Fidelity or TIAA: Choosing the Right Income Option for Your Retirement

Retirement is the time to turn your hard-earned savings into a steady income. If you’re a university employee (or anyone with workplace plans) using Fidelity or TIAA, you may wonder which provider’s approach to retirement income fits you best. Fidelity and TIAA offer different ways to withdraw money in retirement, from flexible self-directed withdrawals to lifetime guaranteed income streams.

In this article, we’ll explain Fidelity’s flexible retirement income method and TIAA’s two retirement income options, then compare them side-by-side. By the end, you should have a clearer idea of what suits your needs and feel confident about Fidelity vs. TIAA withdrawals for your situation. Let’s dive in! 

Fidelity’s Flexible Retirement Income Approach 

Fidelity’s approach to retirement income is all about flexibility and control. Unlike a traditional pension, Fidelity does not automatically turn your 403(b) or 401(k) into a fixed monthly check. Instead, you decide how and when to withdraw your money. This can be done through one-time withdrawals or a systematic withdrawal plan (an automated schedule of payments you choose). In other words, you can create your own “paycheck” from your Fidelity retirement account by specifying the amount and frequency – for example, “pay me $1,000 on the 15th of every month” – and you can change or stop those payments whenever you want1. Your remaining savings stay invested in the market, which means they can continue to grow tax-deferred even as you take out income​1. 

This flexibility gives you a lot of control. You can increase or decrease your withdrawals if your needs change, and you’re free to withdraw additional lump sums for big expenses (keeping IRS rules in mind). Fidelity’s platform is designed to make these withdrawals easy, and you can customize things like tax withholding on your payments. Essentially, you remain in the driver’s seat of your retirement funds. 

However, with freedom comes responsibility. Because Fidelity’s default is not a guaranteed pension, there are no built-in lifetime income guarantees. You have to carefully manage how much you withdraw to ensure you don’t run out of money in your lifetime​1. Fidelity will let you withdraw as much as you need (after age 59½ to avoid penalties), so it’s on you (or your advisor) to set a sustainable withdrawal rate. If the market swings downward, your account value can drop and limit how much you should withdraw1​.

In short, the risk of outliving your savings is something you must plan for. Fidelity often provides tools and calculators (like retirement income planners) to help decide a safe withdrawal amount, but ultimately the approach is “self-directed” income management rather than a pre-defined pension. 

Key points about Fidelity’s retirement income option: 

It is very flexible and customizable (you control timing and amount of withdrawals), it keeps your money accessible for unforeseen needs, and it allows continued growth potential of your investments. On the flip side, it offers no guaranteed paycheck for life – the burden is on you to budget withdrawals wisely. Many Fidelity retirees follow guidelines like the 4% rule (adjusting annually) as a starting point for withdrawals, but you can choose what makes sense for you. If you desire a guaranteed income, Fidelity can facilitate purchasing an annuity from an insurer (for example, through their “Guaranteed Income Direct” service), but this is optional and not built into the core plan​2

Generally, Fidelity’s strength is giving you maximum flexibility in how you turn your savings into income. 

TIAA’s Retirement Income Options 

TIAA takes a somewhat different approach, offering two distinct income paths for retirees. TIAA has a long history with retirement annuities (after all, TIAA stands for Teachers Insurance and Annuity Association), so they specialize in providing an option for a guaranteed lifetime income stream. At the same time, TIAA also allows flexible withdrawals similar to Fidelity’s style. Let’s break down both options: 

Option 1: Lifetime Annuity (Annuitized Income with TIAA Traditional) 

One of TIAA’s hallmark offerings is the ability to annuitize your retirement account, especially with the TIAA Traditional annuity. Annuitizing means you convert some or all of your retirement savings into a guaranteed monthly paycheck for life – essentially, it becomes like a pension. For example, if you have money in TIAA Traditional (a fixed annuity account), you can choose to start lifetime income payments at retirement. In return, TIAA promises to pay you (and your spouse/partner, if you choose a two-life annuity) a check every month for as long as you live3. Even if you live to 100, those checks keep coming – you cannot outlive this income. This guarantee is backed by TIAA’s claims-paying ability, and TIAA has a strong track record (they’ve been around 100+ years and have never missed a payment). 

