How it works
How much income can I get from an annuity?
How much do I put into an annuity to get my target income?
Nothing in this tool should be construed as a recommendation that any action be taken by you. In providing this tool for your use TIAA is not acting as a fiduciary.
What's the difference between fixed and variable?
How we calculated the results
Overview and important disclosure
The Lifetime Income Calculator (the "tool") is an interactive educational tool intended to: (1) help you estimate how much income you may receive in the first month of annuitization from a fixed or variable annuity or (2) help you estimate how much you may need to annuitize to generate a specific monthly income amount in the first month of annuitization from a fixed or variable annuity.
The initial payment calculation generated by Lifetime Income Calculator tool is an estimate of the first month's payment only based on the assumptions described below and your inputs. Payments in subsequent months will vary. There are important differences between fixed and variable annuities. Fixed annuities are insurance contracts which pay a minimum guaranteed rate of return, and in some cases additional amounts, subject to the claims paying ability of the issuing insurance company. Variable annuities are securities subject to investment performance, including the risk of loss of principal and the amount of each income payment is not guaranteed and will fluctuate. As a result, payments in subsequent months for variable annuities may be substantially lower or higher than the first month's payment estimated by the tool.
This document describes the inputs needed as well as the assumptions used to generate the tool's estimates, as well as the limitations of the tool and other important considerations. IMPORTANT: The projections or other information generated by the tool are hypothetical in nature, do not reflect actual investment results and are not guarantees of future results. Your results may vary with each use and over time.
You should not view or construe the tool or its estimates as a recommendation or suggestion that you take or refrain from taking a particular course of action, as the advice of an impartial fiduciary, or as an offer to sell or a solicitation to buy any securities. In making the tool and information available to you, we assume that you are capable of evaluating the information and exercising independent judgment. You should not purchase an insurance contract or buy or sell any security or other investment property without first considering whether it is appropriate for you based on your own particular situation. TIAA will not perform any suitability or other analysis to check, for example, whether an insurance contract, security or other investment property you select after using the tool is consistent with your investment objectives. The information derived from the tool is for illustrative purposes only. The purpose of the tool is not to predict future returns, but to be used as education only. You should consider your other assets, income and investments and should not rely on the tool as the sole source of making any financial decisions. Contact your tax advisor regarding the tax implications.
If you hold annuities in your employer sponsored plan or IRA accounts at TIAA, consider using the Retirement Income Planner to know your annuity options.
Inputs and assumptions
In order to simplify the tool, we have made various assumptions on the user's behalf that, when combined with inputs the user has provided through the tool, results in the numbers presented through the tool. The assumptions used include the following:
- Payments will be made monthly to the annuitant(s). Please note that different income payment frequencies (such as quarterly, semi-annually or annually) may be possible.
- The tool assumes annuity purchase on the date the results are generated by the user through the tool and the first monthly payment is paid immediately.
- The estimated first month's payment information displayed in this tool is based on certain TIAA fixed and variable annuities and the formula for the calculation, which may vary over time, is described below under "How Annuity Income is Estimated." Annuities issued by other insurance providers may use different formulas.
- Rates are subject to change.
- To replicate the estimated income payment, the same investment amount used to get the estimate must be used to fund the annuity.
- The estimates do not reflect the impact of taxes.
- Guaranteed income payments are subject to the claims paying ability of the issuing insurance company.
- You can modify the assumption criteria to customize your income to your specific needs by calling TIAA at 855-728-8422.
How Annuity Income is Estimated:
In general, lifetime annuities are calculated as the amount of money funding the annuity divided by a life annuity factor. A life annuity factor is the amount needed today to fund a stream of payments of $1 payment per period for the remainder of the life of the annuitant (and the life of the second annuitant in a joint annuity, including any applicable reduction in payments upon the first death) discounted with interest and probabilities of death.
For fixed annuities, the annuity issuer selects an interest rate and mortality assumption that will produce a payment level which is expected to be sustainable for the life of the annuitant. The interest rate used is generally in line with expected returns on the issuer's investments, less expenses, and the mortality assumption is set based on industry-wide mortality experience, issuer-specific mortality experience or a combination of the two. In a fixed annuity, the payment generally remains level for the duration of the contract.
A variable annuity is typically calculated the same way as a fixed annuity with one important difference. Since there is no way to know what the future earnings of the underlying funds will be, and the payments are going to vary based on those future earnings, the initial payment must be set based on an assumed investment return (AIR). Future payments will then vary based on the actual fund experience (net of expenses) relative to the AIR.
For purposes of estimating the first month's payment for a fixed annuity, the tool assumes the interest rate and mortality assumption currently used by TIAA to determine initial annuity income on new contributions made to a TIAA fixed annuity.
For purposes of estimating a variable annuity, the calculator assumes a 4% AIR and the mortality assumption currently used by TIAA to determine initial annuity income in certain variable annuities issued by CREF. In case of variable annuities, future payments will be subject to fluctuations (up or down) based on the market performance of the underlying funds relative to 4%. Therefore, if the underlying funds experience a 4% net annual growth the future payments would be expected to remain level. If the underlying funds grow at a rate greater than 4% annually, net of expenses, future payments would be expected to rise, and vice versa if the underlying funds grow at a rate of less than 4%, net of expenses.
You have the option to include a guarantee period of 10, 15 or 20 years with your lifetime annuity payment. A guarantee period ensures that another person will continue to receive payments for the remainder of that period should you (and any annuity partner) die within that period of time. Your initial monthly payment will be lower when you include a guarantee period and the longer the guarantee period, the greater the reduction in initial monthly income. There are some age restrictions impacting which guarantee periods may be available to you.
Actual annuity payments may be materially different than estimates included in the report and as a result, actual payments may be more or less than estimated by the tool. Your annuity contract may offer many potential annuity options and income options, and you should evaluate all your contract provisions as the above annuity options are for educational purposes only.