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QUESTION:
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Annuities- any comments? | Hi all-
I'm a 60 year old high school teacher and have been with TIAA-CREF, a private penion company, since 1977. TIAA has the highest ratings in the USA, so it is quite trustworthy.
My assets with TIAA-CREF are 84% TIAA-Traditional annuity, 12% Real Estate,and 4% CREF stock. That is about as conservative as you can get! Keep in mind, I did not pay real attention to the different TIAA-CREF accounts, but instead just kept adding on a monthly basis via my own self-remitters (after-tax).
I'm going to supposedly begin my first annuity payment on September 1st unless I change my mind. The paperwork was sent in, but I can still cancel it all a week or so before September 1st if I feel the need to. What are my concerns?
First, I tell people my net worth, and it is pretty satisfactory for a single guy like myself, but when I annuitize PART of my TIAA Traditional, I sacrifice my net worth for an initial guaranteed lifetime income of $41,500, but increasing about $400 per year. If I annuitize everything, the initial income would be more like $53,000/year. However, I will only annuitize enough to give me the initial $41,500 and hold off on the rest until later on.
Here is my concern--> You really have to trust an insurance company to give them this sum of money for an annuity, and I guess I do with TIAA, but I it hurts to lose control of my money in place of this guaranteed lifetime income. Once I begin receiving monthly income, I cannot change my mind. Boy- do I hate losing control of that money!!! However, I love having this income stream coming in for the rest of my life.
Second- there is a part of me that likes to delay one more year. However, the increase in my annuity payment if I annuitize in Septemeber 2008 (versus September 2007) is only $3,204. If I annuitize in September 2009, then my increase is about $3,400. Annuitizing now means that I get less per year, and annuitizing a year later means that it would take me at least 10 years to catch up to losing the 42,500 by not annuitizing now.
Third - I have looked at the cost of living all over the USA. In a pinch, I guess I wonder if a person can get by on $42,500/year (initially) in many areas of the US, even with paying rent. I plan on teaching or working part-time, as mentioned, and might conceivably close up my new home and venture overseas again. I even did a budget (I'm not a big spender) and came out that my budget is less is about $39,000/year in most areas of the US. Am I wrong?
Fourth- Having a constant stream of money from my TIAA Traditional psychologically gives me the courage to continue to put 100% of the rest of my contributions into CREF stock and TIAA Real Estate, so when I am 66 to 70, that will add significantly as a variable annuity to my TIAA traditional annuity, or by that time, I might simply withdraw that money and re-invest.
Any comments on one or all of what I have written is appreciated. I am slightly burned out as a teacher, and desire to look for more altruistic teaching positions that offer something different, so money in the future will not be the attraction if and when I accept teaching positions.
Regards,
Rob |  | asked by Rob, 7/10/2007 |
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Categories:
Annuities
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