Anyone ever sold their TIAA annuity?

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RationalWalk
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Anyone ever sold their TIAA annuity?

Post by RationalWalk »

I'm in need of a cash lump sum more than the income from my TIAA annuity. Has anyone brokered their TIAA annuity, or another annuity, who can provide some guidance about this? Thanks.
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Re: Anyone ever sold their TIAA annuity?

Post by Stinky »

RationalWalk wrote: Fri Jun 02, 2023 8:47 pm I'm in need of a cash lump sum more than the income from my TIAA annuity. Has anyone brokered their TIAA annuity, or another annuity, who can provide some guidance about this? Thanks.
I have not sold an annuity for a cash settlement.

If I were you, I'd google "sell my annuity" and get in touch with one or two of the firms that come up on your search. Then post back here with the responses that you get from the firms.
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Re: Anyone ever sold their TIAA annuity?

Post by crefwatch »

Because you used simple terms in your OP, I want to make sure that you have actually exercised your option to turn your TIAA Retirement Annuity into a lifetime income stream. (Some posters here find the name "annuity" used at retirement providers to be confusing.)

I will say that the first of my TIAA contracts (and the paired CREF contract) I laid a hand on today has a section, #58, which says:

No assignment, transfer, or loans. Neither you nor any other person may assign, pledge, or transfer ownership of this contract or any benefits, nor transfer any of your duties, under the terms of this contract. Any such action will be void and of no effect. This contract does not provide for loans.

It occurs to me that some states might prohibit such a restriction. No personal experience.
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Re: Anyone ever sold their TIAA annuity?

Post by RationalWalk »

crefwatch wrote: Sat Jun 03, 2023 12:44 pm Because you used simple terms in your OP, I want to make sure that you have actually exercised your option to turn your TIAA Retirement Annuity into a lifetime income stream. (Some posters here find the name "annuity" used at retirement providers to be confusing.)

I will say that the first of my TIAA contracts (and the paired CREF contract) I laid a hand on today has a section, #58, which says:

No assignment, transfer, or loans. Neither you nor any other person may assign, pledge, or transfer ownership of this contract or any benefits, nor transfer any of your duties, under the terms of this contract. Any such action will be void and of no effect. This contract does not provide for loans.

It occurs to me that some states might prohibit such a restriction. No personal experience.
Ah, thanks for that. I haven't annuitized the contract as yet and hadn't planned on doing so immediately - unless I would have the option of selling for a lump sum when I do. Are you referring to the TIAA contract wording prior to annuitizing? Is there another contract that is issued when you do annuitize that contains the wording you refer to? It would seem that when you've begun your stream of payments you should have the option of selling that stream of payments to another party. However, I read that this transaction has to be approved by the insurance company that issued the annuity.
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Re: Anyone ever sold their TIAA annuity?

Post by crefwatch »

RationalWalk wrote: Sat Jun 03, 2023 1:51 pm Ah, thanks for that. I haven't annuitized the contract as yet and hadn't planned on doing so immediately
You need to name precisely the product you want to cash out, like (this is made up ...) "TIAA Traditional Annuity, in an educational institution's 403(b) retirement account, type RA." No dollar numbers needed.

Some types of TIAA accounts have time-withdrawal restrictions, but none of them would need a viatical sale to an investor who seeks those in desperate need of immediate cash settlements for an in-progress annuity. Depending on your answer to my question, you might have your cash in a few weeks, directly from TIAA. "Annuity" in this case is a form of retirement plan, rather than an existing income stream.

(I'd feel better if you assured us that you are not being preyed-upon by a relative or romantic partner fraudulently seeking cash.)
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Re: Anyone ever sold their TIAA annuity?

Post by Katietsu »

RationalWalk wrote: Sat Jun 03, 2023 1:51 pm I haven't annuitized the contract as yet and hadn't planned on doing so immediately - unless I would have the option of selling for a lump sum when I do.
Are you comfortable explaining a little more about your goal and how you expect selling a TIAA annuity to help with that goal? In general, the reason one is forced to “sell” an annuity is because they have already annuitized the contract. It would be unusual to intentionally annuitize a contract when you want a lump sum.
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Re: Anyone ever sold their TIAA annuity?

