TIAA Annuity Help understanding Contact Language

Have a question about your personal investments? No matter how simple or complex, you can ask it here.
Post Reply
Topic Author
drzzzzz
Posts: 495
Joined: Sat Sep 22, 2012 9:56 pm

TIAA Annuity Help understanding Contact Language

Post by drzzzzz » Wed May 20, 2020 9:00 am

hi
I am retired from my employer, age 64 and currently my retirement plan is with TIAA (with primarily Vanguard mutual fund holdings including VBTLX (vanguard total bond indewx). This particular account plan allows me to exchange into TIAA Traditional - Retirement Choice Annuity (RC). When I spoke with my rep he said the current crediting rate is 3% and that would continue for the life of the contract (and could go up), but was illiquid meaning withdrawals over 9 years and 1 day - all of which sounds like a good deal right now for part of my fixed income "bond" component of the portfolio.

The fax sheet online, however, to me seems to state things somewhat differently and so I wanted to get input from BH who have TIAA annuities or are familiar with them to better understand their verbiage and the difference if anyway between accumulating state versus contributions applied. Per the information below if I exchange into the TIAA traditional will I get 3% yearly for as long as I have the contract or does it get reset each year? I think it is the first paragraph about accumulating state and the last paragraph of the copied material that I have the questions about and what exactly they mean. I wanted to get some BH insight before talking to the rep again. Thanks

I have questions about the folowing which I copied from the TIAA fact sheet online:

ACCUMULATING STAGE INTEREST CREDITING RATES AS OF 5/01/2020
CONTRIBUTIONS APPLIED FROM 03/01/20 TO 02/28/21

04/01/20 - 05/31/20 3.00%
03/01/20 - 03/31/20 3.50%
05/01/19 - 02/29/20 3.75%
01/01/19 - 04/30/19 4.40%
01/01/17 - 12/31/18 4.30%
01/01/12 - 12/31/16 3.90%
08/01/05 - 12/31/11 4.30%
The interest rates above and below include the minimum guaranteed rate plus additional amounts that are not guaranteed but may be established on a year-by-year basis by the TIAA Board of Trustees. Additional amounts, when declared, remain in effect through the end of the "declaration year", which begins each March 1 for accumulating annuities and January 1 for payout annuities. Additional amounts are not guaranteed for the future years. Any guarantees under annuities issued by TIAA are subject to TIAA's claims-paying ability. This product is a guaranteed insurance contract and not an investment for Federal securities law purposes.

This investment offers you the option to convert a portion of your balance into lifetime income when you retire.

INCOME PAYOUT RATES FOR LIFETIME ANNUITIES ISSUED DURING JUNE 2020
VINTAGE
(WHEN MONEY WAS CONTRIBUTED) LIFETIME INCOME PAYOUT RATE
SINGLE LIFE WITH 10-YEAR GUARANTEE LIFETIME INCOME PAYOUT RATE
JOINT LIFE WITH 20-YEAR GUARANTEE
2020 5.7% 4.9%
2019 5.8% 5.0%
2016 - 2018 5.8% 5.0%
2012 - 2015 5.9% 5.1%
2002 - 2011 6.4% 5.6%
Pre-2002 8.0% 7.2%
An income payout rate represents the amount of annual income you will receive as a percentage of the amount you convert to lifetime annuity payments.

The examples shown above are based on a 65-year-old choosing a single life annuity with a 10-year guarantee period or a joint life annuity (with full benefit to survivor) with a 20-year guarantee period. Income payout rates for each participant will vary by age, the annuity partner’s age (for joint options) and the income option selected. Note that participants who contribute to TIAA Traditional over the long term may receive higher income amounts, since they would get the rates applicable to the older vintages as shown above.

Figures shown above are based on the TIAA Traditional Standard Payment Method.

To learn more about your personal income rate, call us at 888-583-2535 or log in to the Retirement Income Illustrator tool.

The minimum guaranteed rate during the accumulation phase for TIAA Traditional under Retirement Choice (RC) annuity contracts is re-determined annually on January 1 and will be between 1% and 3%. The minimum guaranteed rate applicable to contributions and transfers into the TIAA Traditional account under RC contracts during 2020 is 1.00%. This rate will continue to be guaranteed to these 2020 contributions and transfers for 10 calendar years. The minimum guaranteed rate for payout annuities is 2%. The RC inception date is August 1, 2005.

talzara
Posts: 955
Joined: Thu Feb 12, 2009 7:40 pm

Re: TIAA Annuity Help understanding Contact Language

Post by talzara » Wed May 20, 2020 11:46 am

drzzzzz wrote:
Wed May 20, 2020 9:00 am
This particular account plan allows me to exchange into TIAA Traditional - Retirement Choice Annuity (RC). When I spoke with my rep he said the current crediting rate is 3% and that would continue for the life of the contract (and could go up), but was illiquid meaning withdrawals over 9 years and 1 day - all of which sounds like a good deal right now for part of my fixed income "bond" component of the portfolio.
Only the old RA/GRA/SRA/GSRA annuities have a 3% guarantee. The new RC annuities have a 1% guaranteed rate.

Here is TIAA's comparison of the old contract to the new contract: https://www.tiaa.org/public/pdf/underst ... choice.pdf

Several Bogleheads have questioned TIAA's ability to keep paying a 3% guaranteed rate. However, TIAA has been taking steps to limit its risk. When a university solicits RFPs for its 403(b) plan, TIAA will only bid with the RC annuity. The RA/GRA/SRA/GSRA annuities are only available if the university stays on the old contract.

Topic Author
drzzzzz
Posts: 495
Joined: Sat Sep 22, 2012 9:56 pm

Re: TIAA Annuity Help understanding Contact Language

Post by drzzzzz » Wed May 20, 2020 12:02 pm

talzara wrote:
Wed May 20, 2020 11:46 am
drzzzzz wrote:
Wed May 20, 2020 9:00 am
This particular account plan allows me to exchange into TIAA Traditional - Retirement Choice Annuity (RC). When I spoke with my rep he said the current crediting rate is 3% and that would continue for the life of the contract (and could go up), but was illiquid meaning withdrawals over 9 years and 1 day - all of which sounds like a good deal right now for part of my fixed income "bond" component of the portfolio.
Only the old RA/GRA/SRA/GSRA annuities have a 3% guarantee. The new RC annuities have a 1% guaranteed rate.