Choosing a lifetime annuity can provide great peace of mind. You’re essentially insuring yourself against longevity risk – the risk of outliving your money. If you value financial security and simplicity, this option might appeal to you. TIAA Traditional in particular offers some unique features: it guarantees your principal and a minimum interest rate while you’re saving, and when you annuitize, it calculates your payout based on factors like your account balance, age, and interest rates. TIAA often is able to pay a bit more than other insurers because it shares excess profits with participants, potentially leading to “loyalty bonuses” or higher payouts for longtime savers​3. The result is usually a predictable, stable income that doesn’t fluctuate with markets – a true “set and forget” retirement paycheck. 

Of course, there are trade-offs with an annuity. The big one is lack of flexibility once you annuitize. Converting to lifetime income is generally irrevocable1. That means after you’ve started, you usually cannot change your mind and take the remainder as a lump sum – you’ve traded that liquidity for the guarantee. You also lose some potential upside: if the stock market booms, you won’t directly benefit because your payments are fixed (except for any small increases TIAA might grant, such as variable annuity payouts or declared bonuses). There’s also the consideration of inflation – a fixed annuity payment can lose purchasing power over time if inflation rises.

TIAA does offer variable annuity options (like CREF stock accounts) where payments can go up or down with investments, which provides some inflation hedge at the cost of variability​3. However, the classic TIAA Traditional payout is fixed (with some potential annual increase if TIAA declares it). Many retirees address this by using only part of their savings for an annuity and keeping the rest invested for growth. In any case, the annuity option is all about guarantees and simplicity: you get a check that’s largely worry-free, but you give up some flexibility and growth potential. 

It’s also worth noting that some TIAA plan contracts encourage annuitization by restricting other withdrawals from TIAA Traditional. In certain employer plans, if you don’t annuitize TIAA Traditional, you can only withdraw it in installments over ~10 years (not all at once)​3. This isn’t a concern if you plan to annuitize (or if your money is in TIAA mutual funds/CREF accounts), but it’s something to be aware of. TIAA does allow a one-time partial lump sum (up to 10%) at the moment of annuitization (called a Retirement Transition Benefit)1, which gives a bit of liquidity while still turning the rest into lifelong payments. 

Summary of annuitized income: TIAA’s annuity option (e.g. using TIAA Traditional) provides a guaranteed lifetime income stream​3 akin to a personal pension. It’s reliable and requires no ongoing management on your part (TIAA sends the checks). The drawbacks are irreversibility1, loss of some liquidity, and the need to plan for inflation since the payments are generally fixed. It’s a great option for those who want security and simplicity and are comfortable with the trade-off. 

Option 2: Flexible Withdrawals from TIAA Investments (Mutual Funds or Annuities) 

The second path with TIAA is much like Fidelity’s: you can opt for flexible withdrawals from your TIAA accounts without locking into a lifetime annuity. If your retirement savings are in TIAA’s mutual funds, CREF variable annuities, or the TIAA Real Estate Account, you can treat them as a portfolio to draw from as needed. TIAA allows systematic withdrawals just like Fidelity – you can set up a plan to receive a certain amount monthly, quarterly, or annually, and you can start, stop, or change that plan at any time1. While taking such withdrawals, the remaining balance stays invested and can continue to grow (or fluctuate with the market). 

In practice, if you choose not to annuitize, TIAA acts very similarly to Fidelity. You maintain full control. You could take ad-hoc cash withdrawals (partial lump sums) whenever an expense comes up, or schedule regular payments. There’s also an option to withdraw only your RMD (Required Minimum Distribution) each year once you reach the required age – this lets you satisfy the IRS minimum but otherwise keep the money invested as long as possible​1.

Essentially, TIAA’s flexible withdrawal option means you manage your own retirement paycheck. This could be appropriate if you want to keep your money accessible or aim to leave remaining funds to heirs. It’s also a common choice if you believe your investments can earn enough returns to fund your withdrawals (or if you have other sources of guaranteed income, like a pension or Social Security, and don’t need another guarantee). 

The pros and cons here mirror those under Fidelity’s approach. 

Pros: High flexibility – you can adapt withdrawals to your needs, and you retain control of (and access to) your money. You also keep the potential for growth: if your investments perform well, you can even increase your withdrawals or leave more for later. 

