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if you are looking at a fixed monthly amount that NEVER changes that's what you need to focus on. Is it enough considering that it will be likely constantly eroded based on inflation.
Contrast that with investing your money yourself. The payout/withdrawal rate will vary based on how much you take out. If you have a good year you can take out more. Bad year you take out less.
Can you live with that.
Those are the questions that matter.
The questions that matter, to me, were the questions I asked the TIAA reps, and I got contradictory answers.
A fixed annuity pays a fixed monthly amount, and that fixed monthly amount is based on a fixed payout rate, and that fixed payout rate does not change.
I did not need to ask the TIAA reps about the advantages and disadvantages of fixed annuities, because I already know that. That is why I decided, years ago, that I would get a fixed annuity.
The questions that matter, to me, were the questions I asked the TIAA reps, and I got contradictory answers.
A fixed annuity pays a fixed monthly amount, and that fixed monthly amount is based on a fixed payout rate, and that fixed payout rate does not change.
I did not need to ask the TIAA reps about the advantages and disadvantages of fixed annuities, because I already know that. That is why I decided, years ago, that I would get a fixed annuity.
[mod cut] also said that less than a quarter of my retirement savings would be in fixed annuities. The rest of it will have to deal with inflation one way or another.
[mod cut] also said that less than a quarter of my retirement savings would be in fixed annuities. The rest of it will have to deal with inflation one way or another.
OK......not sure what the mods cut out or how that was relevant, but as I said before if the fixed amount you will be getting monthly without inflation protection is ok with you, that's the bottom line issue. Personally, unless I had fixed expenses that would not change equal to the monthly annuity amount, it would not be ok with me, but that's a personal decision and gamble as to what the inflation rate going forward will be.
I skipped the last several posts, but I caught the earlier ones regarding my annuity. I pulled out the documentation I received after I annuitized one of my TSP contracts and it states*:
Payment Choices
The following are the payment choices you made:
Income Starting Date: xx/xx/2008
Payment Frequency: monthly
Income Option: Lifetime With No Guaranteed Period
TIAA Traditional Payment Method
The TIAA Traditional accumulation from which you are beginning income will be paid as follows:
0% under the Graded Payment Method
100% under the Standard Payment Method
Note: If you elected TIAA's Graded Method, keep in mind that this method is only available for vintages with payouts based on an interest rate at 4% or more. If the interest rate for a particular vintage is less than 4%, your initial payment and all future payments for the portion of your accumulation in that vintage will be made under TIAA's Standard Method. For information on TIAA's current payout rates, please visit our Web Center...
* Bolded captions in original document
__________________________________________________ ______________________________
Every December I receive a notice that is similar to this:
I can't format this correctly but the contractual payments remain the same while the additional amounts (dividends) increased the payment from $59.61 to $60.83. The first year (or two?) there was no increase.
The website said the initial payout rate if I started in January 2017 would be 6.18%, or $572/month. I asked if that is a lifetime guaranteed payout rate, and the first guy said no, only 2.5% is guaranteed, and the rest is added on. He said the added on amount can change every year, and is voted on by the board of trustees.
The guaranteed interest on the TIAA traditional account is 3%. But the guaranteed payout once you start getting monthly payments is only 2.5%, according to the first guy.
I explained the whole thing to the second guy, and he said the 6.18% rate is guaranteed for life. Then I told him what the first guy said, and he went and asked someone, and came back and agreed with the first guy.
I explained to him, over and over and over, that the website says $572 is a fixed monthly payout. What could "fixed" possibly mean if it is not fixed??
He kept repeating that only 2.5% is guaranteed. I think he thought 2.5% would be $572/month, even though I told him over and over it is much less.
He told me to get a calculator and multiply $111k (approx) by .0618, and sure enough it's $572. I told him yes of course I know, and I explained to him again that 2.5% would be much lower.
I asked to speak to a supervisor. He went and looked but couldn't find one.
However, by that time he had decided that I would get $572/month guaranteed for life. I asked why he changed his mind, but he could not explain.
I asked for a signed letter, and he promised to send one.
I forgot to ask his name, can't believe I was that stupid.
You are confusing the annuity payout rate, which includes the return of your own money, with the interest crediting rate, which is the rate at which new money is added to your account because it is earning interest.
Any TIAA CSR should be able to explain this but (1) maybe they can't or (2) maybe you're too angry to listen.
You are confusing the annuity payout rate, which includes the return of your own money, with the interest crediting rate, which is the rate at which new money is added to your account because it is earning interest.
Any TIAA CSR should be able to explain this but (1) maybe they can't or (2) maybe you're too angry to listen.
They could NOT explain that. All they had to say was "Don't worry, if the starting payout is $572, it can never go below that, for your whole life."
They WOULD NOT say that. I asked many many times. There was no reassurance whatsoever.
The 3rd representative I spoke to said it cannot go below the amount it starts at. That is what it means to buy a fixed annuity.
Whether it can increase above the starting amount I do not know. One of them said that it could, another one said that it can't.
The first two phone reps were STUPID. An intelligent person might not know the answer, but they will try to understand the question and to find an answer.
A stupid person is unwilling, or afraid, to admit they don't know the answer or don't understand the question.
I think these two guys were afraid, and felt they had to know and understand everything. As a result they had no empathy. They could not understand why a retiree would be afraid their monthly payment was subject to a decrease each year.
When they put me on hold to get advice from someone else, they obviously did not repeat the question I had asked. They thought I was unable to do the simple calculation to find the monthly payment based on the payout rate. They assumed I was an idiot. They were obviously young, and some young people think every old person is an idiot.
The third rep I spoke to was older and experienced and immediately understood exactly what I was asking.
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