TIAA Trad Guaranteed Rate Increase

[JS-Elcano]

I have a stable value fund in my 457b that was paying 3.5%, but as of January is down to 3% going forward.

So, I decided to put the money into my TIAA Trad account which is currently paying 6.5%. This is the 'Retirement Choice' (RC) flavor that is not liquid. I was a little hesitant at first because the guaranteed rate for RC is only 1%, but decided to do it nonetheless, in part because it is only 30k that I was looking to transfer.

Today, I checked that the exchange had gone through and saw that the guaranteed rate has changed to 2.8%! The additional amount is 3.7% for a total crediting rate of 6.5%.

My older vintages (pre-2023) in this RC account show the 1%. So it looks like TIAA decided to increase the guaranteed rate for Retirement Choice from 1% to 2.8%. What a nice surprise! Are others seeing this as well? I haven't seen this being announced anywhere.

[tibbitts]

I have a stable value fund in my 457b that was paying 3.5%, but as of January is down to 3% going forward.

So, I decided to put the money into my TIAA Trad account which is currently paying 6.5%. This is the 'Retirement Choice' (RC) flavor that is not liquid. I was a little hesitant at first because the guaranteed rate for RC is only 1%, but decided to do it nonetheless, in part because it is only 30k that I was looking to transfer.

Today, I checked that the exchange had gone through and saw that the guaranteed rate has changed to 2.8%! The additional amount is 3.7% for a total crediting rate of 6.5%.

My older vintages (pre-2023) in this RC account show the 1%. So it looks like TIAA decided to increase the guaranteed rate for Retirement Choice from 1% to 2.8%. What a nice surprise! Are others seeing this as well? I haven't seen this being announced anywhere.

That's surprising to me, and I hadn't heard it before now.

[VA_Gent]

08/01/2022 - 09/30/2022 5.750 % 1.000 % 4.750 %
10/01/2022 - 10/31/2022 6.000 % 1.000 % 5.000 %
11/01/2022 - 12/31/2022 6.500 % 1.000 % 5.500 %
01/01/2023 - 01/31/2023 6.500 % 2.800 % 3.700 %

That is strange. I show the same changes. Perhaps it is an anomaly caused by the maintenance being completed over the weekend, as per the login flash screen notification.

[Katietsu]

Could this be what you are seeing?

From the TIAA Fact Sheet:
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.

[crefwatch]

When I complained to TIAA about RC/RCP paying more than [the original product ... with a longer lock-up! ] RA, their answer included the claim that it costs them less to run an RC account than it does an RA account. (That statement does not appear anywhere in black and white.) Note that TIAA Traditional does not have an SEC-regulated "Expense Ratio", and different flavors are in fact, paid for differently.

While we just went through an unusually low-interest rate period, I think many TIAA Participants focus too much on their account's Guaranteed Minimum Interest Rate. And many less well-informed questioners here mistakenly believe/assume that the minimum is likely to be their maximum. Unless you have an online account login, and click on "Show Interest Rates", you may not even know what you are currently earning.

I feel confident that one of the reasons TIAA created RC/RCP accounts in the form that they did, was because they had to pay 3% to so many people while the 10-year Treasury rate (just to pick a related metric, not because it's enshrined in the machine; it isn't) was below 2% for three YEARS. Being able to ADJUST the Guarantee is quite a boon for TIAA.

[ResearchMed]

When I complained to TIAA about RC/RCP paying more than [the original product ... with a longer lock-up! ] RA, their answer included the claim that it costs them less to run an RC account than it does an RA account. (That statement does not appear anywhere in black and white.) Note that TIAA Traditional does not have an SEC-regulated "Expense Ratio", and different flavors are in fact, paid for differently.

While we just went through an unusually low-interest rate period, I think many TIAA Participants focus too much on their account's Guaranteed Minimum Interest Rate. And many less well-informed questioners here mistakenly believe/assume that the minimum is likely to be their maximum. Unless you have an online account login, and click on "Show Interest Rates", you may not even know what you are currently earning.

