Feeling retirement stress? Some products offer guaranteed income stream

While not for everyone, Americans need a better understanding of annuities and other products that can provide them with steady income in retirement

By Amy Podzius

Jul 29, 2015 @ 11:12 am EST

When considering your investment options as you plan for your retirement, it is vital to consider many factors, such as your age, current financial situation, employment status and career plan, as well as your financial goals.

With the myriad of investment products that are available to an individual, these factors play a critical role in determining which financial strategy is the right fit. There is no one-size-fits-all retirement plan.

Retirement income is critical to financial well-being, and according to TIAA-CREF's 2015 Lifetime Income Survey, the vast majority of Americans - 84% - understands the importance of having a guaranteed monthly paycheck.

Despite this understanding, only 14% of Americans have taken the necessary steps to ensure lifetime income with the purchase of an annuity. The survey results demonstrate that Americans need a better understanding of annuities and the investment products that can provide them with a stream of income in retirement.


Lifetime income: One of the greatest benefits of annuities is that they solve one of the biggest concerns in financial planning, “longevity risk,” or the risk of being unable to fund your retirement if you live longer than expected. Life annuities offer one advantage that other investment options do not - a guaranteed stream of income that will last as long as you live. Through an annuity, you can avoid the danger of exhausting your retirement assets.

Part of a package: Annuities are not an “all or nothing” investment choice. Combining an annuity with lump-sum or systematic withdrawals can be a great way to create an income strategy that may be well suited to your needs.


Complicated: One factor to consider if you are looking to invest in an annuity is that they can be complex - especially compared with other investment products on the market. Individuals who buy the investment product need to make sure they have an understanding of the product and its features, such as what the products provide and the difference between different types of annuities.

Our 2015 Lifetime Income Survey found that even though 49% of respondents would be willing to commit a portion of their savings to a product like an annuity that would provide them with a monthly income, only 34% of Americans are familiar with annuities. Becoming more familiar with annuities can offer a solution to a problem most Americans are grappling with as pensions become increasingly less common.

Flexibility: Annuities also are typically less flexible than other investment products. For example, once you annuitize, the decision to receive payments is irrevocable - you cannot, for example, change the annuity option to another payout option.

Because most annuities are designed to provide a stream of income over time, they are not ideally suited to cover large unplanned expenses. The expenses associated with annuities differ from other products as well.


In order to make informed investment decisions, it is vital to have a clear vision of your financial goals and needs. With this in mind, you can more easily decipher if annuities are a good fit for your long-term investment strategy. Consider working one-on-one with a financial adviser to learn more about the investment solutions that can help achieve your long-term goals.

Amy Podzius is a director in the field consulting group at TIAA-CREF.

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