Cons: No lifetime guarantee – you must ensure you don’t deplete the account too quickly. You take on the longevity and market risk yourself. TIAA explicitly warns that you need to manage your withdrawals carefully to ensure you don’t outlive your savings​1, and that market downturns can affect how much you can safely take out. In other words, the onus is on you to budget and invest wisely. Some people find this manageable, especially if they work with a financial planner or use TIAA’s tools, while others might worry about it. 

One thing to highlight: you don’t have to choose only one path at TIAA. Some retirees do a combination – for instance, annuitize a portion of their TIAA Traditional to cover basic living expenses with a guaranteed floor, and leave the rest in mutual funds for flexible needs. TIAA’s platform supports mixing and matching (you could even annuitize later after trying flexible withdrawals, though if you’ve waited a long time you may have fewer assets left to annuitize). The bottom line is TIAA gives you two retirement income options – secure lifetime income or DIY withdrawals – and you can utilize both according to your comfort level. 

Comparing Fidelity and TIAA: Flexibility vs. Guarantees 

Both Fidelity and TIAA ultimately let you draw down your retirement savings, but the experience and guarantees differ. Here’s a side-by-side comparison of key factors to help you weigh Fidelity’s flexible withdrawals vs. TIAA’s annuity and withdrawal options: 

Factor	Fidelity – Flexible Withdrawals	TIAA – Lifetime Annuity (TIAA Traditional)	TIAA – Flexible Withdrawals
Flexibility	High. You decide how much and when to withdraw. Can start, stop, or change payments at any time​1. Full access to remaining balance for emergencies.	Low. In exchange for a fixed lifetime stream, you give up access to the lump sum. Once annuitized, the decision is generally irrevocable​1. No ability to adjust payment amount (except for pre-chosen survivor options).	High. Similar to Fidelity, you can take money as needed or set up a schedule, adjusting or pausing anytime​1. Full access to non-annuitized funds (though TIAA Traditional in some plans has withdrawal restrictions).
Guaranteed Income	None. No guaranteed lifetime payment – you could outlive your money if not managed carefully. The onus is on you to create a sustainable income. (Fidelity does offer optional annuity products, but these are separate choices, not the default.)	Yes – Guaranteed for life. Provides a predictable paycheck for life that you cannot outlive​3. Backed by TIAA’s insurance guarantees. Peace of mind that income will last no matter how long you live.	None. No guarantee of lifetime income if you only do withdrawals. You carry the longevity risk. (However, you retain the option to annuitize later if desired.)
Income Level	Variable. You control the amount. It can be as high or low as you choose (subject to taxes and possibly plan rules). Caution: withdrawing too much too fast can drain the account. In good markets, you might feel comfortable taking more; in bad markets, you may need to tighten the belt.	Fixed (with possible small increases).The initial payout is set by formula (based on your balance, age, interest rates, etc.). Often, the payout rate might be comparable to 4-6% of the balance per year, but it’s designed to be paid for life​3. Generally does not automatically increase with inflation (unless using a variable annuity); you get the same dollar amount each period, which might include TIAA’s occasional bonuses.	Variable. You choose the amount, like with Fidelity. You can base it on a plan (e.g. 4% rule or required minimums). Your income can be adjusted over time. If investments do well, you could potentially increase withdrawals; if markets falter or you’re drawing down too fast, you might have to reduce payments to avoid running out.
Inflation Protection	Potential, but not guaranteed. Because your money stays invested in mutual funds/bonds/etc., you have the potential to grow your account and increase withdrawals to keep up with inflation. However, this is not automatic – it depends on investment performance and your withdrawal discipline. There’s no built-in COLA (Cost-of-Living Adjustment). You need to plan for inflation by perhaps investing part of your portfolio in growth assets or adjusting withdrawals over time.	Limited. A fixed annuity payment does not automatically rise with inflation, so over decades the purchasing power can drop​4. TIAA does allow choosing variable annuity accounts (stock or real estate based) for income, which means your payments can increase if markets rise (and decrease if they fall)​3. But the standard TIAA Traditional annuity is a fixed amount. To combat inflation, many people annuitize only a portion of their assets (for a stable base income) and invest the rest in assets that can grow​4.	Potential, but not guaranteed. Same as Fidelity: your withdrawals can increase if your investments grow. You retain the ability to invest in assets that may outpace inflation (like equities). But there’s no guarantee – you must manage the portfolio to try and hedge inflation. You could, for example, increase your withdrawal amount each year for inflation, but you have to ensure your account can support it.
Effort & Management	Moderate to High. You (or your advisor) must actively manage your retirement funds and withdrawal strategy. This means monitoring your investment mix, deciding how much to take out each year, and possibly making adjustments for market changes or life events. If you enjoy being hands-on or have help, this is workable. If not, it could be stressful to some.	Low. Once set up, the annuity is hands-off. TIAA handles the investments and simply pays you every month. No need to decide what to sell or worry about market fluctuations – your income is on autopilot. This can greatly simplify your financial life in retirement. The only ongoing “management” might be tracking your budget with the fixed income and handling any tax considerations (annuities payments are partially taxable).	Moderate to High. Similar to Fidelity’s case, you need to manage the remaining portfolio and withdrawals. You have to be engaged in making sure your money lasts. TIAA provides support tools and consultations, but ultimately you’ll be making decisions on how much to withdraw and how to invest the rest. It’s a do-it-yourself income approach, so it requires some effort and comfort with financial planning.