Post by student »

RationalWalk wrote: Sat Jun 03, 2023 1:51 pm
crefwatch wrote: Sat Jun 03, 2023 12:44 pm Because you used simple terms in your OP, I want to make sure that you have actually exercised your option to turn your TIAA Retirement Annuity into a lifetime income stream. (Some posters here find the name "annuity" used at retirement providers to be confusing.)

I will say that the first of my TIAA contracts (and the paired CREF contract) I laid a hand on today has a section, #58, which says:

No assignment, transfer, or loans. Neither you nor any other person may assign, pledge, or transfer ownership of this contract or any benefits, nor transfer any of your duties, under the terms of this contract. Any such action will be void and of no effect. This contract does not provide for loans.

It occurs to me that some states might prohibit such a restriction. No personal experience.
Ah, thanks for that. I haven't annuitized the contract as yet and hadn't planned on doing so immediately - unless I would have the option of selling for a lump sum when I do. Are you referring to the TIAA contract wording prior to annuitizing? Is there another contract that is issued when you do annuitize that contains the wording you refer to? It would seem that when you've begun your stream of payments you should have the option of selling that stream of payments to another party. However, I read that this transaction has to be approved by the insurance company that issued the annuity.
If you haven't annuitized, then you may be able to have transfer out of TIAA Traditional right away. My understanding is that there are usually two kinds. For example, Retirement Annuity and Group Retirement Annuity are illiquid, and Supplemental Retirement Annuity and Retirement Annuity or Group Retirement Annuity are liquid. For the liquid ones, you can transfer to another investment right away. For the illiquid ones, it depends on the contract, for Retirement Annuity and Group Retirement Annuity, it would be 10 annual installments over 9 years and 1 day, unless you account balance is small enough.
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Re: Anyone ever sold their TIAA annuity?

Post by Katietsu »

student wrote: Sun Jun 04, 2023 7:37 am
RationalWalk wrote: Sat Jun 03, 2023 1:51 pm
crefwatch wrote: Sat Jun 03, 2023 12:44 pm Because you used simple terms in your OP, I want to make sure that you have actually exercised your option to turn your TIAA Retirement Annuity into a lifetime income stream. (Some posters here find the name "annuity" used at retirement providers to be confusing.)

I will say that the first of my TIAA contracts (and the paired CREF contract) I laid a hand on today has a section, #58, which says:

No assignment, transfer, or loans. Neither you nor any other person may assign, pledge, or transfer ownership of this contract or any benefits, nor transfer any of your duties, under the terms of this contract. Any such action will be void and of no effect. This contract does not provide for loans.

It occurs to me that some states might prohibit such a restriction. No personal experience.
Ah, thanks for that. I haven't annuitized the contract as yet and hadn't planned on doing so immediately - unless I would have the option of selling for a lump sum when I do. Are you referring to the TIAA contract wording prior to annuitizing? Is there another contract that is issued when you do annuitize that contains the wording you refer to? It would seem that when you've begun your stream of payments you should have the option of selling that stream of payments to another party. However, I read that this transaction has to be approved by the insurance company that issued the annuity.
If you haven't annuitized, then you may be able to have transfer out of TIAA Traditional right away. My understanding is that there are usually two kinds. For example, Retirement Annuity and Group Retirement Annuity are illiquid, and Supplemental Retirement Annuity and Retirement Annuity or Group Retirement Annuity are liquid. For the liquid ones, you can transfer to another investment right away. For the illiquid ones, it depends on the contract, for Retirement Annuity and Group Retirement Annuity, it would be 10 annual installments over 9 years and 1 day, unless you account balance is small enough.
There are also other less common possibilities. For instance, the newer version is a 7 annual installments over 6 years plus a day. And there can be a window after you sever employment where one can make a withdrawal for a fee. (Ours is 2.5%-don’t know if that is universal.)
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Re: Anyone ever sold their TIAA annuity?