I feel confident that one of the reasons TIAA created RC/RCP accounts in the form that they did, was because they had to pay 3% to so many people while the 10-year Treasury rate (just to pick a related metric, not because it's enshrined in the machine; it isn't) was below 2% for three YEARS. Being able to ADJUST the Guarantee is quite a boon for TIAA.

Okay, being able to drop a min guarantee from 3% certainly has its advantages for TIAA.
But why would they *now* need to up it from 1%?

11/01/2022 - 12/31/2022 6.500 % 1.000 % 5.500 %
01/01/2023 - 01/31/2023 6.500 % 2.800 % 3.700 %

If they were already paying 6.5%, who would be likely to complain that it was composed of 1% + 5.5% instead of 2.8% + 3.7%, something most never would have even thought about?

The question isn't why TIAA would want to be able to drop the guar min, but why they upped it now.

RM

[student]

If they were already paying 6.5%, who would be likely to complain that it was composed of 1% + 5.5% instead of 2.8% + 3.7%, something most never would have even thought about?

The question isn't why TIAA would want to be able to drop the guar min, but why they upped it now.

RM

I don't understand either. The only thing I could think of is when they tried to convince institutions to switch to the RC versions, they have clauses in the contract regarding guaranteed rate adjustments. It may be related to what someone posted above "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."

[VA_Gent]

Perhaps TIAA is anticipating rates being lower in the near future and want to prevent churn of this low rate account. I would think that would lower the cost of administering the plan.

[student]

Perhaps TIAA is anticipating rates being lower in the near future and want to prevent churn of this low rate account. I would think that would lower the cost of administering the plan.

I don't understand about the churning part. How to do it as it is illquid (the version that the OP mentioned)?

[JS-Elcano]

When I complained to TIAA about RC/RCP paying more than [the original product ... with a longer lock-up! ] RA, their answer included the claim that it costs them less to run an RC account than it does an RA account. (That statement does not appear anywhere in black and white.) Note that TIAA Traditional does not have an SEC-regulated "Expense Ratio", and different flavors are in fact, paid for differently.

While we just went through an unusually low-interest rate period, I think many TIAA Participants focus too much on their account's Guaranteed Minimum Interest Rate. And many less well-informed questioners here mistakenly believe/assume that the minimum is likely to be their maximum. Unless you have an online account login, and click on "Show Interest Rates", you may not even know what you are currently earning.

I feel confident that one of the reasons TIAA created RC/RCP accounts in the form that they did, was because they had to pay 3% to so many people while the 10-year Treasury rate (just to pick a related metric, not because it's enshrined in the machine; it isn't) was below 2% for three YEARS. Being able to ADJUST the Guarantee is quite a boon for TIAA.

Thank you for the explanation. This makes a lot of sense. I just never had expected the guaranteed rate to increase, end then by so much at once. I have had the RC account for over 10 years and don't recall ever seeing anything over 1%, but also admit that until summer 2020 when I finally sat down and worked my way through the three different TIAA Trad flavors in my retirement accounts I did not check rates regularly, so could have missed it.

Now I regularly login and click "Show interest rates" especially at the beginning of the year when rates may change and vintages get combined.

Having 2.8% guaranteed for the next 10 years plus, very likely additional % amounts, works very well for my fixed AA. My AA is 65/35 and all of the 35% is in TIAA accounts, yielding 5.15% across all accounts and vintages. Besides RC (illiquid) I also have GRSA (liquid) and RA (illiquid).

[JS-Elcano]

Perhaps TIAA is anticipating rates being lower in the near future and want to prevent churn of this low rate account. I would think that would lower the cost of administering the plan.

You cannot "churn" money in the RC-type TIAA Trad account because it is not liquid.

[JS-Elcano]

Could this be what you are seeing?

From the TIAA Fact Sheet:
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.

Yes, this is it. Thank you for doing the reading for me. I should have just have dug into the docs myself

[Katietsu]

Could this be what you are seeing?

