Make the Most of Your Income Sources for Retirement 


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Well before your retirement date sneaks up on you, it’s a good idea to create your budget for essential and lifestyle needs and then take a complete inventory of the various sources you will have to replace your current paycheck. Funding your retirement may be quite different from how your parents, or even your older siblings, paid for their retirement. Most people retiring in America today face more challenges and uncertainties than at any time in recent history. To determine how much income you need to maintain the standard of living you desire, please read Beyond Goal Setting: The Importance of Lifetime Income.

What is “Retirement Income”?

In general, you can think of retirement income as the amount of cash you will need each month to pay your bills and enjoy your life in retirement. As you plan for your retirement date, have you thought about how you will generate cash for 25 to 30 years or more? Today, you (or your spouse or partner) receive a single paycheck from your employer. Once you retire you will need to substitute that paycheck and generate your own retirement income from your assets and resources.

The first step is to create a retirement income plan that includes your goals for retirement, your budget, and a complete inventory of each financial source you can use for future income and the amount of income it can generate for you.

Multiple sources of income complicate the process

Many individuals are surprised to find that they have between 5 and 10 different sources of income when they enter retirement. And, when combining all of the sources within a household, there may be even more. Making the best decisions to create an income stream in retirement can be quite complicated. How will you know which accounts to draw down first? How much income will each source provide – and have you maximized its income potential?

Think about your personal inventory. You may have one or more of the following types of accounts and sources for retirement income:

1. Current employer plan (401(k), 403(b), 457, profit sharing, SIMPLE-IRA, SEP-IRA)

2. Former employer plan or plans

3. Traditional or Rollover IRA(s)

4. Roth IRA

5. Employee stock ownership plans or stock options plans

6. Taxable investment accounts

7. Bank savings accounts, including CDs

8. US savings bonds

9. Deferred annuities

10. Defined benefit pension plan

11. Military pension

12. Social Security

13. Union retirement plan

14. Part-time work

15. Rental income

16. Health savings accounts (HSAs)

17. Medicare benefits

They add up fast! Now, combine your accounts and sources for retirement income with those of your spouse or partner. Together, you likely have a large number of accounts, each with different tax requirements and access points that differ by age, length of service or plan provisions. There isn’t any way to avoid some of the complexities of creating your own retirement income stream, but it is important to take the time to consider all your options.

Start with the basics

The best place to begin is with your Social Security benefit. You’ll need to make decisions about when to file and begin collecting. There are many different options to consider – filing for benefits to begin at 62 (the earliest age possible); waiting until your full retirement age; or delaying benefits until age 70 to receive the maximum monthly benefits. If you are married, your decisions may affect when your spouse takes his or her benefits or how much income he or she will continue to receive if you are the first to die. Because the choices can be complex, exploring the Social Security website and trying out their calculators well before retirement is highly recommended. TIAA-CREF consultants can also help you navigate through the process.

Next, you’ll want to assess your options with any employer defined benefit plans, military pensions and stock options. Each plan will allow different payout schedules and options, from joint-life options to single-life options to lump-sum payouts. The plan documents are often lengthy and complicated, so reviewing them carefully with your employer’s benefits office is a critical piece of your planning.

The decisions you make for your Social Security benefits and any available pension payments set your retirement income foundation.

Look to maximize income from your personal resources

Next, you’ll need to figure out how much income you need to produce from your personal resources such as IRAs, taxable accounts and former employer plan assets. You’ll need to create a plan that maximizes the income and minimizes taxes from these accounts. A few items to keep in mind when assessing each different type of income source:

  • Can you consolidate any similar accounts to simplify managing your assets? For example, former employer plans can be rolled over into an IRA and you might organize all of your taxable accounts at a single financial institution. Before transferring assets, consider the differences in features, costs, surrender charges, services, company strength, and any tax consequences. Consult with an advisor regarding your own personal situation.
  • When should you tap your Traditional IRA assets? Depending on your tax situation and when you need to generate income, you can withdraw from a Traditional IRA without any penalties once you reach age 59½ or you can wait until age 70½, at which time you are required to begin distributions. Withdrawals prior to age 59½ may be subject to an additional 10% penalty, in addition to ordinary income tax.
  • Should you use your Roth IRAs as an income source in retirement? Roth IRAs may be your only source of tax-free income in retirement. You might draw some amount from a Roth IRA to provide income without raising your tax bracket. Or, you may want to keep the assets growing until late in retirement to maximize the value of the Roth.

There is no simple solution to designing your personal income stream from all your different resources. You need to balance your personal goals, income needs and sources of income available, while considering your personal tax situation. The goal is to produce the most income possible from your savings for as long as you live. Our retirement income consultants can help you with your important decisions. You should also consult your own tax and other advisors before making any decisions.