Post by student »

Katietsu wrote: Sun Jun 04, 2023 8:20 am
student wrote: Sun Jun 04, 2023 7:37 am
RationalWalk wrote: Sat Jun 03, 2023 1:51 pm
crefwatch wrote: Sat Jun 03, 2023 12:44 pm Because you used simple terms in your OP, I want to make sure that you have actually exercised your option to turn your TIAA Retirement Annuity into a lifetime income stream. (Some posters here find the name "annuity" used at retirement providers to be confusing.)

I will say that the first of my TIAA contracts (and the paired CREF contract) I laid a hand on today has a section, #58, which says:

No assignment, transfer, or loans. Neither you nor any other person may assign, pledge, or transfer ownership of this contract or any benefits, nor transfer any of your duties, under the terms of this contract. Any such action will be void and of no effect. This contract does not provide for loans.

It occurs to me that some states might prohibit such a restriction. No personal experience.
Ah, thanks for that. I haven't annuitized the contract as yet and hadn't planned on doing so immediately - unless I would have the option of selling for a lump sum when I do. Are you referring to the TIAA contract wording prior to annuitizing? Is there another contract that is issued when you do annuitize that contains the wording you refer to? It would seem that when you've begun your stream of payments you should have the option of selling that stream of payments to another party. However, I read that this transaction has to be approved by the insurance company that issued the annuity.
If you haven't annuitized, then you may be able to have transfer out of TIAA Traditional right away. My understanding is that there are usually two kinds. For example, Retirement Annuity and Group Retirement Annuity are illiquid, and Supplemental Retirement Annuity and Retirement Annuity or Group Retirement Annuity are liquid. For the liquid ones, you can transfer to another investment right away. For the illiquid ones, it depends on the contract, for Retirement Annuity and Group Retirement Annuity, it would be 10 annual installments over 9 years and 1 day, unless you account balance is small enough.
There are also other less common possibilities. For instance, the newer version is a 7 annual installments over 6 years plus a day. And there can be a window after you sever employment where one can make a withdrawal for a fee. (Ours is 2.5%-don’t know if that is universal.)
You are right. I forgot about the limited "surrender charge" option.
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Re: Anyone ever sold their TIAA annuity?

Post by RationalWalk »

This happens to be a TIAA After Tax Annuity (ATRA) that I funded myself. It's a non-qualified plan. All the money is in TIAA Traditional where the only withdrawal options are a life annuity or a transfer payout annuity (TPA). The latter pays out over a 9-year period. It is likely I'll never need the income from this annuity. But It is likely that I'll need a large lump sum to purchase entry into a CCRC within the next two years or so. My only option for that is to cash out my Roth IRA in it's entirety, which I don't want to do. The Roth would be a much better asset to pass to my beneficiaries and a much more flexible source of funds for myself. It would be great if I could convert the ATRA to a lump sum for the CCRC. It has not been annuitized yet.
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Re: Anyone ever sold their TIAA annuity?

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RationalWalk wrote: Sun Jun 04, 2023 11:56 am This happens to be a TIAA After Tax Annuity (ATRA) that I funded myself. It's a non-qualified plan. All the money is in TIAA Traditional where the only withdrawal options are a life annuity or a transfer payout annuity (TPA). The latter pays out over a 9-year period. It is likely I'll never need the income from this annuity. But It is likely that I'll need a large lump sum to purchase entry into a CCRC within the next two years or so. My only option for that is to cash out my Roth IRA in it's entirety, which I don't want to do. The Roth would be a much better asset to pass to my beneficiaries and a much more flexible source of funds for myself. It would be great if I could convert the ATRA to a lump sum for the CCRC. It has not been annuitized yet.

Can you start the TPA today (tomorrow)?
In 2 years, you'll have 30% of the money out; in 4 years, 50% out.
This would at least seriously lower the amount you'd need from the Roth.

Some CCRCs will "wait" for money if it's obviously *there*, but that's usually when waiting for a house to sell after moving to the CCRC.

RM
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Re: Anyone ever sold their TIAA annuity?

