Complete information about each income option can be found in our Making the Most of Your Retirement brochure and other resources available on the secure site at tiaa-cref.org, under the Advice & Guidance tab. Choices May choose from a host of options including: Single-life annuity that provides income for you W W Joint-life annuity that provides income for both you and your annuity partner (can be a spouse, partner, child, etc.) W W Additional guaranteed period to ensure your beneficiaries receive any remaining payments W W Choose from fixed or variable options. Key Considerations to Meet Your Income Needs W W Choose to receive a guaranteed income amount from a fixed annuity or variable amounts from a variable annuity. W W Comfortable trading off flexibility for a guaranteed stream of income for your lifetime W W Taxes are due only on the income paid at your individual tax rate. May choose from a variety of payment schedules: Monthly Quarterly Semiannually Annually 7-year withdrawal option from the Retirement Choice Plan W W Prefer to manage your own investment strategy to meet your retirement income and are willing to take on market risks W W Spouse or partner can manage these assets if you should die first These assets are for discretionary expenses. Keep your principal balance in the TIAA Traditional Account while receiving a steady income stream from: Retirement Annuity Group Retirement Annuity Retirement Choice W W Prefer to maintain your TIAA Traditional Account balance until required minimum distributions begin W W Interest rate of 1% 3%, plus any additional declared amounts, is sufficient to meet your income need, even when payments fluctuate Depending on the type of plan offered with your employer, the following option may be available: W W 10 annual withdrawals over 9 years from TIAA Traditional Account principal in a Retirement Annuity or Group Retirement Annuity W W Prefer higher dollar amount of income over a shorter, specific time period W W Have other income sources that will provide sufficient income once TIAA Traditional Account is fully paid out The number of years will depend on the type of plan and annuity you own: W W From 2 to 30 years: cashable TIAA Real Estate and CREF Retirement Annuities or Group Retirement Annuities; TIAA and CREF Supplemental Retirement Annuities; TIAA and CREF IRAs W W From 5 to 30 years: TIAA Traditional Group Retirement Annuities; TIAA and CREF Group Supplemental Retirement Annuities May choose your payment schedule from: Monthly Quarterly Semiannually Annually W W Prefer higher amount of income over a shorter, specific time period W W Have other income sources that will provide sufficient income once the payment period ends W W Spouse or partner has income sources if they outlive you, and beyond the payment period selected W W Optimize tax-deferral as long as possible, then minimize taxable income W W Other income sources are available until you are 70 ½ W W Prefer the flexibility to change your mind and turn these assets into a stream of life annuity income later Run additional reports at tiaa-cref.org or call us at

8 Ask the right questions Over the years, you ve been busy raising children, running an active household, building a successful career, and so on. You might not have built in time to talk about the tough stuff. To help you get started on this important step, here are a number of questions that might be useful as you think about retirement. Ask yourself these questions, discuss them with a spouse, partner or others who will help you with your decision to retire, then take the appropriate action steps to finalize your retirement plans. Ready to retire Am I ready to leave my career and retire? Where will I live and do I want to downsize or upsize? What will I be doing once I retire? Can I actually afford to retire and do all that I want to do? Social Security and Medicare When should I start receiving my Social Security benefit? How do I apply for Social Security? When does Medicare start and how does it work? What do I do about healthcare coverage until Medicare begins? Retirement plan and taxes W W Can I tap my pension plans and what options for payouts should I take? W W Am I prepared to take my required minimum distributions and do I know how to start distributions? What are the tax implications to taking distributions? How should I plan for my estate and avoid probate for my heirs? If you are retiring within the next two years, make sure you have your financial house in order: Complete your retirement income plans and budgets. Sign up for Social Security (if eligible) and Medicare. W W Make sure all documents are in good order: will, estate plan, healthcare and financial proxies, etc. Name current beneficiaries on all financial accounts. W W Learn about healthcare coverage in retirement for your particular situation the cost, the options, and other factors. Retire with confidence There are many aspects of life to consider when moving into the phase of life we call retirement. The more thinking and planning you can do in advance, the more confident you are likely to be when it comes time to retire. Throughout the process, you should feel comfortable consulting with a TIAA-CREF Financial Consultant. They have a wealth of information and are ready to help you take your next steps forward for a confident and secure retirement! Consultants are available at , Monday through Friday, from 8 a.m. to 10 p.m. (ET), and Saturday, from 9 a.m. to 6 p.m. (ET). Guaranteed income provided by TIAA annuities is subject to TIAA s claims-paying ability. TIAA-CREF Individual & Institutional Services, LLC, Member FINRA and SIPC. Annuity contracts and certificates are issued by Teachers Insurance and Annuity Association (TIAA) and College Retirement Equities Fund (CREF), New York, NY. You should consider the investment objectives, risks, charges and expenses carefully before investing. Please call or log on to tiaa-cref.org for a prospectus that contains this and other information. Please read the prospectus carefully before investing Teachers Insurance and Annuity Association-College Retirement Equities Fund (TIAA-CREF), 730 Third Avenue, New York, NY C3029 A12716 (10/13)