Here is TIAA's comparison of the old contract to the new contract: https://www.tiaa.org/public/pdf/underst ... choice.pdf

Several Bogleheads have questioned TIAA's ability to keep paying a 3% guaranteed rate. However, TIAA has been taking steps to limit its risk. When a university solicits RFPs for its 403(b) plan, TIAA will only bid with the RC annuity. The RA/GRA/SRA/GSRA annuities are only available if the university stays on the old contract.
Thank you - great link and I now know what I should be confirming with the rep

macher
Posts: 160
Joined: Tue Apr 14, 2020 5:21 pm

Re: TIAA Annuity Help understanding Contact Language

Post by macher » Wed May 20, 2020 5:34 pm

talzara wrote:
Wed May 20, 2020 11:46 am
drzzzzz wrote:
Wed May 20, 2020 9:00 am
This particular account plan allows me to exchange into TIAA Traditional - Retirement Choice Annuity (RC). When I spoke with my rep he said the current crediting rate is 3% and that would continue for the life of the contract (and could go up), but was illiquid meaning withdrawals over 9 years and 1 day - all of which sounds like a good deal right now for part of my fixed income "bond" component of the portfolio.
Only the old RA/GRA/SRA/GSRA annuities have a 3% guarantee. The new RC annuities have a 1% guaranteed rate.

Here is TIAA's comparison of the old contract to the new contract: https://www.tiaa.org/public/pdf/underst ... choice.pdf

Several Bogleheads have questioned TIAA's ability to keep paying a 3% guaranteed rate. However, TIAA has been taking steps to limit its risk. When a university solicits RFPs for its 403(b) plan, TIAA will only bid with the RC annuity. The RA/GRA/SRA/GSRA annuities are only available if the university stays on the old contract.
I work for University of PA and on old contract.

User avatar
oldzey
Posts: 1527
Joined: Sun Apr 13, 2014 8:38 pm
Location: Land of Lincoln

Re: TIAA Annuity Help understanding Contact Language

Post by oldzey » Wed May 20, 2020 5:41 pm

Here's a link to the Morningstar TIAA funds forum, with the May accumulation and payout rates for the various flavors of TIAA Traditional: https://community.morningstar.com/t5/TI ... d-p/696813

You can also register to ask questions on that forum - some of the regulars there have been investing with TIAA-CREF since the 1960s.
"The broker said the stock was 'poised to move.' Silly me, I thought he meant up." ― Randy Thurman

User avatar
ResearchMed
Posts: 10158
Joined: Fri Dec 26, 2008 11:25 pm

Re: TIAA Annuity Help understanding Contact Language

Post by ResearchMed » Wed May 20, 2020 6:15 pm

oldzey wrote:
Wed May 20, 2020 5:41 pm
Here's a link to the Morningstar TIAA funds forum, with the May accumulation and payout rates for the various flavors of TIAA Traditional: https://community.morningstar.com/t5/TI ... d-p/696813

You can also register to ask questions on that forum - some of the regulars there have been investing with TIAA-CREF since the 1960s.
Keep in mind that the Accumulating Rates are, I believe, the same for all in that same Plan (e.g "RA").

However, the Payout Rates shown there on the Morningstar Discussion are for just one of *many* different combinations of choices of payout terms for annuitizing. Those are a function of vintage combinations (dates of contributions into Trad Ann); age at annuitizing; whether there is just one annuitant, or if there are two (and if two, the ages of both); if joint, what proportion of the initial joint payout will be provided for the surviving member (there are a few categories to choose from); whether there is any guarantee, etc., and also, whether one selects a straight annuity or a graduated payout, which would start lower, but increase over time.

One would need to enter one's own TIAA account, and look at the choices for your particular ages/choices, to see approximately what you might be able to select in the near term or for the future (or call a TIAA rep who could help you with this).
That will also take into account the precise amounts per vintages of your own contributions.

[Note that although the accumulating crediting rates of more recent vintages vary by months or just a few years, as time goes on, the vintages tend to collapse, and become a single rate for a wider time span. These changes depend upon economic conditions and presumably the performance of TIAA's General Fund, etc. These accumulating rates are not the same as the payout rates for various vintages, for any given payout start date.]

N.b.: I hope I got that correct above. "It tends to be complicated" is a bit of an overstatement. :wink:
But some of us have parents who were very happy to have the payout annuities for decades and decades...

RM
This signature is a placebo. You are in the control group.

macher
Posts: 160
Joined: Tue Apr 14, 2020 5:21 pm

Re: TIAA Annuity Help understanding Contact Language

Post by macher » Thu May 21, 2020 5:49 am

ResearchMed wrote:
Wed May 20, 2020 6:15 pm
oldzey wrote:
Wed May 20, 2020 5:41 pm
Here's a link to the Morningstar TIAA funds forum, with the May accumulation and payout rates for the various flavors of TIAA Traditional: https://community.morningstar.com/t5/TI ... d-p/696813

You can also register to ask questions on that forum - some of the regulars there have been investing with TIAA-CREF since the 1960s.
Keep in mind that the Accumulating Rates are, I believe, the same for all in that same Plan (e.g "RA").

However, the Payout Rates shown there on the Morningstar Discussion are for just one of *many* different combinations of choices of payout terms for annuitizing. Those are a function of vintage combinations (dates of contributions into Trad Ann); age at annuitizing; whether there is just one annuitant, or if there are two (and if two, the ages of both); if joint, what proportion of the initial joint payout will be provided for the surviving member (there are a few categories to choose from); whether there is any guarantee, etc., and also, whether one selects a straight annuity or a graduated payout, which would start lower, but increase over time.

One would need to enter one's own TIAA account, and look at the choices for your particular ages/choices, to see approximately what you might be able to select in the near term or for the future (or call a TIAA rep who could help you with this).
That will also take into account the precise amounts per vintages of your own contributions.

[Note that although the accumulating crediting rates of more recent vintages vary by months or just a few years, as time goes on, the vintages tend to collapse, and become a single rate for a wider time span. These changes depend upon economic conditions and presumably the performance of TIAA's General Fund, etc. These accumulating rates are not the same as the payout rates for various vintages, for any given payout start date.]

N.b.: I hope I got that correct above. "It tends to be complicated" is a bit of an overstatement. :wink:
But some of us have parents who were very happy to have the payout annuities for decades and decades...

RM
I contribute to TIAA-CREF. It says the current payout is 4.9% for 100% joint survivor. Does that mean the annuity is your accusation x 4.9%? And does that 4.9% change every year? And is that payout for a fixed annuity or variable?