As the comparison shows, Fidelity’s retirement income approach vs. TIAA’s annuity approach boils down to flexibility vs. guarantees. Fidelity (and TIAA’s flexible option) let you retain control and adaptability, which is great if you want or need that freedom. TIAA’s annuity provides security and simplicity, which can be invaluable for those who worry about running out of money or managing investments in their 80s and 90s. Neither path is “better” universally – it truly depends on your personal preferences, health, and financial situation. 

In fact, you might not need to choose one exclusively. It’s quite common to use a blend: for instance, use some of your TIAA account to get a small lifetime pension (covering your essential expenses) and keep the rest with Fidelity or in TIAA mutual funds for discretionary spending and emergencies. This way you get the best of both worlds – a safety net of guaranteed income and a flexible pool of money for growth and unexpected needs​4. The right mix might also depend on other factors like Social Security or a university pension you might have. If Social Security will cover a big chunk of your needs, you may feel less urgency to annuitize your TIAA funds; conversely, if you have little guaranteed income, annuitizing part of your savings could provide a comfortable floor. 

Real-Life Examples: Which Option for Who? 

To make these concepts more concrete, let’s look at two hypothetical university employees and the choices they make: 

Persona 1 – “Secure Sally”: Sally is a 65-year-old professor who is about to retire. She has accumulated retirement savings split between Fidelity and TIAA, including a significant amount in TIAA Traditional. Sally values certainty – she wants to know that her bills will be paid no matter what. She’s also not very interested in managing investments in retirement. After discussing with a financial advisor, Sally decides to annuitize a large portion of her TIAA Traditional balance. This conversion will give her, say, $2,000 per month for life as a baseline income, covering her core expenses.

She likes that this income is guaranteed forever​3, even if she lives to 95. With the remaining savings in her Fidelity account, Sally sets up a small systematic withdrawal (about 3% per year) to fund her hobbies and travel. This portion stays flexible and invested. Sally’s plan gives her peace of mind – between TIAA’s lifetime income and Social Security, her basic needs are met with steady checks, and she still has some accessible money on the side. She doesn’t worry about stock market swings affecting her monthly budget because her core income is stable. 

Persona 2 – “Flexible Frank”: Frank is a 66-year-old university IT specialist who is also retiring. He has most of his money in Fidelity mutual funds and some in TIAA CREF accounts. Frank is comfortable with investing and likes the idea of maintaining control over his nest egg. He also has a goal of leaving some money to his children if possible, and he’s in decent health with family members often living into their 90s.

Frank decides not to annuitize any of his accounts. Instead, he consolidates his retirement savings at Fidelity (rolling over his TIAA funds into Fidelity’s platform upon retiring). He sets up a flexible withdrawal plan: initially 4% of his balance per year, paid monthly, which he will adjust annually depending on his needs and market performance. This way, Frank can withdraw more in years when the market is up (perhaps to enjoy a big vacation) and pull back in years when the market is down, all while monitoring that his overall portfolio should last 30+ years.

