Benefits Plans - 457(b) Deferred Compensation Plan: TIAA-CREF Income Options

One-Life Annuity

With a one-life annuity, you receive an income for as long as you live. No further payments are made after your death, except under a guaranteed period. The amount you receive from a one-life annuity depends on the size of your accumulation and your age at the time you start receiving income. The more money you “annuitize” (use to buy a lifetime annuity), the larger your individual payments will be. The longer your life expectancy at the time you annuitize, the smaller your individual payments will be, since your accumulation will have to stretch further. If you live beyond your life expectancy, payments will continue as long as you live.

Two-Life Annuity

A two-life annuity guarantees lifetime income not only for yourself but also for the lifetime of a second person (called your annuity partner). Your age and your annuity partner’s age will affect the amount of income you receive from a two-life annuity. The younger you and your annuity partner are, the smaller the annuity payments will be based on a given accumulation, because your joint life expectancy is longer. Furthermore, once you start receiving income under a two-life annuity, you can’t change your annuity partner.

TIAA-CREF offers three kinds of two-life annuities. All three are available to you if your spouse is your annuity partner; otherwise, your annuity partner’s age might restrict the use of some options. The best type of annuity option will depend on the difference in ages, level of financial dependence and health.

  • Full Benefits to Survivor. You and your annuity partner receive lifetime income. The income to your survivor doesn't change at your death. This is the only option that doesn't reduce income for the survivor when the annuitant dies. However, since it pays more to the surviving partner than the other two options listed below, the income payments are smaller.
  • Half Benefit to Second Annuitant. You and your annuity partner receive lifetime income. If your annuity partner dies first, your income remains the same. If you die first, payments to your annuity partner continue at half the amount.
  • Two-Thirds Benefit to Survivor. You and your annuity partner receive lifetime income. At the time of your death or your annuity partner’s death, income drops to two-thirds of the amount to the survivor. This is the only two-life annuity option that reduces your monthly income if your annuity partner dies first.

Guaranteed Periods

With a guaranteed period, if you die (under the one-life option) or both you and your annuity partner die (under the two-life option) during the guaranteed period, income continues to your beneficiary for the remainder of the period. If you and your partner both outlive the guaranteed period, no payments will be made to your beneficiaries when you and your annuity partner die.

TIAA-CREF offers guaranteed periods of 10, 15, or 20 years. In some cases, federal tax law affects your choice of a guaranteed period. You are generally not allowed to select a period that would continue payments beyond your life expectancy, based on the Internal Revenue Service’s (IRS) mortality tables.

Fixed-Period Annuity

A fixed-period annuity makes regular payments over a specific number of years (5-30 years), which you choose in advance. By the end of the period, you will have received all of your principal and any earnings. If you live beyond this period, your annuity payments will not continue. If you die during the payment period, payments continue to your beneficiary. Fixed-period annuity payments of less than 10 years are subject to 20% federal tax withholding and may also be rolled over.

Next: TIAA-CREF and Fidelity Income Options

The University of Michigan in its sole discretion may modify, amend, or terminate the benefits provided with respect to any individual receiving benefits, including active employees, retirees, and their dependents. Although the university has elected to provide these benefits this year, no individual has a vested right to any of the benefits provided. Nothing in these materials gives any individual the right to continued benefits beyond the time the university modifies, amends, or terminates the benefit. Anyone seeking or accepting any of the benefits provided will be deemed to have accepted the terms of the benefits programs and the university's right to modify, amend or terminate them.