Have 14 years to go until retirement and would be nice to know what I might be doing with my accumulation or at least plan for it now.

I work at University of PA and work with a lot of old timers from other universities. They have always suggested to me ‘stay with TIAA they’ve been good to me’. Most if not all old timers seemed to annuitize for lifetime income. Some told me their university wouldn’t let them contribute less than 50% of salary to TIAA Traditional, had to contribute at least 50% to TIAA Traditional.

User avatar
jjustice
Posts: 513
Joined: Tue Aug 04, 2009 9:58 am

Re: TIAA Annuity Help understanding Contact Language

Post by jjustice » Thu May 21, 2020 9:19 am

macher wrote:
Thu May 21, 2020 5:49 am

I contribute to TIAA-CREF. It says the current payout is 4.9% for 100% joint survivor. Does that mean the annuity is your accusation x 4.9%? And does that 4.9% change every year? And is that payout for a fixed annuity or variable?
The payout chart in the OP has lost its formatting and is difficult to read. Here is a link. Scroll to the bottom of the site.
https://www.tiaa.org/public/investment- ... r=47933632

You will see that the 4.9% payout is for money contributed to Traditional in 2020 that is converted to a joint-life annuity at age 65 and also has a 20-year guarantee. It is 4.9% of the accumulation that is paid out annually. But the percentage varies with your age, the contribution year, whether it is joint-life, and the existence and length of a guarantee. The chart just gives snap shots of the payout percentages for each contribution year for just two particular individual cases.

John

User avatar
ResearchMed
Posts: 10158
Joined: Fri Dec 26, 2008 11:25 pm

Re: TIAA Annuity Help understanding Contact Language

Post by ResearchMed » Thu May 21, 2020 11:00 am

macher wrote:
Thu May 21, 2020 5:49 am
ResearchMed wrote:
Wed May 20, 2020 6:15 pm
oldzey wrote:
Wed May 20, 2020 5:41 pm
Here's a link to the Morningstar TIAA funds forum, with the May accumulation and payout rates for the various flavors of TIAA Traditional: https://community.morningstar.com/t5/TI ... d-p/696813

You can also register to ask questions on that forum - some of the regulars there have been investing with TIAA-CREF since the 1960s.
Keep in mind that the Accumulating Rates are, I believe, the same for all in that same Plan (e.g "RA").

However, the Payout Rates shown there on the Morningstar Discussion are for just one of *many* different combinations of choices of payout terms for annuitizing. Those are a function of vintage combinations (dates of contributions into Trad Ann); age at annuitizing; whether there is just one annuitant, or if there are two (and if two, the ages of both); if joint, what proportion of the initial joint payout will be provided for the surviving member (there are a few categories to choose from); whether there is any guarantee, etc., and also, whether one selects a straight annuity or a graduated payout, which would start lower, but increase over time.

One would need to enter one's own TIAA account, and look at the choices for your particular ages/choices, to see approximately what you might be able to select in the near term or for the future (or call a TIAA rep who could help you with this).
That will also take into account the precise amounts per vintages of your own contributions.

[Note that although the accumulating crediting rates of more recent vintages vary by months or just a few years, as time goes on, the vintages tend to collapse, and become a single rate for a wider time span. These changes depend upon economic conditions and presumably the performance of TIAA's General Fund, etc. These accumulating rates are not the same as the payout rates for various vintages, for any given payout start date.]

N.b.: I hope I got that correct above. "It tends to be complicated" is a bit of an overstatement. :wink:
But some of us have parents who were very happy to have the payout annuities for decades and decades...

RM
I contribute to TIAA-CREF. It says the current payout is 4.9% for 100% joint survivor. Does that mean the annuity is your accusation x 4.9%? And does that 4.9% change every year? And is that payout for a fixed annuity or variable?

Have 14 years to go until retirement and would be nice to know what I might be doing with my accumulation or at least plan for it now.

I work at University of PA and work with a lot of old timers from other universities. They have always suggested to me ‘stay with TIAA they’ve been good to me’. Most if not all old timers seemed to annuitize for lifetime income. Some told me their university wouldn’t let them contribute less than 50% of salary to TIAA Traditional, had to contribute at least 50% to TIAA Traditional.
From my post that you quoted:

"...One would need to enter one's own TIAA account, and look at the choices for your particular ages/choices, to see approximately what you might be able to select in the near term or for the future (or call a TIAA rep who could help you with this).
That will also take into account the precise amounts per vintages of your own contributions
...."

Even for *you*, with *your* given contributions/total, payout would depend upon the *age* at which you started the annuity; whether there is one or two lives being covered, etc...
The software will let you play around with hypothetical starting ages, choices of % to survivor, etc., to see what you'd be getting (under current conditions).

Don't forget: A life annuity is payment planned "for the rest of your life". So in general, the older you are when you start, the more you'd receive each month/year, etc. Likewise, if two lives are covered rather than one? Then a lower starting payment...

This can be confusing if one isn't yet familiar with some of this. In that case, why not call TIAA and ask for someone who can discuss your particular choices if you annuitize. But they could only give you some estimates of "what it might be in the future", as basic rates change with the economy and interest rates, until one actually starts the annuity.
But they could help give you an idea, with info about choices such as "IF you annuitized [with given age, # annuitants, type of annuity, etc.] under *current* conditions, here is what you could expect", etc.

RM
This signature is a placebo. You are in the control group.

crefwatch
Posts: 368
Joined: Sun Apr 15, 2007 1:07 pm
Location: New Jersey, USA

Re: TIAA Annuity Help understanding Contact Language

Post by crefwatch » Thu May 21, 2020 12:23 pm

jjustice wrote:
Thu May 21, 2020 9:19 am
You will see that the 4.9% payout is for money contributed to Traditional in 2020 that is converted to a joint-life annuity at age 65 and also has a 20-year guarantee. It is 4.9% of the accumulation that is paid out annually. But the percentage varies with your age, the contribution year, whether it is joint-life, and the existence and length of a guarantee. The chart just gives snap shots of the payout percentages for each contribution year for just two particular individual cases.
John makes an excellent observation here. TIAA Traditional is a very complicated product, but this is an aspect that is, in general, favorable to long-term investors. If you leave your "old" money in TIAA Traditional alone, it can have a much higher value towards your annuitization amount. You may, or may not find the cash withdrawal (or re-allocation) rules onerous, but they are related to these higher rates for "older Vintages" of your investment. This product was conceived of (in 1918) as a lifetime retirement income accumulation product. (Much has changed since 1918 in the investment world, but the restrictions on TIAA and on its Participants have lingered in the original RA and SRA versions of this product. That is not always a bad thing.)