Choose your options to create a retirement income stream with your TIAA-CREF assets

The assets in your employer plan held at TIAA-CREF are another important source of retirement income. Depending on the options your employer makes available and the terms of each contract you own, you can use a portion of these assets to create a stream of guaranteed income to cover your essential expenses. Another portion could provide additional income to cover some of your discretionary expenses. You’ll want to decide how to draw down your employer plan assets in conjunction with all your other sources of income.

A TIAA-CREF consultant can help you use the TIAA-CREF Retirement Income Planner. With this tool, you’ll see a snapshot of how much income you may receive from your employer plan assets and how different options provide varying amounts of income for different time periods.

There are six different options offered at TIAA-CREF, depending on plan provisions and contract type:

  1. The Lifetime Annuity. The most popular option for providing a guaranteed stream of income. With this option, you “convert” a portion of your plan savings to an income annuity that you cannot outlive. You’ll have the opportunity to choose from a wide range of features and choices to tailor your income stream. You’ll select if you prefer payments for just you or for you and a partner; if you want a specific guaranteed period; and, if you want payments from the TIAA Traditional Annuity using the Standard or Graded method. Keep in mind that the lifetime annuity option you choose cannot be changed once it begins. And note that any guarantees are subject to the TIAA-CREF’s claims-paying capability. Payments from variable accounts will rise or fall based on investment performance.
  2. Systematic Withdrawal. This option allows you to take payments without turning your savings into an annuity, giving you more control over your investments. You receive a set dollar amount or a percent of your balance on a schedule you determine. Since you can outlive these assets, it is generally wise to use this option for discretionary income needs.
  3. Interest-Only Payments. With this option, you can keep your principal intact while still getting some income from your assets. You will receive the interest earned on your portfolio up until age 70½. IRS rules require that must begin distributing your principal balance, in addition to earnings, after reaching age 70½ (the Required Minimum Distribution rules).
  4. Transfer Payout Annuity. This option is used when you need to access and reallocate your assets over a shorter period of time. It is a distribution option where your TIAA Traditional Annuity assets are paid out to you in substantially equal amounts over nine years. It is often used after you have a plan to provide guaranteed income for your essential expenses. You might use this option to pay for other retirement discretionary goals or as a “bridge” strategy before your Social Security payments begin.
  5. Fixed-Period Annuity. If you want to liquidate your TIAA-CREF plan assets over a specific number of years, this option allows you to set the payout period and distribute all of your assets in a specified period of time. Because this is not a guaranteed income option, you run the risk of outliving these assets. However, this option allows you to move your assets into an IRA or other taxable account where you may have more investment flexibility than in an annuity and it may allow you access to your assets over a shorter period of time.
  6. Required Minimum Distributions. Some people do not need or want to draw on their retirement plan savings until much later in life, either because they continue to work or because they have adequate savings in other accounts. But once you reach 70½, IRS rules require that you draw a minimum amount of savings from your retirement accounts each year and pay taxes on the distribution. We can calculate the minimum amount required from all the tax-deferred accounts you have, or transfer to, TIAA-CREF. You simply do a one-time set-up, and then we’ll send you your required payment each year.

Talk to TIAA-CREF’s knowledgeable consultants to help you build your retirement income

There is no “one-size-fits-all” when it comes to planning for how you will create an income stream in retirement. And, developing a plan for your assets to last a lifetime can be complicated.

Talk to one of our consultants about your situation. They are available to answer your questions and help you decide how to best use the resources you have available for income.

Then, use the many resources available on TIAA-CREF’s website to see how much income you might generate from your various income sources. You’ll find tools, materials and links to important information. You can also attend seminars offered at your employer and you’ll find educational information and a variety of brochures here in the TIAA-CREF website.

TIAA-CREF Individual & Institutional Services, LLC, and Teachers Personal Investors Services, Inc., members FINRA, distribute securities products. Annuity contracts and certificates are issued by Teachers Insurance and Annuity Association (TIAA) and College Retirement Equities Fund (CREF), New York, NY. 

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.

You should consider the investment objectives, risks, charges and expenses carefully before investing. Please call 877-518-9161 or log on to for a prospectus that contains this and other information. Please read the prospectus carefully before investing.

Keep in mind that there are always inherent risks associated with investing in securities including loss of principal. As with all securities, your accumulations can increase or decrease; depending on how well the underlying investments perform.

Neither TIAA-CREF nor its affiliates offer tax advice. See your tax advisor regarding your personal situation.


© 2014 and prior years, Teachers Insurance and Annuity Association - College Retirement Equities Fund (TIAA-CREF), New York, NY 10017