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My wife has some portion of her TIAA-CREF in their "gauranteed" annuity, which I guess would be immediate once she has to start RMD's.
I sometimes think about annuitizing some of my IRA. I think there's a limit. Still three years out for both of us, so not really thinking much about it yet.
@JD_co You mention rate..........are you noting the interest rate paid by an annuity?
@WABAC Our being curious searched for the below. Assumed to be accurate.
Annuitizing a portion of your IRA transforms that specific segment of your retirement savings from a variable investment into a guaranteed, predictable income stream for life or a set period. This is a strategic move often used to cover essential living expenses or manage tax liabilities.
Strategic Benefits
Income Stability: You receive level, periodic payments that are unaffected by market volatility, providing a reliable financial "floor". Longevity Protection: It mitigates the risk of outliving your savings by ensuring payments continue for as long as you live. Simplified RMD Management: Under the SECURE Act 2.0, the income from an annuitized portion of your IRA can often be used to satisfy the Required Minimum Distributions (RMDs) for that portion, and potentially offset the RMD requirements for the remaining non-annuitized balance. Passive Management: Once annuitized, you no longer need to manage investments or rebalance that portion of your portfolio.
Key Considerations and Risks
Irreversibility: Annuitization is typically a permanent decision. Once you begin receiving payments, you generally cannot "undo" the contract or access the original lump sum. Loss of Liquidity: You lose the ability to take large, ad-hoc withdrawals from the annuitized funds for emergencies; your access is limited to the scheduled payments. Inflation Risk: Unless you purchase a specific (and often expensive) inflation rider, your fixed payments may lose purchasing power over time. Impact on Heirs: In a standard "life-only" payout, payments stop when you die, potentially leaving nothing for your beneficiaries. You may need "Period Certain" or "Joint and Survivor" options to ensure a legacy, though these usually reduce your monthly payout. Fees and Costs: Annuities often carry higher internal costs, such as commissions and administrative fees, compared to a standard IRA brokerage account.
How to Implement
Determine Your Income Gap: Calculate your essential monthly expenses and subtract guaranteed income like Social Security to see how much you need from an annuity. Select an Annuity Type: Common choices within an IRA include: Single Premium Immediate Annuity (SPIA): Payments start almost immediately. Qualified Longevity Annuity Contract (QLAC): A deferred option that specifically helps manage RMDs in later life (up to age 85).
Execute a Direct Transfer: To avoid immediate taxes and penalties, have your IRA custodian transfer funds directly to the insurance company.
We have that option to convert part of my 401(K) to an annuity. The advertised 4% return is not attractive for us. Also the annuity return is not guaranteed. Can do better on my own.
I don’t own any immediate annuities but I do own a few Multi-Year Guaranteed Annuities which act like CD’s and let you earn a guaranteed interest rate for a set term. If you hold them outside an IRA, taxes on the interest earned are deferred until you withdraw them from your account.
TIAA Traditional works almost like SPIA. A slight difference is that it has a $base (fixed) plus $bonus (variable), so the $total may fluctuate. However, over last 25-30 years, TIAA has kept $total level or rising (i.e. no declines even during ZIRP). In a SPIA, $total is FIXED. There is a monthly thread on SV rates.
MYGA can be fine if rates are very attractive. But your money is now within tax-deferred a/c that has penalties and taxes before 59.5. Of course, you can do 1035 exchanges among annuity vendors if you are beyond any surrender periods.
@catch22 thank you for all of the information. I am mainly considering it for some point when I don't care to manage so much of my IRA. Though I will say, in the last 12 months or so, I have got very good at selling assets in the IRA.
A portion of my TIAA Traditional is annuitized. Has paid exact same monthly amount for about 10 years. I believe it has lifetime benefits for me or my wife, whoever survives. Honestly don’t know how to look under the hood of this annuity to see how it operates. My advisor recommended it.
Comments
I sometimes think about annuitizing some of my IRA. I think there's a limit. Still three years out for both of us, so not really thinking much about it yet.
@WABAC Our being curious searched for the below. Assumed to be accurate.
Annuitizing a portion of your IRA transforms that specific segment of your retirement savings from a variable investment into a guaranteed, predictable income stream for life or a set period. This is a strategic move often used to cover essential living expenses or manage tax liabilities.
Strategic Benefits
Income Stability: You receive level, periodic payments that are unaffected by market volatility, providing a reliable financial "floor".
Longevity Protection: It mitigates the risk of outliving your savings by ensuring payments continue for as long as you live.
Simplified RMD Management: Under the SECURE Act 2.0, the income from an annuitized portion of your IRA can often be used to satisfy the Required Minimum Distributions (RMDs) for that portion, and potentially offset the RMD requirements for the remaining non-annuitized balance.
Passive Management: Once annuitized, you no longer need to manage investments or rebalance that portion of your portfolio.
Key Considerations and Risks
Irreversibility: Annuitization is typically a permanent decision. Once you begin receiving payments, you generally cannot "undo" the contract or access the original lump sum.
Loss of Liquidity: You lose the ability to take large, ad-hoc withdrawals from the annuitized funds for emergencies; your access is limited to the scheduled payments.
Inflation Risk: Unless you purchase a specific (and often expensive) inflation rider, your fixed payments may lose purchasing power over time.
Impact on Heirs: In a standard "life-only" payout, payments stop when you die, potentially leaving nothing for your beneficiaries. You may need "Period Certain" or "Joint and Survivor" options to ensure a legacy, though these usually reduce your monthly payout.
Fees and Costs: Annuities often carry higher internal costs, such as commissions and administrative fees, compared to a standard IRA brokerage account.
How to Implement
Determine Your Income Gap: Calculate your essential monthly expenses and subtract guaranteed income like Social Security to see how much you need from an annuity.
Select an Annuity Type: Common choices within an IRA include:
Single Premium Immediate Annuity (SPIA): Payments start almost immediately.
Qualified Longevity Annuity Contract (QLAC): A deferred option that specifically helps manage RMDs in later life (up to age 85).
Execute a Direct Transfer: To avoid immediate taxes and penalties, have your IRA custodian transfer funds directly to the insurance company.
TIAA Traditional works almost like SPIA. A slight difference is that it has a $base (fixed) plus $bonus (variable), so the $total may fluctuate. However, over last 25-30 years, TIAA has kept $total level or rising (i.e. no declines even during ZIRP). In a SPIA, $total is FIXED. There is a monthly thread on SV rates.
https://ybbpersonalfinance.proboards.com/thread/998/weekly-business-digest-february-2026
https://www.barrons.com/articles/annuity-income-retirement-investment-f05edecc
https://www.mutualfundobserver.com/discuss/discussion/65713/stable-value-sv-rates-3-1-26
https://mutualfundobserver.com/discuss/discussion/comment/180220/#Comment_180220