It's perhaps the least important part of the product, but note that 10-year guarantee and 20-year guarantee are simply (very) popular options that have been selected for display in the periodic notice of current rates. Not only can you choose those two annuity rules, you can also chose (with spousal consent required in some cases) single life without guarantee, half-benefit to Survivor, and half-benefit to Second Annuitant. (Those last two are significantly different.) These are calculated to be "actuarially neutral", so they are simply among the many options you might want at the time of annuitization. It may also be true that two spouse's ages may be more different today than they were in 1918.

As more families have multiple long-time career workers and blended family groups, these options can provide more flexibility in retirement decision-making.

That said, because I'm not working any longer, I had not bothered to read all the rules of the RC and RCP plans. (I only have RA, SRA, and GSRA.) I was surprised to read that the RC minimum interest rules can be changed after ten years. That makes sense from TIAA's point of view, but it is a sea change from TIAA being required to honor my 3% mimimums for the rest of my life, in my institutional plans. Note that TIAA did have the opportunity to freeze [additions to] my 3% money in my IRA account, and future TIAA Traditional additions there only have a lower guarantee. That new contract says:

"The minimum effective annual interest rate to be credited will be reset each March 1. The rate will be set equal to the [January] Constant Maturity Treasury [rate reported by the Federal Reserve] less 0.0125, rounded to the nearest 0.0005, provided ... not less than 1% nor greater than 3%."

Didn't you (OP) ask "Is this a "fixed annuity"?, and did you get a satisfactory answer yet?

User avatar
oldzey
Posts: 1527
Joined: Sun Apr 13, 2014 8:38 pm
Location: Land of Lincoln

Re: TIAA Annuity Help understanding Contact Language

Post by oldzey » Thu May 21, 2020 1:58 pm

OP, since you specifically asked for help understanding the TIAA contact language, I've provided a link below to some TIAA-CREF publications I have collected over the years. Note that through the recent redesign of the TIAA website, some of these handouts are dated and/or no longer available.

https://www.dropbox.com/sh/y08d3qbmvisa ... QrZIa?dl=0

Hope this information is useful to you in decoding some of the TIAA language. As others have mentioned, TIAA Traditional is a very complicated product.
"The broker said the stock was 'poised to move.' Silly me, I thought he meant up." ― Randy Thurman

Topic Author
drzzzzz
Posts: 495
Joined: Sat Sep 22, 2012 9:56 pm

Re: TIAA Annuity Help understanding Contact Language

Post by drzzzzz » Fri May 22, 2020 9:52 pm

Spoke to the TIAA rep today who said in two of my plans I would have a guaranteed 3% for funds that I might invest this year and that 3% would continue for as long as I stay in that product. When I asked about the plan type, he said it was the RC plan - as I spent more time reading their fact sheet, however, it looks to me that after 10 years they can lower the yearly amount credited, but not to less than 1%. I will call him again next week since one of us is not interpreting it correctly. I understand that when TIAA calculates what they are planning to pay next year in 2021 for new annuity money they might set the rate lower, but I still want to confirm that for this year and ongoing years it will be 3% for however long I hold the account.

Does anyone know how TIAA generates the returns they are paying on their annuities? I don't understand how they can continue to pay higher rates than what is generally available from other products.

crefwatch
Posts: 368
Joined: Sun Apr 15, 2007 1:07 pm
Location: New Jersey, USA

Re: TIAA Annuity Help understanding Contact Language

Post by crefwatch » Sat May 23, 2020 10:18 am

drzzzzz wrote:
Fri May 22, 2020 9:52 pm
Does anyone know how TIAA generates the returns they are paying on their annuities? I don't understand how they can continue to pay higher rates than what is generally available from other products.
Unfortunately there is no short answer to your perfectly reasonable question. Here are two threads in the M* board that shed some light on it:

https://community.morningstar.com/t5/TI ... d-p/691278

https://community.morningstar.com/t5/TI ... d-p/685010

It helps to understand that this is an insurance product, not a fractional ownership investment product (I mean, like a mutual fund.) If it makes you uncomfortable to depend on an (even very healthy) insurance company for your retirement, then you have to do enough research to feel better about it. I don't mean to make that decision for you. It helps me that my mother has been collecting her TIAA Trad (and CREF Stock) payments since 1990. And that my first retirement plan in my first job was TIAA. But the investment world is so much wider today that it's reasonable to be ... suspicious. I don't put TIAA in the same class with Mutual Benefit Life! And neither does A.M. Best ratings service.

I use the term insurance product to refer to the fact that large numbers of people are having their predicted lifetime decisions and life spans grouped and used to determine how to invest their money. Under (we hope) the supervision of the NY State Department of Insurance. In a way, it's reassuring that TIAA had a rate guarantee crisis in (approximately) the 1930s, and survived and learned from it. All guarantees were honored. It's also important to remember how many people with the best guarantees have withdrawal restrictions on their TIAA Traditional Accounts. They may post here and there about how onerous those rules are, but in fact, those restrictions are a part of the answer to your return-generation question.

A more "negative" answer to your question might be to point out that retirement (I mean, annuitized) income is only guaranteed to be based on 2.5% in the 3% accumulation rule accounts. And that TIAA Traditional currently pays retireees with lots of "old" money (I mean, in the older Vintages) a lot more than they are legally bound to by their contracts. I don't mean to suggest that their payout setting to one given retiree already in the payout stage is in danger. I mean, rather, that they have the opportunity to lower that payout for future customers if their General Account return no longer makes actuarial sense.

It would be reassuring to know what proportion of TIAA's "fixed annuities" are under which minimum interest guarantees. But that kind of information is only rarely available. I certainly feel that the number of RA and SRA plans is wasting away, with their owners (!).

(I also urge you to look at your last Quarterly Report (personal report, I mean) and see for yourself if it says RC or Retirement Choice!)

Topic Author
drzzzzz
Posts: 495
Joined: Sat Sep 22, 2012 9:56 pm

Re: TIAA Annuity Help understanding Contact Language

Post by drzzzzz » Sat May 23, 2020 11:23 am

(I also urge you to look at your last Quarterly Report (personal report, I mean) and see for yourself if it says RC or Retirement Choice!)
[/quote]

Thanks for the detailed response since I don't currently have any annuities with them to look at a statement, I am pretty sure it is RC per the rep. It's what the gurantee is that I am confused about since the RC fact sheet says one thing and the rep something else.