From the TIAA Fact Sheet:
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.

Yes, this is it. Thank you for doing the reading for me. I should have just have dug into the docs myself

This was useful for me. I found it right away because I knew that RC/RCP did not have a minimum guaranteed rate but a floating guaranteed rate. However, I had not taken time to understand the details since it has floated below the 3% RA rate guarantee for so much of the recent years since the RC adoption became widespread.

[JS-Elcano]

...

If they were already paying 6.5%, who would be likely to complain that it was composed of 1% + 5.5% instead of 2.8% + 3.7%, something most never would have even thought about?

...

RM

To me it does matter because the additional rate is adjusted frequently whereas the guaranteed rate for RC is set for 10 years for the money you contributed at that rate. So, even if the additional rate goes to 0% in the future I will still be getting 2.8% instead of only 1%. Important difference for me.

[JS-Elcano]

Could this be what you are seeing?

From the TIAA Fact Sheet:
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.

Yes, this is it. Thank you for doing the reading for me. I should have just have dug into the docs myself

This was useful for me. I found it right away because I knew that RC/RCP did not have a minimum guaranteed rate but a floating guaranteed rate. However, I had not taken time to understand the details since it has floated below the 3% RA rate guarantee for so much of the recent years since the RC adoption became widespread.

I didn't know until today that the rate floats between 1-3%. Always just saw the 1% and thought that was the rate just like 3% is for the other flavors

[aristotelian]

I am also showing 2.8% guaranteed for the most recent contributions and 6.5% overall. Excellent news!

[crefwatch]

I do not "know the answer", but I'll offer this comment.

The entire TIAA Traditional rate-setting process is entirely enclosed (from our point, the Participants') in a "black box." It's not essential to know why TIAA took a specific decision because we have no control or influence over it. It's not a lot different from asking, "Gee, when are they finally going to raise the interest rate, now that the Fed has acted again and again?" They did, eventually act, and with surprising vigor.

One possible "explanation" [to speculate about] could be "marketing". They want those employees who have a choice, to choose RC/RCP, and they want Faculty Investment Committees to choose RC/RCP for their menu.

A more complex speculation could be the deposit of interest payments. The less "Additional Amounts" there are, the less interest is deposited in the "current" vintage, and the more is deposited in the "original vintage" of the investment.

But all I really care about is the total in my pocket.

[daleddm]

I have searched for this in my own TIAA account and would appreciate knowing where or how this can be viewed and confirmed (?)

I have a number of RC contracts and this minimum of 2.8% is something that sounds too good to be true.

Yes, I know it's possible as my RA contract has a min rate of 3%

It sounds from the original post that the information showed up (only?) upon confirmation of an exchange/purchase?

THANKS!

[JS-Elcano]

I have searched for this in my own TIAA account and would appreciate knowing where or how this can be viewed and confirmed (?)

I have a number of RC contracts and this minimum of 2.8% is something that sounds too good to be true.

Yes, I know it's possible as my RA contract has a min rate of 3%

It sounds from the original post that the information showed up (only?) upon confirmation of an exchange/purchase?

THANKS!

It showed up not just confirming transfer of funds into RC. If you have RC within your TIAA Trad plans, then you can see it when you log into your TIAA account, then go to the retirement plan with the RC plan in it and next to the big pie chart where it shows the percentage you have in various investment categories within this plan, it shows "View interest rates" under Guaranteed. That will open a new window with all of your TIAA Trad accounts. When you expand them to view all the vintages you can see that the most recent vintage (2023) in RC shows 2.8% whereas the older ones show 1%.

If you can't see the 2.8% yet it could be because you haven't made ant contributions yet in 2023 or because interest has not yet been paid in 2023.

Hope this helps.

[daleddm]

Thanks, I will try that -- I also (just) noted a link in another thread running right now that does seem to show it:

https://www.tiaa.org/public/investment- ... r=47933637

While the interest crediting rate has dropped tp 6.25 (from 6.5), the min rate of 2.8 is there (top).

dm