TIAA (cref)

[t walgamuth]

I have some money in tiaa, used to be tiaa cref.

So now I am taking some out. I want to clean it out and use the money. I called and got what felt like the run around. It appears there is no way to get it all out now. l know I did in the past.

Also some mention of using it as collateral for a loan.

Anybody know the ins and outs of TIAA?

[Mxfrank]

TIAA has many products. If it's in a IRA, or similar self-directed retirement plan, you're above retirement age and they can't stop you if you want to empty the account. If it's in a trading account or managed account, it's your money. But if you're in an annuity (which is a big product for them), then it gets complicated. The answer would depend on when the annuity was purchased and whether it is in accumulation or distribution. The annuity contract may have been set up as part of an employer retirement plan, which is a further complication. They should be able to tell you exactly what you have and what options are available.

[t walgamuth]

I believe it is an annuity. I paid into it when working but now they seem to say I cannot take my money out. Are they planning to keep it until I die? Does TIAA have counselors who will give me un-slanted advice?

[Mxfrank]

TIAA has an advisory program, but as a rule of thumb, anyone involved in financial advice is working on an angle to make money. I suspect they'll try to push managed accounts. Brokers angle for commissions, fiduciaries angle for wrap fees. All of them want to be in your pockets.

Where you should probably start is with their brokerage/retirement services number, 800-842-2252. Ask them what sort of product you have, and how you go about accessing the money. If it's an annuity, find out if you can take a lump sum distribution, or if you must take annuitized payments. Also find out if the plan is qualified or non-qualified. The are legally obligated to answer your questions.

To prepare you for the discussion, even the simplest annuity has a lot of complications, so we have to talk about the annuity life cycle. Initially, there is a period during which you invest money. You generally don't directly pay commissions, but rather you are obligated to keep the money in the account for a minimum period of time. This is called the "surrender period". If you pull your money out before the term is satisfied, you will owe a deferred sales commission, but if you wait it out, you will not. If you invest periodically (as opposed to once, up front), each new addition will have a separate surrender period.

You can keep the money in the annuity indefinitely, or take it out, but at some point you would probably "annuitize", meaning that the insurance company will start paying you lifetime income. The income you receive will be based on your contributions and earnings, and will continue for your lifetime. If you're cursed with long life, the insurance company will keep paying even if all your funds have been depleted.

If you make the choice to annuitize, you will lose access to your principal. This is a bit scary if you think of this like an investment, but it's insurance. In return for guaranteed lifetime income, you are paying a big lump sum to the insurance company. You can win that bet, all you have to do is live a very long time. Although it sounds terrible, the only other way to get a guaranteed lifetime income is via Social Security or an old-fashioned defined benefit pension plan. No other discretionary investment plan can accomplish this.

If the annuity is in the accumulation phase, you should be able to withdraw any or all of the balance without any cost or penalty, as long as the surrender period has been observed. If it's already been annuitized, the balance belongs to the insurance company and you can't withdraw it. In that case, it may still may be possible to work out a structured settlement, where a third party pays you a discounted lump sum, but collects the regular distributions going forward.

What I've just described is a simple annuity. They can get very complex.

https://www.tiaa.org/public/support/contact-tiaa

I used to be in the business, so if you need some specific advice, PM me rather than hanging this out on a public thread.

[t walgamuth]

I was hoping to find someone inside AARP who could lead me by the hand and get my $ out. I'll check out your link.

Thanks very much!

Tom

[savas]

I'm not an expert but have looked at the TIAA annuity becasue it's an option for my wife. As Frank said, it's best to contact them to get the rules about the specific one you have. But in general if you want to take a lump sum from an annuity you pay a surrender charge around 2-3% and get taxed on it. Also they have rules like if you take out a lump sum, they pay it out over several years in installments. Annuities are supposed to be long term, low risk, guaranteed amount so they make it relatively unpleasant to take a lump sum cash out.

[Mxfrank]

Originally Posted by savas

I'm not an expert but have looked at the TIAA annuity becasue it's an option for my wife. As Frank said, it's best to contact them to get the rules about the specific one you have. But in general if you want to take a lump sum from an annuity you pay a surrender charge around 2-3% and get taxed on it. Also they have rules like if you take out a lump sum, they pay it out over several years in installments. Annuities are supposed to be long term, low risk, guaranteed amount so they make it relatively unpleasant to take a lump sum cash out.

As I said, it's complicated. During the accumulation phase, you can take all the money out without paying a surrender charge, but only if it's held beyond the surrender period (usually 5-7 years). It's helpful to understand the why of this: there's no commission due on signing. Instead, the insurance company pays its agent from the profits it expects to earn during the surrender period. So if you redeem it early, you pay a deferred sales charge, which is actually compensating the company for the agent's commission.

During the surrender period, many annuity products give you the ability to withdraw a small portion of the principal free of penalties and sales charges. If you have a seven year surrender period, you may be able to withdraw 1/7 of the principal "free" each year.

That said, once the the surrender period is past and before the time you decide to annuitize, you can take all the money out, without charges or deferred commissions. Maybe a nuisance fee for transferring the cash. Upon withdrawal, you pay tax only on the increase in value, not on principal (earnings accrue tax-deferred inside the annuity). Tax is paid at ordinary income rates.

It's possible to use an annuity within a retirement plan, sometimes this is called an IRA annuity, or a qualified annuity. The only difference is in taxation: since money you put into an IRA is pre-tax, both the principal and earnings are taxable upon withdrawal.

At any point after you purchase, you can choose to annuitize. When you do that, you've essentially paid the insurance company all your money in return for lifetime income. The principal is held for your benefit, but is no longer "yours." From that point the annuity will pay a monthly or annual amount for life. These payments are taxable as ordinary income in proportion to your after tax contributions: each check is partially taxable and partially tax free. Usually the only way to get a lump sum at that point would be a structured settlement, where a third party agrees to accept your lifetime insurance income in return for a discounted sum of cash. You would lose money in such a deal, but if you have to, you have to.

This is all a cash flow game, swapping cash today for cash tomorrow. The insurance company makes a decent profit, both through direct fees and indirectly through brokerage on the underlying assets. Compared to any traditional investment, it's expensive. What you get for the expense is a guarantee that you will always have income. No other investment is so expensive, but no other investment can give you that guarantee.

These comments apply to simple deferred annuities. There are many types and many complications, so it's important to understand the specific product.

[t walgamuth]

yes..........

[t walgamuth]

Thanks guys!

Tom