User avatar
House Blend
Posts: 4719
Joined: Fri May 04, 2007 1:02 pm

Re: TIAA Annuity Help understanding Contact Language

Post by House Blend » Sat May 23, 2020 7:58 pm

drzzzzz wrote:
Sat May 23, 2020 11:23 am
It's what the gurantee is that I am confused about since the RC fact sheet says one thing and the rep something else.
If TIAA documentation says one thing and a TIAA rep says another, then the rep is wrong. Or you are reading the wrong documentation. Re-dial and hope that the next rep you reach is more competent.

I do not have any RC contracts, but I know how to read. What reading reveals is that the RC guarantee is variable. (Nice oxymoron there, if you ask me.)

More precicsely, once per year on January 1, the "guaranteed" rate is recomputed by a formula:
1.25% less than the current rate on 5 year Treasury bonds,
or 1% (if 1% is a higher rate),
or 3% (if 3% is a lower rate).

Since 5 year bonds were earning less than 2.25% back on 1/1/2020, the guaranteed rate on 2020 contributions is 1%.

At the same time, each vintage has the potential for "additional amounts". Those are variable too, but completely opaque and not determined by a formula. Or at least not a formula that TIAA is willing to share in public. For old vintages, these additional amounts are declared on March 1, and remain in place for the next 12 months.

Contributions in May of 2020 are guaranteed to earn 3% until Feb 28 of 2021, but that's only because TIAA has chosen to add an extra 2% in "additional amounts" for that particular vintage. Contributions in June of 2020 may earn something else. In March of 2021, your May 2020 contributions may start
earning something less than 3%. Only 1% is guaranteed.

Other contracts have other rules.
TIAA wrote:For Retirement Choice (RC) Contracts, a guaranteed rate is set each calendar year for amounts remitted in that calendar year. The floating guaranteed rate will be between 1%–3%, inclusive (based on the 5-year Constant Maturity Treasury Rate less 125 bps). The guaranteed rate for each calendar year remittance will be maintained for at least 10 years. The current guaranteed rate is 1.00% for amounts remitted effective January 1, 2020. The account also offers the opportunity for additional amounts in excess of the guaranteed rate. When declared, additional amounts remain in effect for the twelve-month period that begins each March 1.

macher
Posts: 160
Joined: Tue Apr 14, 2020 5:21 pm

Re: TIAA Annuity Help understanding Contact Language

Post by macher » Sun May 24, 2020 7:34 am

crefwatch wrote:
Sat May 23, 2020 10:18 am
drzzzzz wrote:
Fri May 22, 2020 9:52 pm
Does anyone know how TIAA generates the returns they are paying on their annuities? I don't understand how they can continue to pay higher rates than what is generally available from other products.
Unfortunately there is no short answer to your perfectly reasonable question. Here are two threads in the M* board that shed some light on it:

https://community.morningstar.com/t5/TI ... d-p/691278

https://community.morningstar.com/t5/TI ... d-p/685010

It helps to understand that this is an insurance product, not a fractional ownership investment product (I mean, like a mutual fund.) If it makes you uncomfortable to depend on an (even very healthy) insurance company for your retirement, then you have to do enough research to feel better about it. I don't mean to make that decision for you. It helps me that my mother has been collecting her TIAA Trad (and CREF Stock) payments since 1990. And that my first retirement plan in my first job was TIAA. But the investment world is so much wider today that it's reasonable to be ... suspicious. I don't put TIAA in the same class with Mutual Benefit Life! And neither does A.M. Best ratings service.

I use the term insurance product to refer to the fact that large numbers of people are having their predicted lifetime decisions and life spans grouped and used to determine how to invest their money. Under (we hope) the supervision of the NY State Department of Insurance. In a way, it's reassuring that TIAA had a rate guarantee crisis in (approximately) the 1930s, and survived and learned from it. All guarantees were honored. It's also important to remember how many people with the best guarantees have withdrawal restrictions on their TIAA Traditional Accounts. They may post here and there about how onerous those rules are, but in fact, those restrictions are a part of the answer to your return-generation question.

A more "negative" answer to your question might be to point out that retirement (I mean, annuitized) income is only guaranteed to be based on 2.5% in the 3% accumulation rule accounts. And that TIAA Traditional currently pays retireees with lots of "old" money (I mean, in the older Vintages) a lot more than they are legally bound to by their contracts. I don't mean to suggest that their payout setting to one given retiree already in the payout stage is in danger. I mean, rather, that they have the opportunity to lower that payout for future customers if their General Account return no longer makes actuarial sense.

It would be reassuring to know what proportion of TIAA's "fixed annuities" are under which minimum interest guarantees. But that kind of information is only rarely available. I certainly feel that the number of RA and SRA plans is wasting away, with their owners (!).

(I also urge you to look at your last Quarterly Report (personal report, I mean) and see for yourself if it says RC or Retirement Choice!)
I’m trying to understand how this works too because I’d like to know what I’m going to do with my accumulation. Looks like I’ll probably annuities all or a large portion.

Let’s say I was retiring tomorrow, I’m single and have $500k in my TIAA account, $250k TIAA Traditional and $250k Cref Stock.

Let’s say I’m getting $24k a year SS.

I need about $48k for living expenses and discretionary income.

When I read the current payout rates 5.7% and annuitize the whole $500k that’s about $28,500. I’m assuming this is for a fixed annuity?

If I went the variable annuity route how does that work?

crefwatch
Posts: 368
Joined: Sun Apr 15, 2007 1:07 pm
Location: New Jersey, USA

~

Post by crefwatch » Sun May 24, 2020 9:19 am

House Blend, some of us are focusing on the specific fact that the lower bound of the Guarantee for RC is only in effect for ten years at a time. That is a huge change in the history of TIAA Traditional products. It's absolutely routine that vintage time-spans and interest rates get reset every year. It's not a plot, it's a key part of the answer to the question, "How does TIAA afford to pay [these interest rates]?" However, I personally believe that market competition for the business of institutional retirement committees is also involved.

macher, have you registered for online access to your TIAA account? The reason I ask is that your own calculation of a benefits-estimate is a very rough figure. First of all, when you log into your account and look at the TIAA Traditional accumulation, you should see an underlined link that lets you View Interest Rates. This should bring up a popup (enable pop-ups in your browser for TIAA sites if necessary) that shows the exact size and distribution of your current accumulating vintages. You can print this out if you wish. Sometimes it's easier to cut and paste into your word processor. This may give you enough information to distribute your accumulating vintages among the payout vintages.

