PLANSPONSOR - November/December 2024 - 5

SPONSORED SECTION
Retirement Experts: A Better Way
To Crack the Retirement Income Nut.
Guaranteed income sources can help retirees maximize Social Security benefits.
M
history (also known as Peak 65)1
ore than 11,200 Americans will turn 65 every day for the next
four years, the largest surge of retirement-aged people in U.S.
. And it's highlighting many of the
flaws in our retirement system.
For this year's annual TIAA TMRW Retirement Income Roundtable,
we sat down with an annuity expert, a policy wonk and a financial
planner on how more people can get an income edge in retirement.
What follows is an excerpt from a larger conversation published in
the most recent edition of TMRW.
TIAA: Retirees get the most from Social Security if they wait until age
70 to claim benefits, but how should retirees think about income if
they don't want to work that long?
Wade Pfau, author of the " Retirement Planning Guidebook " and
professor of practice at the American College of Financial Services:
If you are delaying Social Security, you'll probably need to draw from
investments. That comes with sequence-of-return risk. That's the
risk of markets falling early in your retirement, because in order
to cover your expenses, you need to sell more when they're down
in value. The problem is you won't have that money in the markets
to enjoy the recovery, so it's hard to get back to an amount that
supports your initial spending plan.
Dana Anspach, founder and CEO of fee-only wealth manager Sensible
Money: A reason people don't delay Social Security is that it feels scary
to rely on investments even for a few years. It can feel like a lot when
they're taking 6% or 8% out of their retirement accounts each year for
up to eight years. This is the better strategy when you look at a lifetime
of spending, not just a few years, but it can be emotionally hard.
Pfau: To cover the missing Social Security benefit in those years, you
can carve out income, either through an annuity or a bond ladder. That
way you are not as vulnerable to the markets.
This is an excerpt from an article that
appeared in the TIAA TMRW Magazine.
To read the full article, visit: www.tiaa.org/
public/plansponsors/insights/tmrw/edition-4/
american-retirement-crisis-solutions
Any guarantees are backed by the claimspaying
ability of the issuing company.
This material is for informational or educational
purposes only and is not fiduciary investment
advice, nor is it a securities, investment
strategy or insurance product recommendation.
This material does not consider an individual's
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Jason Fichtner, chief economist at the Bipartisan Policy Center and
executive director of Alliance for Lifetime Income's Retirement Income
Institute: I call that a " bridge annuity. "
TIAA: Did someone say annuity? How do you all think they fit into
retirement planning?
Pfau: Annuities can be workhorses for retirees because they provide
protected, reliable income that can cover disproportionately more
of your spending needs than other investments. And, the more you
have, the less vulnerable your spending is to market downturns. Your
portfolio may decline, but your lifestyle isn't going to be affected as
negatively.
Fichtner: If people have enough protected income, they can use the
rest of their assets for growth. For higher-income people, Social Security
will only replace maybe a third of their income. They need something
on top of that to maintain their lifestyles.
There's research that says getting regular paychecks from an
annuity can help you budget, because your recurring income is basically
your license to spend until you get that bump in Social Security.
Anspach: I like the term protected income. This truly is a different
asset class: You have upside assets for growth, reserve assets for
the unexpected, and then there's protected income that's allocated to
lifetime income.
Pfau: Since you have that protected income, you don't have to rely
on your investments to fund your essential expenses, which means
you have the capacity to invest more aggressively with the rest of
your assets.
1 " The Peak 65 Zone is Here: Creating a New Framework for America's
Retirement Security, " Retirement Income Institute, January 2024.
own objectives or circumstances which should
be the basis of any investment decision.
Converting some or all of your savings to
income benefits (referred to as " annuitization " )
is a permanent decision. Once income benefit
payments have begun, you are unable to change
to another option.
Investment, insurance and annuity products
are not FDIC insured, are not bank guaranteed,
are not deposits, are not insured by any federal
government agency, are not a condition to any
banking service or activity, and may lose value.
TIAA-CREF Individual & Institutional Services,
LLC, Member FINRA and SIPC, distributes securities
products. SIPC only protects customers'
securities and cash held in brokerage accounts.
Annuity contracts and certificates are issued by
Teachers Insurance and Annuity Association of
America (TIAA) and College Retirement Equities
Fund (CREF), New York, NY. Each is solely responsible
for its own financial condition and contractual
obligations. © 2024 Teachers Insurance
and Annuity Association of America - College
Retirement Equities Fund, New York, NY 10017
http://www.tiaa.org/public/plansponsors/insights/tmrw/edition-4/american-retirement-crisis-solutions http://www.tiaa.org/public/plansponsors/insights/tmrw/edition-4/american-retirement-crisis-solutions http://www.tiaa.org/public/plansponsors/insights/tmrw/edition-4/american-retirement-crisis-solutions
PLANSPONSOR - November/December 2024

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