The Teachers Insurance and Annuity Association, or TIAA, is a fascinating life insurance and annuity company that should be recognizable to any corporation that serves a large number of higher education institutions as we do.
The Teachers Insurance and Annuity Association (TIAA) was founded in 1918 by Andrew Carnegie, who was worried about teachers’ poor pay and difficulty saving for retirement.
Since then, TIAA has transformed from a non-profit organization to an insurance giant, promoting its products to the general public outside of the educational sector over the past 20 years.
In 1952, TIAA launched the world’s first variable annuity, branded the College Retirement Equity Fund, in response to investors who had become tired of receiving consistent, predictable returns from their annuities (CREF).
Since then, the corporation has been referred to as a conglomeration of these two entities (TIAA-CREF).
It was a few years ago that they discontinued the service “CREF” and once again became known as TIAA. TIAA.
Perhaps this name change reflects TIAA’s position in the industry.
Despite the fact that virtually every annuity provider provides a selection of “TIAA, unlike CREF, does not offer a “variable subaccount” option for its two principal products: the TIAA Traditional Annuity and the TIAA Real Estate account.
This week’s blog is all about TIAA Traditional, not the other one.
When it comes to TIAA Traditional Annuities, the most important thing to keep in mind is that your plan may look very different from what your neighbor has.
It’s not the same from retirement plan to retirement plan, among contracts within a plan, and, often, between members in the same contract type!
To begin with, let’s take a look at the similarities and differences between TIAA Traditional Contracts.
To begin, TIAA is a FIXED annuity.
This means that the value of a share remains constant (although the interest may vary over time).
TIAA doesn’t keep your money in a designated account, like you would with a stock or bond mutual fund.
TIAA’s commitment to pay you a set sum in the future is reflected in your account balance, as is the case with most bank accounts. To put it another way, the total assets at TIAA would be dwarfed if all TIAA participants totaled up their TIAA Traditional Balance from their statements.
Even though it may appear shady, it’s quite typical.
In general, you can have confidence in the promises made by the TIAA if they say they would pay you a certain amount of money.
In the same way that annuity firms obtain a “rating,” TIAA does the same.
It’s almost impossible to find a firm with a better rating than theirs.
In a nutshell, ratings analysts are impressed with TIAA’s performance.
For those who want to withdraw money from their Traditional TIAA account, TIAA has a “General Account” that can be used to pay them.
Currently, there are a bit more than $300 billion in assets in this account.
This account has a moderate level of risk.
Assets include medium to high-quality public and private bonds, a few mortgages, and small amounts of commercial property as well as private equity and natural resource holdings.
For whichever type of account you have, your income is paid from it and the interest you earn may be affected by how well this account performs.
TIAA accounts are credited with interest every day.
Every day of the week.
Even on a rainy day “It’s Leap Day this month, so don’t miss out!
TIAA’s ‘intriguingness,’ however, comes from the fact that, depending on the TIAA contract you have, you may earn more or less income and have varied possibilities for “cashing out” or moving your annuity to other investments within your contract.
Your TIAA Annuity’s total interest is composed of two components during the ‘Accumulation Phase’: a Guaranteed Minimum Rate (ranging from 1 percent to 3 percent depending on your contract) and Additional Amounts.
On top of their very impressive base rate, TIAA has consistently added additional payments.
A new rate for each contract is announced on March 1 each year by the TIAA Board of Trustees.
In what way are the rates calculated?
However, it is evident that the company is trying to find a pricing that is both competitive and profitable.
Structures for TIAA’s retirement plans vary from one to the next.
When establishing contracts with each institution, TIAA takes the size of the plan and the broader competitive landscape into consideration (and for products available to the general public).
The following is true for the majority of plans:
Plan participants often contribute nothing to SRAs or GSRAs, which are supplemental retirement annuities that only accept voluntary payments. These concepts are the simplest to grasp. Investors in these schemes typically earn a minimum of three percent on their money. Most of the time, these contracts are 100 percent liquid, allowing participants to shift their money out of TIAA Traditional at any time and to withdraw funds upon retirement without limitation. When UMS signed a group contract with TIAA in 2004, GSRAs were mostly in place. Since that time, contracts have been offered to participants on an individual basis, and SRAs have taken the place of GSRAs.
A different type of TIAA contract called the SRA was implemented in March of 2020 in place of new contributions to SRAs “Choices for Retirement” (RCP). TIAA Traditional in an RCP still has unrestricted liquidity, allowing you to shift your money freely to other investments. With the RCP, the key difference is the level of interest guaranteed: The RCP contracts feature a 1% floor, as opposed to the 3% level of the previous contracts.
Is my money safe in TIAA CREF?
You may rest assured that your money is secure. TIAA’s claims-paying ability ensures that your contributions are safe. Secondly, you receive a competitive rate of return. In addition to a guaranteed minimum rate, TIAA Traditional pays one of the best rates1 available, both while you’re saving and in retirement.
How reliable is TIAA CREF?
To put it another way, it’s one of the biggest companies in the world. It’s not just GM and Citigroup who make up the rest of the Fortune 500: AIG is 13th on the list of the world’s most valuable companies. Before the recent implosion, this list was finalized. With $27 billion in revenue and $1.4 billion in profits, TIAA-CREF is the country’s largest life insurance company. There are hundreds of billions of dollars of assets under management at TIAA-CREF. In the academic, medical, cultural, and nonprofit sectors, it serves more than three million individual customers at more than 15,000 institutions, many of which are staffed by well-paid professionals and have fared better than manufacturing or retail. TIAA-long-term CREF’s viability can be attributed to the solidity of its client base, which suggests a continuous revenue stream.