Second, the online account has a place (I confess that I don't know exactly where it is) for you to request a formal estimate of your retirement payout. This is not an application for benefits, just a request for a formal, binding, estimate. You can do this in a phone call if you are afraid to use the machinery on the website. Note that there are variables that have not been discussed here yet, like your age at the time of annuitization. If your health is good and your children's financial needs are not large, you might even want to know the figure without a 10-year guarantee.

TIAA Traditional is, nominally, a "fixed annuity". In fact, there are small variations in the payouts, but not wide enough to affect your lifestyle budget. If your question about variable annuities is intended to be limited to the TIAA products, you may mean the CREF Variable Annuity accounts. Do you have any money in any of these? I mainly ask because it's equally easy to get a formal estimate of your income in those. Because vintages are not involved, it's closer to accurate to multiply that to imagine a larger allocation just before annuitization. (You can't do that successfully with TIAA Traditional because of the vintage system. For many years, more recent contributions have had lower accumulation and lower payout rates.)

If you look at the Prospectus for the CREF VAs, you will find descriptions of the payout procedures, and, I think, ten-year charts of recent results. It is possible to change the account from which your variable income comes, after annuitization. I consider that an advanced topic. It involves, among other things, whether one made a mistake in the original choice, as well as whether you are market-timing.

I should caution you that variable annuities are not for everyone. If you look back at that chart for my mother, she has had very large increases and decreases in her CREF Stock annuity payouts. That is not a bug, it's a feature! That feature scares many (but not all) retirees. As I may have said before, on balance, she felt she did much better than the many independent elementary school ladies she worked with who chose 100% TIAA Traditional ("fixed") Annuity in retirement/payout. How do you feel about the stock or bond markets going forward?

Edit: clarified term "TIAA' in last paragraph.
Last edited by crefwatch on Tue May 26, 2020 10:12 am, edited 1 time in total.

macher
Posts: 160
Joined: Tue Apr 14, 2020 5:21 pm

Re: ~

Post by macher » Sun May 24, 2020 9:36 am

crefwatch wrote:
Sun May 24, 2020 9:19 am
House Blend, some of us are focusing on the specific fact that the lower bound of the Guarantee for RC is only in effect for ten years at a time. That is a huge change in the history of TIAA Traditional products. It's absolutely routine that vintage time-spans and interest rates get reset every year. It's not a plot, it's a key part of the answer to the question, "How does TIAA afford to pay [these interest rates]?" However, I personally believe that market competition for the business of institutional retirement committees is also involved.

macher, have you registered for online access to your TIAA account? The reason I ask is that your own calculation of a benefits-estimate is a very rough figure. First of all, when you log into your account and look at the TIAA Traditional accumulation, you should see an underlined link that lets you View Interest Rates. This should bring up a popup (enable pop-ups in your browser for TIAA sites if necessary) that shows the exact size and distribution of your current accumulating vintages. You can print this out if you wish. Sometimes it's easier to cut and paste into your word processor. This may give you enough information to distribute your accumulating vintages among the payout vintages.

Second, the online account has a place (I confess that I don't know exactly where it is) for you to request a formal estimate of your retirement payout. This is not an application for benefits, just a request for a formal, binding, estimate. You can do this in a phone call if you are afraid to use the machinery on the website. Note that there are variables that have not been discussed here yet, like your age at the time of annuitization. If your health is good and your children's financial needs are not large, you might even want to know the figure without a 10-year guarantee.

TIAA Traditional is, nominally, a "fixed annuity". In fact, there are small variations in the payouts, but not wide enough to affect your lifestyle budget. If your question about variable annuities is intended to be limited to the TIAA products, you may mean the CREF Variable Annuity accounts. Do you have any money in any of these? I mainly ask because it's equally easy to get a formal estimate of your income in those. Because vintages are not involved, it's closer to accurate to multiply that to imagine a larger allocation just before annuitization. (You can't do that successfully with TIAA Traditional because of the vintage system. For many years, more recent contributions have had lower accumulation and lower payout rates.)

If you look at the Prospectus for the CREF VAs, you will find descriptions of the payout procedures, and, I think, ten-year charts of recent results. It is possible to change the account from which your variable income comes, after annuitization. I consider that an advanced topic. It involves, among other things, whether one made a mistake in the original choice, as well as whether you are market-timing.

I should caution you that variable annuities are not for everyone. If you look back at that chart for my mother, she has had very large increases and decreases in her CREF Stock annuity payouts. That is not a bug, it's a feature! That feature scares many (but not all) retirees. As I may have said before, on balance, she felt she did much better than the many independent elementary school ladies she worked with who chose 100% TIAA in retirement/payout. How do you feel about the stock or bond markets going forward?
How do I feel about the stock abs bond markets going forward?

First I don’t have bonds in my allocation.

My allocation is 65% Cref Equity Index 35% Traditional

Second For US stocks I’m pretty conservative going forward forward. I’m expecting 4% returns.

On my 65% equity index 35% TIAA Traditional in expecting 3.5% going forward.

With my $500k accumulation example I would be more comfortable annuitizing the whole amount and get a 5.7% payout. However the payout % changes.

bighatnohorse
Posts: 238
Joined: Thu Oct 13, 2016 4:04 pm

Re: TIAA Annuity Help understanding Contact Language

Post by bighatnohorse » Sun May 24, 2020 9:56 am

I can only provide you with my experience with TIAA on the phone.
The answers that I got from speaking with their "help" people were different depending on which person was answereing.
You are right to carefully read their documentation.
Take names and jot down notes when talking to their people.

crefwatch
Posts: 368
Joined: Sun Apr 15, 2007 1:07 pm
Location: New Jersey, USA

Re: ~

Post by crefwatch » Sun May 24, 2020 2:19 pm

macher wrote:
Sun May 24, 2020 9:36 am
First I don’t have bonds in my allocation.
My allocation is 65% Cref Equity Index 35% Traditional
Second For US stocks I’m pretty conservative going forward forward. I’m expecting 4% returns.
On my 65% equity index 35% TIAA Traditional in expecting 3.5% going forward.
With my $500k accumulation example I would be more comfortable annuitizing the whole amount and get a 5.7% payout. However the payout % changes.
Just in case you misunderstood me, I wasn't challenging you in any way. I only asked about your return expectations because you expressed a willingness to consider a variable annuity. Risk tolerance is essential when electing a variable retirement income stream. Your mention of 4% is very helpful, because it happens that the CREF Variable Annuities use an Assumed Annual Investment return of 4% for their increases. That means that unless (say ... ) the CREF Stock Account goes up 4% in a year, the annuity payout will not go up. If it goes up less than 4%, or declines, the payout will drop.