He understands there’s a risk in this approach – if he’s too generous with himself early on or if markets tank, he might have to reduce his lifestyle later. But Frank enjoys staying engaged with his finances, and he likes knowing the remaining money continues to grow (and can be inherited by his kids if not used). He also keeps a healthy cash reserve for emergencies. For Frank, the flexibility and potential for growth outweigh the need for a guaranteed pension. He’s essentially acting as his own pension manager, with Fidelity’s tools to help. And if Frank changes his mind, he knows he could purchase an annuity later or annuitize part of his TIAA via an IRA annuity – but for now, he prefers keeping his options open. 

These two scenarios are simplified, but they’re common decision paths. You might see yourself more in Sally’s shoes (preferring security) or Frank’s (preferring flexibility), or perhaps somewhere in between. The good news is both Fidelity and TIAA offer solutions that can be tailored to you. It doesn’t have to be all one or the other. The key is to evaluate what mix of guaranteed income and flexible access will make you most comfortable in retirement. 

Questions to Ask Yourself 

Choosing how to generate retirement income is a personal decision. To help figure out the right approach for you, here are some reflection questions: 

• How much certainty do I need? Do you worry about the risk of outliving your money, or would a guaranteed “paycheck” help you sleep better?5  

• Will I actively manage my investments in retirement? If not, would you prefer an income that runs on autopilot? If yes, are you comfortable adjusting your withdrawals with market changes? 

• Do I have other sources of guaranteed income? (e.g., Social Security, a pension). If those cover most essentials, you might lean toward more flexibility with your other savings. If not, an annuity could provide that safety net. 

• How important is leaving an inheritance? Annuities typically stop at your (and your partner’s) death (unless a guarantee period is added), whereas remaining funds in an investment account can go to heirs. Consider what’s important for your legacy or family needs. 

• What’s my health and longevity outlook? If you’re in great health and have a family history of longevity, a lifetime income that you can’t outlive becomes more valuable. Conversely, if you have serious health concerns, you might not benefit as much from an annuity’s lifetime guarantee​5. 

• How do I handle market risk? If a downturn happened, could you tighten your budget temporarily? Or would you rather have a fixed check that isn’t affected by markets? Be honest about your risk tolerance in retirement. 

• Do I want a mix of options? Many people split their strategy. Consider if you want to annuitize a part of your money for basics and keep the rest flexible. What portion of your expenses do you want guaranteed vs. variable? 

These questions can guide you toward a combination of solutions. It’s often helpful to run the numbers (perhaps with a financial advisor or online calculators) for different scenarios – for example, “What if I annuitize $200,000 and flexibly withdraw the rest? How would my income look?” 

Next Steps and Conclusion 

Ultimately, Fidelity vs. TIAA retirement income options is not about which provider is “better,” but about which approach aligns with your goals. Fidelity’s flexible withdrawal strategy offers freedom and control, while TIAA’s annuity option offers security and simplicity. Understanding the differences and the fact that you can utilize both is a big step in planning a comfortable retirement. 

If you’re still unsure which path to choose or how to balance them, don’t worry. We’re here to help. 

In fact, we invite you to join our free Fidelity vs. TIAA Masterclass on Learning with Provizr. In this friendly online class, we dive deeper into these strategies with examples and interactive tools. You’ll learn how to optimize withdrawals, evaluate annuity options, and make a personalized plan for a worry-free retirement. It’s designed especially for folks in higher education like you, and it won’t cost a dime. Consider this your next step to becoming confident about your retirement income plan – check out the masterclass details on our site and sign up! 

Good planning today can translate into peace of mind tomorrow. Whether you lean towards Fidelity’s flexibility or TIAA’s guaranteed income (or a mix of both), the right choice is the one that makes you feel secure and empowered. Here’s to a happy and financially healthy retirement! 

P.S. This article is part of our retirement series. In the previous installment, we compared mutual funds vs. annuities as investment options for retirement. Be sure to read that one too. It’s a great foundation for understanding how your retirement savings vehicles (like mutual funds or annuity accounts) set the stage for the income choices we discussed here.​  

📚 References 

¹ hr.umich.edu – Your Retirement Income Options ² planadviser.com – Fidelity Goes National With 401(k)-to-Income Annuity Offering 3 tiaa.org – TIAA Traditional annuity product 4 protectedincome.org – How Annuities Can Help Retirees Protect Against Inflation 5 schwab.com – A Lump Sum vs. an Annuity: How to Decide