In response to the Request for Information Regarding Lifetime Income Options for Participants in Retirement Plans, issued jointly by the DoL and the Department of the Treasury, TIAA-CREF said all Americans should have investment choices in their workplace retirement accounts that would guarantee a lifetime stream of income.
Specifically, TIAA-CREF said workers should have access to a fixed annuity that offers a guaranteed return on investment during their working years. TIAA-CREF said it supports the use of a fixed annuity because it allows individuals to take advantage of interest rates rising and falling across a number of economic cycles, which can provide a higher, more predictable income stream at retirement than if they were to transfer accumulations into a fixed annuity at retirement and annuitize during a low-interest rate environment.
“A low-cost, fixed annuity can make all the difference in whether one outlives their savings or can afford life’s essential expenses throughout retirement,” said TIAA-CREF President and CEO Roger W. Ferguson, Jr., according to a press release. “Today most retirement accounts emphasize wealth accumulation, with little thought to how that wealth will translate into retirement income. A guaranteed income option helps ensure that workers build lifetime financial security.”
To help spark public comment, in February, the DoL and Treasury issued an RFI with 39 questions relating to the lifetime income products issue (see “DoL Calls for Public Comment about Annuities”).
In its response, TIAA-CREF also said participants should not be required to annuitize their entire retirement accumulation, and should have access to partial annuitization options. This recognizes the unique nature of retirement planning, encourages use of annuities, and addresses participant concerns about depleting savings or removing financial flexibility during retirement, the company said.
In recent years, TIAA-CREF has found that nearly one-third of its participants choose to annuitize some portion of their assets, according to the press release. Approximately 17% of those beginning an income stream choose to fully annuitize.
On the issue of expenses, TIAA-CREF stated that keeping expenses low is a crucial element in the successful management of retirement accounts. The company also endorsed steps to increase transparency and establish uniform disclosure of fees, expenses, surrender charges, and returns to help further reduce costs associated with annuity products.