Post by RationalWalk »

ResearchMed wrote: Sun Jun 04, 2023 12:06 pm
RationalWalk wrote: Sun Jun 04, 2023 11:56 am This happens to be a TIAA After Tax Annuity (ATRA) that I funded myself. It's a non-qualified plan. All the money is in TIAA Traditional where the only withdrawal options are a life annuity or a transfer payout annuity (TPA). The latter pays out over a 9-year period. It is likely I'll never need the income from this annuity. But It is likely that I'll need a large lump sum to purchase entry into a CCRC within the next two years or so. My only option for that is to cash out my Roth IRA in it's entirety, which I don't want to do. The Roth would be a much better asset to pass to my beneficiaries and a much more flexible source of funds for myself. It would be great if I could convert the ATRA to a lump sum for the CCRC. It has not been annuitized yet.

Can you start the TPA today (tomorrow)?
In 2 years, you'll have 30% of the money out; in 4 years, 50% out.
This would at least seriously lower the amount you'd need from the Roth.

Some CCRCs will "wait" for money if it's obviously *there*, but that's usually when waiting for a house to sell after moving to the CCRC.

RM
I've thought of that and am considering it. My understanding is that I could have the TPA pay out to TIAA Real Estate, or to CREF funds of my choosing. Money in those can be withdrawn on a discretionary basis when needed. However, just 30% of the balance would still require me to liquidate most of my Roth for the CREF entry fee in two years, which I'd like to avoid. My understanding is that once the TPA is initiated, it can't be stopped or converted to a life annuity, so the money I don't really need would just keep flowing. It's a partial solution, but a messy one.

I don't know if the CCRC would "wait" for settlement of the entry fee, so I could inquire. My hunch is that they might be willing to wait for a few months as they would for someone selling a house, but not any longer.
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Re: Anyone ever sold their TIAA annuity?

Post by Jimbo Moneybags »

Why would you prefer to sell an annuity rather than withdraw what you need from your portfolio?

Have you considered that what you would be offered by any company that buys annuity products will be substantially less than the actual value of the annuity if you were to keep it? Also, do you realize that all growth in your annuity would be taxed upon the sale as ordinary income?

How would those financial aspects factor into your decision about the source of funds for the CCRC buy-in?
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Re: Anyone ever sold their TIAA annuity?

Post by ResearchMed »

RationalWalk wrote: Sun Jun 04, 2023 12:37 pm
ResearchMed wrote: Sun Jun 04, 2023 12:06 pm
RationalWalk wrote: Sun Jun 04, 2023 11:56 am This happens to be a TIAA After Tax Annuity (ATRA) that I funded myself. It's a non-qualified plan. All the money is in TIAA Traditional where the only withdrawal options are a life annuity or a transfer payout annuity (TPA). The latter pays out over a 9-year period. It is likely I'll never need the income from this annuity. But It is likely that I'll need a large lump sum to purchase entry into a CCRC within the next two years or so. My only option for that is to cash out my Roth IRA in it's entirety, which I don't want to do. The Roth would be a much better asset to pass to my beneficiaries and a much more flexible source of funds for myself. It would be great if I could convert the ATRA to a lump sum for the CCRC. It has not been annuitized yet.

Can you start the TPA today (tomorrow)?
In 2 years, you'll have 30% of the money out; in 4 years, 50% out.
This would at least seriously lower the amount you'd need from the Roth.

Some CCRCs will "wait" for money if it's obviously *there*, but that's usually when waiting for a house to sell after moving to the CCRC.

RM
I've thought of that and am considering it. My understanding is that I could have the TPA pay out to TIAA Real Estate, or to CREF funds of my choosing. Money in those can be withdrawn on a discretionary basis when needed. However, just 30% of the balance would still require me to liquidate most of my Roth for the CREF entry fee in two years, which I'd like to avoid. My understanding is that once the TPA is initiated, it can't be stopped or converted to a life annuity, so the money I don't really need would just keep flowing. It's a partial solution, but a messy one.

I don't know if the CCRC would "wait" for settlement of the entry fee, so I could inquire. My hunch is that they might be willing to wait for a few months as they would for someone selling a house, but not any longer.

Right.
But each year you wait, in case it isn't "in exactly 2 years", etc., is another 10%.
So 30% or 50% should be a big bite out of what you'd need to take out of the Roth, yes?

