The value of my retirement portfolio has fallen over the past year, and I was planning to retire in the near future. Should I postpone my retirement and attempt to rebuild my savings? And if I do retire soon, should I delay annuitizing into a fixed annuity because prevailing interest rates are low?
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Making the decision on when to retire should be viewed as part of your overall plan, with considerations including when you hoped to retire, how much income you will need when you stop drawing a paycheck (including healthcare costs), whether you want to bequeath money, and any other personal considerations. A TIAA-CREF advisor can help walk you through these variables.
If you don't have much choice in when you leave your employer, you may consider delaying any choice about receiving retirement income until you are more comfortable with the direction of the financial markets and interest rates. This strategy works best if you have enough cash and cash equivalents to cover your living expenses for a period of time. Be vigilant about your debt situation: Avoid taking on additional consumer debt, such as credit card obligations, you cannot support. And consider paying down any consumer debt in an orderly way to conserve needed cash.
Evaluate All Your Retirement Savings Options
If you decide to continue working for a few more years and are looking to rebuild your nest egg, you should review your strategies to make sure that you are taking advantage of all of your retirement savings choices, whether through your employer's plan or through your own accounts. In your employer plan, make sure that you are contributing enough money to receive any additional "match" money that your employer may contribute. If you’re already contributing the maximum amount of money to a work retirement plan, consider putting any additional savings into a personal retirement account such as a Roth IRA. Remember to keep your retirement portfolio diversified by investing in different asset classes. You can read about rebalancing your portfolio to learn more. Rebalancing does not protect against losses or guarantee that an investor's goal will be met.
TIAA Traditional Annuity
If you do retire and wish to generate a steady stream of income, one choice is to annuitize with the TIAA Traditional Annuity. Note however that initial income you would receive from TIAA Traditional does depend, in large part, on prevailing interest rates. Lower rates in the marketplace at the time of annuitization can mean lower income for many years – since increases in interest rates may not affect the long-term investments that are held to support these payments.
The TIAA Traditional guarantees monthly income regardless of how financial markets are performing. That can help stabilize your retirement financial picture. Individuals may also receive additional amounts, which are determined by the TIAA Board of Trustees each year. These additional amounts have been paid for over 50 years. Last December, the Trustees of TIAA voted to hold TIAA Traditional lifetime income steady for 2009; meaning that the additional amounts for 2009 will be equal to the additional amounts paid in 2008.
The TIAA Traditional Annuity guarantees principal and pays a guaranteed minimum interest rate during the accumulation phase - generally 3% for most participants. This guaranteed rate can be increased by additional amounts at the discretion of the TIAA Board of Trustees. Such additional amounts, when declared, remain in effect for the "declaration year" which begins each March 1. Together, the guaranteed minimum plus additional amounts make up the "crediting rate" for those in the accumulation phase.1
If you have further questions about your account, contact a TIAA-CREF consultant. Our advisors receive no commissions. TIAA-CREF compensates them through a salary plus incentive program that rewards client service as well as financial results. To schedule an appointment with a TIAA-CREF consultant near you, please sign up online or call 800 842-2776.
1TIAA Traditional is a guaranteed insurance contract and not an investment for Federal Securities Law purposes. Guarantees are based on TIAA's claims-paying ability. Retirement Annuity (RA) contract form series 1000.24; Group Retirement Annuity (GRA) contract form series G-1000.4 or G-1000.5; G1000.6 or G1000.7 (not available in all states); Supplemental Retirement Annuity (SRA) contract form series 1200.8; Group Supplemental Retirement Annuity (GSRA) contract form series G1250.1 (GSRAs are not available in all states); IRA Annuity contract form series 1280.2 or 1280.4 (not available in all states); Roth IRA Annuity contract form series 1280.3 or 1280.5 (not available in all states); and Keogh Annuity contract form series G1350 (Keoghs are not available in all states) are issued by TIAA (Teachers Insurance and Annuity Association), 730 Third Avenue, New York, NY