TIAA-CREF Endorses Lifetime Income Options in Workplace Retirement Plans
New York, September 14, 2010
Workers should have lifetime income options in their workplace retirement plans, TIAA-CREF said in testimony today before a joint hearing of the U.S. Department of Labor (DOL) and Department of the Treasury.
“One of the benefits of offering affordable, easy-to-understand annuities within a retirement plan is that it ensures plan participants receive a constant reminder that they are saving not just to accumulate wealth, but also to help workers approach retirement with peace of mind, knowing they will have income to last a lifetime,” said Paul Van Heest, senior vice president, retirement plans of TIAA-CREF.
TIAA-CREF manages retirement savings on behalf of 3.7 million Americans who work in the non-profit fields. The company pays more than $10 billion in income to about a half million retirees each year. Nearly one-third of those who begin taking an income stream with TIAA-CREF select an annuity.
The company’s testimony today emphasized that investors considering lifetime income annuities should understand it is not always necessary or required to use all of one’s retirement savings when purchasing an annuity. TIAA-CREF counsels participants to purchase an annuity that will provide the necessary level of income to cover basic expenses.
Mr. Van Heest also called upon retirement plans to make sure that workers receive, at least annually, an illustration of how much projected retirement income their current account balance would provide. TIAA-CREF has provided clients with retirement income projections on a regular basis for more than 40 years, and currently includes a retirement income projection on the first page of all participants’ quarterly review statements.
More than 90 percent of defined contribution retirement plan participants would like to see such illustrations in their quarterly statements, according to the American Council of Life Insurers.1 Sixty percent of respondents in the ACLI survey said that they would start saving more immediately if their illustration projected monthly retirement income to be insufficient to meet their needs.
TIAA-CREF supports passage of the Lifetime Income Disclosure Act, which is sponsored by Senator Jeff Bingaman (D-NM) with co-sponsors Johnny Isaakson (R-GA) and Herb Kohl (D-WI). The bill would require all retirement plan participants to receive, at least annually, an illustration of how their current accumulation would translate into income at retirement.
“However, we believe that retirement plan providers should act now to institute this feature,” Mr. Van Heest added.
The complete text of TIAA-CREF’s testimony is available here (PDF).
Additional information, resources and commentary on the topic of retirement security are available here.
TIAA-CREF (www.tiaa-cref.org) is a national financial services organization with $410 billion in combined assets under management (as of 6/30/10) and is the leading provider of retirement services in the academic, research, medical and cultural fields.
Chad Peterson, TIAA-CREF
firstname.lastname@example.org, 704 988-6811
1 ACLI Retirement Choice Study, May 2010
You should consider the investment objectives, risks, charges and expenses carefully before investing. Please call 877-518-9161, or go to tiaa-cref.org for a current prospectus that contains this and other information. Please read the prospectus carefully before investing.
Variable and Fixed Annuities provide income once the participant chooses annuitization. Payments from variable annuity accounts are not guaranteed and will rise or fall based on investment performance, while fixed annuities offer guaranteed payout rates. 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. Mutual funds do not offer the range of income options available through annuities.
Annuity contracts and certificates are issued by Teachers Insurance and Annuity Association (TIAA) and College Retirement Equities Fund (CREF), New York, NY.
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