You are perfectly correct that TIAA Traditional is not a bond mutual fund. But most holders of that investment count it towards their fixed-income allocation proportion. That's because it has 10-year Treasury LIKE yield, although it has zero interest rate risk, unlike Bond Mutual Funds. Luckily, a fully annuitized TIAA Traditional account has very little fluctuation in payout, regardless of changes in interest rates after the annuitization decision. But, unlike CREF Stock (or CREF Equity Index), it has no prospect of substantial increases, regardless of inflation or anything else. So you are right that the state of the bond market has no effect on a TIAA Traditional payout that is already in progress.

(I should mention that TIAA Traditional technically has a Graded Payout option, which can produce later increases for deferred payouts at the beginning of the payment stream. But prevailing interest rates have been so low for so long that TIAA does not encourage anyone to elect that choice right now.)

I don't remember if you said you have any substantial after-tax savings that will be used for retirement income.

macher
Posts: 160
Joined: Tue Apr 14, 2020 5:21 pm

Re: ~

Post by macher » Sun May 24, 2020 2:58 pm

crefwatch wrote:
Sun May 24, 2020 2:19 pm
macher wrote:
Sun May 24, 2020 9:36 am
First I don’t have bonds in my allocation.
My allocation is 65% Cref Equity Index 35% Traditional
Second For US stocks I’m pretty conservative going forward forward. I’m expecting 4% returns.
On my 65% equity index 35% TIAA Traditional in expecting 3.5% going forward.
With my $500k accumulation example I would be more comfortable annuitizing the whole amount and get a 5.7% payout. However the payout % changes.
Just in case you misunderstood me, I wasn't challenging you in any way. I only asked about your return expectations because you expressed a willingness to consider a variable annuity. Risk tolerance is essential when electing a variable retirement income stream. Your mention of 4% is very helpful, because it happens that the CREF Variable Annuities use an Assumed Annual Investment return of 4% for their increases. That means that unless (say ... ) the CREF Stock Account goes up 4% in a year, the annuity payout will not go up. If it goes up less than 4%, or declines, the payout will drop.

You are perfectly correct that TIAA Traditional is not a bond mutual fund. But most holders of that investment count it towards their fixed-income allocation proportion. That's because it has 10-year Treasury LIKE yield, although it has zero interest rate risk, unlike Bond Mutual Funds. Luckily, a fully annuitized TIAA Traditional account has very little fluctuation in payout, regardless of changes in interest rates after the annuitization decision. But, unlike CREF Stock (or CREF Equity Index), it has no prospect of substantial increases, regardless of inflation or anything else. So you are right that the state of the bond market has no effect on a TIAA Traditional payout that is already in progress.

(I should mention that TIAA Traditional technically has a Graded Payout option, which can produce later increases for deferred payouts at the beginning of the payment stream. But prevailing interest rates have been so low for so long that TIAA does not encourage anyone to elect that choice right now.)

I don't remember if you said you have any substantial after-tax savings that will be used for retirement income.
No problem I didn’t take you were challenging me in anyway.

I would prefer an annuity that might rise a little bit. For retirement planning I was once in the camp where you must inflate living expenses 3% a year. After carefully looking at current expenses and family members who are in their late 70’s + I discovered that living expenses don’t go up 3% a year. The only expense that goes up consistently is property tax and that doesn’t even go up 3% a year. Other expenses like insurance and utility and food go up but not every year. Employer sponsored retirement healthcare doesn’t even go up much in the last 25 years. As far as discretionary spending after carefully looking and asking family members in their late 70’s + discretionary spending goes down.

Reason I’m posting this is because it’s important in my retirement planning and expected returns. I know our SS would go up. So I might be off here but would like at least a 1.5% increase maybe 1% per year in my annuity.

Let’s say I have $500k today and there’s a 5.7% payout that’s fixed right? I mean next year TIAA can lower the 5.7% payout but it will still be fixed or even raise it.

If I could would like my TIAA payout to increase and not stay fixed a little because I’m expecting inflation going forward at about 2% and discretionary spending to go down 1% a year as if I’m retired. Or I might be ok with a fixed annuity.

Like I’ve been contributing to TIAA consistently with employer match without any regard to what happens to accumulation when I retire.

I do have after tax savings but it isn’t substantial it’s basically an emergency fund of 6 months. My job is pretty secure as I’m a union at the university and have lots of seniority top 15% master seniority list, #1 seniority in my department. I’m a lower level university employee compared to most here LOL I’m a bus driver in the transportation department.

crefwatch
Posts: 368
Joined: Sun Apr 15, 2007 1:07 pm
Location: New Jersey, USA

Re: TIAA Annuity Help understanding Contact Language

Post by crefwatch » Sun May 24, 2020 3:37 pm

I'm not aware of a basic TIAA product that guarantees to go up 1 or 2% a year and never go down.

I hate telling other people how to manage their financial lives, but I want to mention that my wife and I (I'm 5 years older) managed to work some natural increases into our income. I retired first, then she retired five years later. For health insurance (several years to Medicare) reasons, we both took early modest pensions from a period of 15-20 years at one past employer. I put off Social Security to 69, which delayed my income, as well as increasing the payment. Unless politicians come after entitlements, she can afford to put off her SS claim to 70 if desired. We've had enough discretionary income to start some small charitable annuities (more of a charity donation, than the "best" investment for an annuity, I know that.) I hope never to annuitize my substantial TIAA holdings. But when each of us is 72, we'll have to start substantial RMDs.

Now, it's likely that we're wealthier than some other retirees, but I'm just trying to sketch out an idea of increasing payouts during the first 20 years of retirement. We both had different careers with good income, it's true. But we also saved a huge proportion of our income. Can you afford to annuitize less than 100% of your holdings when you start your income program?

EDIT: I don't want to overstate the case, but when you annuitize the remaining balance, you and your spouse will be older, which will result in higher payouts using the actuarial formula, even if the interest rate is the same. Of course, the payout interest rate could go down after more years of historically low interest rates! Conversely, some of your money could move into a vintage that pays a higher payout rate because it has been on deposit longer. And if you annuitized the equity annuity (CREF Equity Index) at a later date, the market could decline from the date you wanted to annuitize, which would lower the immediate CREF payout. (The CREF payout would go up in the future if the account goes up over 4% in a year.) But there would also be an effect from increased age when annuitizing. I think you can specify the exact annuitization date when you ask TIAA for a formal estimate.