A++ from A.M. Best, AAA from Fitch, Aaa from Moody’s, and AAA from Standard & Poor’s are TIAA-highest CREF’s possible ratings from the four credit-rating organizations. However, the fact that Moody’s rated Lehman Brothers an A barely a month before it collapsed casts doubt on that conclusion. A triple-A rating was given to the hazardous collateralized debt obligations by all of the rating agencies. Agency research has come under scrutiny because its revenue is tied to the corporations they rate.
This is the equivalent of TIAA-CREF receiving an A grade from four well-known grade inflationists. If TIAA-CREF did not deserve the grades, what does that mean? Not at all. It’s rare for a company to be rated highly by every one of the four rating agencies.
The absence of TIAA-CREF from this year’s headlines and news reports may be the clearest sign of TIAA-long-term CREF’s soundness. It’s been 16 months since TIAA-major CREF’s shakeout, and it hasn’t asked the federal government for a penny. Even so, the corporation maintains that it had only a small amount of exposure to the subprime loans that caused this disaster. TIAA-CREF appears to be significantly more sound than the average financial institution in the United States today.
Why are my TIAA-CREF balances decreasing if TIAA-CREF appears to be sound? Understanding your assets is a prerequisite for this. Your TIAA-CREF investments are annuities only if they are held in a university-sponsored retirement plan. The value of your TIAA Traditional Annuity investment has not decreased, as that account guarantees the principal (the amount you put in) and offers a return.
TIAA-CREF contributors, on the other hand, are likely to have contributed to variable annuities at some point. To describe something as “variable” is to describe it as varying. As the overall stock or real estate market fluctuates, so does the value of these instruments. Whenever there is an uptick in economic activity, they will be back on the rise.
In the meantime, don’t confuse risk with volatility. Volatility in the stock market doesn’t indicate that your entire investment is in danger just because the value of your variable accounts has fallen (risk). If you decide to sell now, while your accounts are low, you will only incur a loss if you lock in the decline. If you have the patience to wait, your current losses may be offset by future gains in the form of paper gains.
Is TIAA a good retirement plan?
Personal Portfolio from TIAA-CREF is a reliable choice for investors who want to invest in socially responsible ways through a financially sound institution. It’s also possible to get all of your financial needs met with the TIAA’s extensive range of products. As long as you’re already enrolled in other TIAA programs, TIAA Personal Portfolio provides a simple option for automating the management of any or all of your investments. As a result, you may also be able to save money on Personal Portfolio or other similar services.
It’s worth noting, though, that TIAA Personal Portfolio has the potential to charge higher-than-average fees when all costs are considered. Inexperienced investors may also find it difficult to come up with the $5,000 needed to open an account. TIAA Personal Portfolio looks to be geared toward educators and other members of the TIAA family, rather than a cheap robo-advisor. Customers that are already loyal to TIAA probably won’t care about this fact. There are, however, a number of robo-advisors that may be compared and contrasted with TIAA’s product for beginners before making a decision.
Can I sell my TIAA annuity?
The minimum payout amount for a Transfer Payout Annuity is either $10,000 or 100% of the balance in your TIAA Traditional account. To withdraw or roll over your TIAA Traditional account balance, you must do it within 120 days after the end of employment, if your employer’s plan allows it (subject to a 2.5 percent surrender fee).
What is the difference between TIAA and CREF?
- A financial institution that primarily serves teachers and their families, it provides pensions, insurance, and investment services.
- The College Retirement Equities Fund (CREF), from which TIAA had previously been a part, was spun off in 2016 and is now an independent company.
How are TIAA annuities taxed?
This means that any earnings removed prior to completing these conditions will be taxed as regular income, which could result in an early withdrawal penalty. There are no withholding requirements for payments made under the terms of a lifetime annuity, a fixed period annuity (one with a term of more than ten years), or a Minimum Distribution Option payment.
How do TIAA CREF variable annuities work?
A variable annuity is an insurance contract that incorporates underlying investments whose value is linked to the success of the stock market. Gains are possible while markets are rising, but losses are possible when markets are falling. As a retiree, you have the option of receiving money for the rest of your life or pursuing several alternative options.
How do I get my money out of TIAA-CREF?
At any time, you can withdraw money from your account. Log into TIAA.org, then select TRANSACTIONS & INFORMATION from the SUPPORT menu. In this area, you’ll find information on how to submit a withdrawal request.
What happened to TIAA-CREF?
Almost a century after Carnegie philanthropist Andrew Carnegie formed the Teachers Insurance and Annuity Association to provide retirement plans for professors, the almost 100-year-old organization has renamed itself. It wasn’t long after that the CREF (College Retirement Equities Fund) program was launched, which allowed academics to invest in stocks.
Fortune’s Susie Gharib spoke with TIAA CEO Roger Ferguson, who explained to her that the rebranding of the company is really just a marketing ploy “an evocative image of something greater That’s what he claims “To convey that the game is also changing, we need a simple, cleaner…more modern name that nevertheless resonates with what we’ve been for the previous century.”
the “According to Ferguson, TIAA’s 5 million customers may now better comprehend how to invest their savings thanks to a new “game.” That’s one of the reasons he chose to keep the TIAA name, rather than a completely new one, for the sake of reassuring his clients “We’ve remained true to our goal, vision, and values.”
What is TIAA-CREF retirement?
For both those who are saving for retirement and those who have already retired, TIAA-CREF accounts provide unique advantages. Employer-sponsored retirement plans can provide their employees with a TIAA Traditional Annuity, which is a guaranteed fixed annuity.