Also, keep in mind there's probably a haircut more than you realize if you sell the annuity.
Whoever buys it... they are paying *now* for that same income stream in the future. The present value of those later payments... it's not going to be the same as the percentage you'd calculate based upon the current total (which isn't discounted).
You might want to do some research on how much you'd "lose" if you sell it... and compare that to removing money from the Roth.

How sure are you of the "two years from now"?

RM
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Re: Anyone ever sold their TIAA annuity?

Post by Stinky »

RationalWalk wrote: Sun Jun 04, 2023 11:56 am This happens to be a TIAA After Tax Annuity (ATRA) that I funded myself. It's a non-qualified plan. All the money is in TIAA Traditional where the only withdrawal options are a life annuity or a transfer payout annuity (TPA). The latter pays out over a 9-year period. It is likely I'll never need the income from this annuity. But It is likely that I'll need a large lump sum to purchase entry into a CCRC within the next two years or so. My only option for that is to cash out my Roth IRA in it's entirety, which I don't want to do. The Roth would be a much better asset to pass to my beneficiaries and a much more flexible source of funds for myself. It would be great if I could convert the ATRA to a lump sum for the CCRC. It has not been annuitized yet.
If you truly do want to sell the annuity, I’d choose the 9 years certain option. I expect that would be a lot more attractive to a settlement company than a life-contingent option.

But brace for a haircut. The folks buying your 9 year annuity will demand a handsome interest rate. If the account value now is (say) $1 million and you were to sell the whole set of payments, I wouldn’t be surprised if you had to take a $100,000 or more haircut; that is, receive $900,000 or less from the settlement company.

That might push you closer to withdrawing from the Roth. Or, maybe the settlement company could purchase just a few or the early payments from you, or a fraction of all payments.
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Re: Anyone ever sold their TIAA annuity?

Post by RationalWalk »

Yes, selling the annuity is complex. I have no idea about the tax treatment of the sale either. Would the entire amount received be treated as income in the year received (minus my small after-tax contributions)?
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Re: Anyone ever sold their TIAA annuity?

Post by crefwatch »

I will say that this is the first time I have read a really good reason why the restrictions on TIAA Traditional could be considered a hardship, rather than a wise (and usually, an higher-interest source during accumulation... ) if paternalistic restriction on long-term retirement funds. Many older people put off recognition of the realities of aging. (My wife and I also plan to use a CCRC in the not so distant future, since we have no children.)

Nobody is giving much consideration to my suggestion that TIAA will prevent any of us from transferring their annuity to another provider. However, while it is un-annuitized, you can use a 1035-Exchange to get funds to another provider. But that does not solve the problem of the 9-years-and-a-day restriction on ATRA TIAA Traditional. And you cannot hold TIAA Traditional at a provider other than TIAA.

You might want to look at the brochure on TIAA Traditional withdrawals that another Participant has kindly put online:
https://www.dropbox.com/sh/y08d3qbmvisa ... QrZIa?dl=0

I suggest you go down the list to:
2021 - Making transfers and withdrawals from the TIAA Traditional Annuity.pdf 2/25/2023 10:23 pm
In this brochure, Page 8 has some special considerations for After-Tax Annuities. I particularly refer to this:

You can move funds out of TIAA Traditional through transfers or cash withdrawals in 10 annual installments.
When you do this: You must use your entire balance in your TIAA contract, which may include both TIAA Traditional and the TIAA Real Estate Account. This means that to set up a Transfer Payout Annuity for your TIAA Traditional account balance, you must first transfer or withdraw any funds you have in the TIAA Real Estate Account.


Here's a quote from an ATRA brochure at TIAA:

How are ATRA distributions taxed?
Earnings in the ATRA grow tax-deferred. Any withdrawals before age 59½ may be subject to a 10% IRS penalty tax in
addition to ordinary income tax on your earnings.
Cash withdrawals are generally distributed as taxable earnings first, and then as a tax-free return of contributions.
The TIAA group of companies does not provide legal or tax advice. Please consult your legal or tax advisor prior to
taking distributions from your ATRA.


