What do you want to know

  • The TIAA 403(b) program served 4.3 million participants in 2018.
  • About 900,000 had retirement income.
  • New retirees’ use of the scheme’s life annuities to collect income for the first time fell to 18% in 2018 from 62% in 2000.

Required minimum distribution rules may steer older American retirees away from setting up guaranteed streams of income for life.

According to the researchers, only 5% of new TIAA 403(b) retirees age 70 and older used life annuities to start drawing on their accounts in 2018.

The share of new, older retirees who used annuities to start earning income declined from 41% in 2000.

The percentage of older new retirees who used RMDs for income rose from 52% to 85% over the same period.

Three economists – Jeffrey Brown, James Poterba and David Richardson – have included these numbers in a new discussion paper on retirement income choices posted on the National Bureau of Economic Research website.

The study

The lead author, Brown, is the dean of the college of commerce at the University of Illinois at Urbana-Champaign and a TIAA trustee.

TIAA is a New York-based nonprofit institution that is best known for providing retirement plans for teachers, researchers, and other employees of nonprofit and government organizations.

TIAA has been providing defined contribution retirement plan services since 1918. In 2018, its leading 403(b) plan program served 4.3 million participants, including 898,990 participants who were receiving income.

The researchers say they based their study on TIAA data because the TIAA has a large, well-established defined contribution pension plan program and can provide more detailed information than many other sources of income data. retirement in the United States, such as federal tax filing databases.

The researchers only looked at retirees who used income and asset withdrawal strategies in the plan, not retirees who built assets into IRAs or individual annuities. The TIAA found in 2017, for example, that about 13% of US working-age adults surveyed reported holding annuities.

Income annuities

Most 401(k) plan sponsors use investment funds held outside of annuities to fund the plans.

A 403(b) plan is more likely to use a variable annuity as a funding vehicle, and it is more likely to offer access to life annuities as income distribution options when participants retire.

The annuity provider converts some or all of the participant’s assets into a guaranteed income stream to meet or exceed a minimum level throughout the participant’s lifetime or, in the case of a couple, for at least one of the spouses or partners is alive.


The federal government considers tax exemptions for funds paid or earned by pension plans to be “tax expenditures” by the federal government.

To limit tax expenditures on 403(b) and other retirement plans, the government requires participants to start taking RMDs, to convert a portion of plan assets into taxable income, at a specified age.