Legal Blog
The Weekly Scenario: What Types of Options Will TIAA Give Me Now That I Am Retired?
Question: I have been an educator my entire life and hold my retirement plan accounts with The Teachers Insurance and Annuity Association of America-College Retirement Equities Fund, also known as TIAA and formerly, TIAA-CREF. What types of options will TIAA give me now that I am retired?
Answer: While I am not a TIAA employee or have any affiliation, in working with clients, I do see a lot of these accounts that cross my desk from time to time. I believe that there are likely thousands, if not, millions of American employees and retirees who are educators, scientists, and hospital employees who have TIAA accounts. TIAA options include CREF variable annuities which can be rolled into a new or existing IRA.
Here is what I understand to be the case. Many participating workers may have something called a TIAA Traditional Annuity. These accounts are designed to be a guaranteed account with the purpose to provide a competitive interest rate for participants during the ‘accumulation’ phase of their life (the ‘working years’). Once the person retires, he can annuitize and receive lifetime (guaranteed) income.
Most of the time, the shortest length of time to roll out of a TIAA Traditional Annuity is by taking 10 payments over 9 years. TIAA calls this the Transfer Payout Annuity or TPA. This option is best for people who want to move some or all of their TIAA Traditional account elsewhere (such as an IRA rollover or cash withdrawal). So long as the annual payments from the TPA are directly rolled to an IRA, there shouldn’t be any income tax consequences.
Comment: If money is transferred via a TPA into a taxable account, it will be subject to tax and depending on a client’s age, a 10% early withdrawal penalty may apply.
As always, if you have any questions or would like to learn more, please contact Steve Shane at sshane@offitkurman.com or .
ABOUT STEVE SHANE
Steve Shane provides strategic counseling to clients in need of estate administration, charitable giving and business continuity planning while minimizing estate, gift, and generation-skipping transfer tax exposure. He offers legal guidance to clients on asset protection and the proper disposition of assets in accordance with the client’s objectives, while employing tax planning techniques such as the use of irrevocable trusts, life insurance planning, lifetime gifts and charitable trust. He is also experienced with drafting documents for business planning, the incorporation and application for exemption for Private Foundations and the administration of decedents’ estates.
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