Sorry, we already know this is "a very complicated product."
Last edited by crefwatch on Mon May 25, 2020 11:02 am, edited 1 time in total.

macher
Posts: 160
Joined: Tue Apr 14, 2020 5:21 pm

Re: TIAA Annuity Help understanding Contact Language

Post by macher » Sun May 24, 2020 3:59 pm

crefwatch wrote:
Sun May 24, 2020 3:37 pm
I'm not aware of a basic TIAA product that guarantees to go up 1 or 2% a year and never go down.

I hate telling other people how to manage their financial lives, but I want to mention that my wife and I (I'm 5 years older) managed to work some natural increases into our income. I retired first, then she retired five years later. For health insurance (several years to Medicare) reasons, we both took early modest pensions from a period of 15-20 years at one past employer. I put off Social Security to 69, which delayed my income, as well as increasing the payment. Unless politicians come after entitlements, she can afford to put off her SS claim to 70 if desired. We've had enough discretionary income to start some small charitable annuities (more of a charity donation, than the "best" investment for an annuity, I know that.) I hope never to annuitize my substantial TIAA holdings. But when each of us is 72, we'll have to start substantial RMDs.

Now, it's likely that we're wealthier than some other retirees, but I'm just trying to sketch out an idea of increasing payouts during the first 20 years of retirement. We both had different careers with good income, it's true. But we also saved a huge proportion of our income. Can you afford to annuitize less than 100% of your holdings when you start your income program?
Can I afford to annuitize less than 100% of holdings when I start my income program?

Depends on how much discretionary spending I want come to think of it.

Just to cover living expenses not discretionary spending I wouldn’t need to annuitize any income today’s dollars because a pension and SS would cover living expenses and there wouldn’t be any debt such as mortgage.

Now if I want $20k a year discretionary spending to use to go on a vacation or 2 etc etc then I would need to annuitize $350k of the $500k ($350k x 5.7%= $19,950).

Hmm maybe I wouldn’t need to annuitize the entire accumulation.

macher
Posts: 160
Joined: Tue Apr 14, 2020 5:21 pm

Re: ~

Post by macher » Sat May 30, 2020 6:50 am

crefwatch wrote:
Sun May 24, 2020 9:19 am
House Blend, some of us are focusing on the specific fact that the lower bound of the Guarantee for RC is only in effect for ten years at a time. That is a huge change in the history of TIAA Traditional products. It's absolutely routine that vintage time-spans and interest rates get reset every year. It's not a plot, it's a key part of the answer to the question, "How does TIAA afford to pay [these interest rates]?" However, I personally believe that market competition for the business of institutional retirement committees is also involved.

macher, have you registered for online access to your TIAA account? The reason I ask is that your own calculation of a benefits-estimate is a very rough figure. First of all, when you log into your account and look at the TIAA Traditional accumulation, you should see an underlined link that lets you View Interest Rates. This should bring up a popup (enable pop-ups in your browser for TIAA sites if necessary) that shows the exact size and distribution of your current accumulating vintages. You can print this out if you wish. Sometimes it's easier to cut and paste into your word processor. This may give you enough information to distribute your accumulating vintages among the payout vintages.

Second, the online account has a place (I confess that I don't know exactly where it is) for you to request a formal estimate of your retirement payout. This is not an application for benefits, just a request for a formal, binding, estimate. You can do this in a phone call if you are afraid to use the machinery on the website. Note that there are variables that have not been discussed here yet, like your age at the time of annuitization. If your health is good and your children's financial needs are not large, you might even want to know the figure without a 10-year guarantee.

TIAA Traditional is, nominally, a "fixed annuity". In fact, there are small variations in the payouts, but not wide enough to affect your lifestyle budget. If your question about variable annuities is intended to be limited to the TIAA products, you may mean the CREF Variable Annuity accounts. Do you have any money in any of these? I mainly ask because it's equally easy to get a formal estimate of your income in those. Because vintages are not involved, it's closer to accurate to multiply that to imagine a larger allocation just before annuitization. (You can't do that successfully with TIAA Traditional because of the vintage system. For many years, more recent contributions have had lower accumulation and lower payout rates.)

If you look at the Prospectus for the CREF VAs, you will find descriptions of the payout procedures, and, I think, ten-year charts of recent results. It is possible to change the account from which your variable income comes, after annuitization. I consider that an advanced topic. It involves, among other things, whether one made a mistake in the original choice, as well as whether you are market-timing.

I should caution you that variable annuities are not for everyone. If you look back at that chart for my mother, she has had very large increases and decreases in her CREF Stock annuity payouts. That is not a bug, it's a feature! That feature scares many (but not all) retirees. As I may have said before, on balance, she felt she did much better than the many independent elementary school ladies she worked with who chose 100% TIAA Traditional ("fixed") Annuity in retirement/payout. How do you feel about the stock or bond markets going forward?

Edit: clarified term "TIAA' in last paragraph.

I have 65% Cref Equity Index 35% TIAA Traditional allocation and current contributions are also going 65% equity index 35% Traditional.

I never thought of TIAA-CREF employer employee contributions as a savings but a pension. I started a year after my university stopped the defined pension plan and after going to some retirement sessions was informed that the 5% employee/ 9% employer match at a somewhat conservative rate of return would equal the ‘old defined benefit pension’ annuitized or close to it.

I remember at retirement seasons saying that a 50% Cref Stock 50% TIAA Traditional estimations a 4.5% return.

The old pension formula is years of service x 1.25% x last 5 years average salary no COLA. I know this formula because my wife stated at the same university 6 years before me and stayed in the pension and gets yearly calculations.


I know lots of co workers who were able to stay in old pension but decided on the ‘new 5% / 9% employer match’ because as I said informed that the new plan would be close to the old pension and ‘it’s my money’.

I also know co workers who have invested 100% of their and employer match to TIAA Traditional because they want a predictable guaranteed “pension”.

A co worker recently retired after 20 years at age 67. He had $200k in accumulations and annuitized the whole amount because ‘that’s his pension’ and is getting $11,400 a year single life. He was getting 4.5% returns average from a 50/50 portfolio. For argument sake if there was still the pension he would be getting $12,100. So it’s somewhat close to the pension but with 50% risk.

Post Reply