Annuity Basics

Annuities are retirement products you purchase from an insurance company that can help generate a guaranteed income stream in your retirement.¹

At TIAA-CREF Life Insurance Company (TIAA-CREF Life), we offer non-qualified annuities you purchase with money you’ve already paid taxes on.

¹ Guarantee subject to the claims-paying ability of the issuing insurance company.

An annuity is designed to provide regular payments to you (the contract holder or annuitant) and, if you have one, your spouse or annuity partner. When you purchase an annuity from an insurance company, your funds are pooled with funds from other people who’ve purchased annuities. In this way, the insurance company is able to reduce overall investment risk. Depending on the type of annuity you purchase, your funds accumulate either at a fixed interest rate or according to the performance of variable funds you select. Of course there are risks associated with investing in variable products including loss of principal.

Because your money isn’t taxed until it is withdrawn, it has the potential to accumulate more quickly. Then, when you withdraw money — beginning as early as age 59½² — you only pay taxes on funds your investment may have earned, not the principal investment. Additionally, with an annuity, your earnings are taxed as if they were ordinary income, not capital gains, which allows you to keep more of your money.

² Taxable amounts received prior to age 59½ may be subject to a 10% IRS penalty in addition to ordinary income tax.

Chances are you may need up to 80% of your pre-retirement income in retirement. With longer life expectancies and uncertainty over how much Social Security will provide or cover, your employer-sponsored retirement plans might not be enough to accumulate the savings you need.

When you’re ready to put away additional money for retirement, an annuity provides several real advantages:

• Contributions may be virtually unlimited³
• Income is guaranteed for life⁴
• You can begin to collect at age 59½

³ The issuing insurance company may reserve the right to limit annual contributions.
⁴ Guarantees subject to the claims-paying ability of the issuing insurance company.

Annuities are an essential part of a well-rounded investment portfolio. Think of your retirement savings as a stool with three legs.

• Employer-sponsored pension or 401(k)

• IRA
• Non-qualified annuity

You can open a non-qualified annuity from TIAA-CREF Life Insurance Company (TIAA-CREF Life) with as little as $2,500. Once your account is opened, additional investments of $50 or more can be made at any time. How much you invest is really up to you, depending on your retirement goals. A conversation with a TIAA-CREF Life Annuities Representative can help you evaluate your situation and make an informed decision.

When you purchase an annuity, you can decide how to invest your money. Your basic choices are:

Guaranteed Investments: Your investment funds will accumulate at a guaranteed interest rate.⁵ If you’re not comfortable with market volatility and its potential to impact your savings or income, this could be the choice for you.

Variable Investments: Your investment will accumulate based on the performance of the funds you select. If you would like the potential for higher returns on your investment and are comfortable with some risk, you may consider this choice. Of course there are risks associated with investing in variable products including loss of principal.

⁵ Guarantees subject to the claims-paying ability of the issuing insurance company.

1. There are two types of annuities, deferred and immediate.
2. Each type of annuity offers two investment options, fixed or variable investments.
3. Other than pensions, annuities are the only retirement products that can guarantee an income stream for life, and guarantees are subject to the issuing company’s claims-paying ability.
4. The money you invest in an annuity accumulates tax-deferred until it is withdrawn.⁶
5. You can contribute to your annuity until age 90.
6. A pension, 401(k) or IRA requires distributions to begin at age 70½. With a non-qualified annuity, you can wait until age 90 to begin taking distributions.
7. You can open a non-qualified annuity even if you’re contributing the maximum amounts allowed to your employer sponsored pension or 401(k) plan.
8. Unlike employers’ plans, there is virtually no limit on how much you can invest in a non-qualified annuity.⁷
9. You can exchange an existing non-qualified annuity, or roll over an annuity from another company.⁸
10. You can purchase a non-qualified annuity using assets from your other retirement savings accounts.

⁶ Taxable amounts received prior to age 59½ may be subject to a 10% IRS penalty in addition to ordinary income tax
⁷ We reserve the right to limit premiums to no more than $1,000,000 in a calendar year. See contract for details.
⁸ 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 before taking such action.