Edit: So unless you opened the ATRA recently, there will be a considerable tax hit from liquidating it. It's not fair to use my example, but MY ATRA is probably 99% taxable appreciation. So it would cost as much as a TIRA withdrawal if I took anything out of it. Is that a factor in CCRC investment-planning? I wonder if you have to use the Roth just to manage the income tax costs? Do you have substantial TIRA or taxable investment accounts? I don't think you've mentioned TIRA or taxable yet.
Last edited by crefwatch on Sun Jun 04, 2023 4:22 pm, edited 1 time in total.
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Re: Anyone ever sold their TIAA annuity?

Post by Stinky »

RationalWalk wrote: Sun Jun 04, 2023 1:08 pm Yes, selling the annuity is complex. I have no idea about the tax treatment of the sale either. Would the entire amount received be treated as income in the year received (minus my small after-tax contributions)?
The web sites that I looked at all seem to say "consult a tax professional if you're going to sell an annuity".

Just using common sense, it would seem that the worst possible outcome is that you would pay ordinary income tax on the excess of the current account value over your after-tax contributions. A better result would be if you paid ordinary income tax on the excess of the single payment that you get from the settlement company over your after-tax contributions.

I do not know if either of my scenarios is correct. I am definitely not a tax professional.
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Re: Anyone ever sold their TIAA annuity?

Post by RationalWalk »

crefwatch wrote: Sun Jun 04, 2023 1:38 pm I will say that this is the first time I have read a really good reason why the restrictions on TIAA Traditional could be considered a hardship, rather than a wise (and usually, an higher-interest source during accumulation... ) if paternalistic restriction on long-term retirement funds. Many older people put off recognition of the realities of aging. (My wife and I also plan to use a CCRC in the not so distant future, since we have no children.)

Nobody is giving much consideration to my suggestion that TIAA will prevent any of us from transferring their annuity to another provider. However, while it is un-annuitized, you can use a 1035-Exchange to get funds to another provider. But that does not solve the problem of the 9-years-and-a-day restriction on ATRA TIAA Traditional. And you cannot hold TIAA Traditional at a provider other than TIAA.

You might want to look at the brochure on TIAA Traditional withdrawals that another Participant has kindly put online:
https://www.dropbox.com/sh/y08d3qbmvisa ... QrZIa?dl=0

I suggest you go down the list to:
2021 - Making transfers and withdrawals from the TIAA Traditional Annuity.pdf 2/25/2023 10:23 pm
In this brochure, Page 8 has some special considerations for After-Tax Annuities. I particularly refer to this:

You can move funds out of TIAA Traditional through transfers or cash withdrawals in 10 annual installments.
When you do this: You must use your entire balance in your TIAA contract, which may include both TIAA Traditional and the TIAA Real Estate Account. This means that to set up a Transfer Payout Annuity for your TIAA Traditional account balance, you must first transfer or withdraw any funds you have in the TIAA Real Estate Account.


Here's a quote from an ATRA brochure at TIAA:

How are ATRA distributions taxed?
Earnings in the ATRA grow tax-deferred. Any withdrawals before age 59½ may be subject to a 10% IRS penalty tax in
addition to ordinary income tax on your earnings.
Cash withdrawals are generally distributed as taxable earnings first, and then as a tax-free return of contributions.
The TIAA group of companies does not provide legal or tax advice. Please consult your legal or tax advisor prior to
taking distributions from your ATRA.


Edit: So unless you opened the ATRA recently, there will be a considerable tax hit from liquidating it. It's not fair to use my example, but MY ATRA is probably 99% taxable appreciation. So it would cost as much as a TIRA withdrawal if I took anything out of it. Is that a factor in CCRC investment-planning? I wonder if you have to use the Roth just to manage the income tax costs? Do you have substantial TIRA or taxable investment accounts? I don't think you've mentioned TIRA or taxable yet.
I appreciate your thoughtful comments, which generally confirm what I understood regarding withdrawals from my Traditional in the TIAA ATRA. There doesn't appear to be any way around the 10-installment, 9-year restriction of the TPA best-case option. This applies even if I want to transfer the ATRA to another company. ResearchMed's suggestion of initiating that now in order to partially mitigate the hit to my Roth IRA seems like the best I can do. I'll have to consider this further.
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