How much of an income edge could retirees get from annuities?

investmentnews.com:

TIAA, a provider of lifetime income solutions, has introduced a new metric designed to illustrate the potential income boost new retirees could achieve from incorporating an annuity strategy into their financial planning compared to just following the 4% rule.

The TIAA Annuity Paycheck Advantage measures the difference between a standard 4-percent withdrawal strategy and a strategy that involves allocating one-third of retirement savings to a TIAA Traditional annuity, while withdrawing 4 percent of the remaining balance.

As the company’s math goes, if a 67-year-old new retiree in 2024 were to allocate a third of their savings to lifetime income with a 10-year guarantee period through its TIAA Traditional annuity and withdraw 4 percent of the remaining balance, they could see a 32-percent increase in their first-year retirement income compared to relying solely on the 4-percent rule.

“First-year retirees can think of the TIAA Annuity Paycheck Advantage as a new ‘North Star’ that can help them achieve a higher guaranteed payout potential and greater certainty around how much to safely spend in retirement,” Kourtney Gibson, chief institutional client officer at TIAA said in a statement.

The conventional 4-percent rule suggests retirees withdraw 4 percent of their savings at most in the first year of retirement. However, Colbert Narcisse, TIAA’s chief product officer, stated that incorporating an annuity alongside a 4-percent withdrawal strategy has historically put retirees in a better financial position.

“We can show that a retiree who has opted to annuitize, alongside a 4-percent withdrawal, has historically been in a better financial position than the person who simply pulled money out of their accounts each year,” he