Henry--
You asked whether annuity income based on Traditional would be affected for retirees.
The answer is a positive "maybe." Here are a couple real scenarios for our TIAA family.
I
annuitized a chunk of Traditional when I retired in 2000. Since
Traditional, when annuitized, is a "participating" annuity this means
that the "additional amounts" other than the guaranteed 2.5 or 3.0 %
(depending on whether you're in accumulation or decumulation) may rise,
stay where they are, or even go down (the latter never has happened to
me).
I knew something was up when in December of '07 I was
notified that my annuitized Traditional amount would go up (it hadn't
for about 3 years) on January 1, 2008. Partly, this reflects investment
opportunity and it's possible some of the hike was a mortality credit
(e.g., more annuitants had died than projected).
If--very big IF--Traditional
can continue to exploit fixed income opportunities (for example, the
spread between AAA corporates and Treasuries had widened tremendously
because of perceived credit crunch) then there's a good chance a
Traditional annuitant will see a further hike of annuity income
payments next December. Time will tell (as usual).
Now,
here's another retiree scenario that applies to my wife's
strategy. She uses the IPRO (interest only option) for
Traditional. So she's skimming dividends, which have gone up,
sideways, and on a couple of occasions down. If Traditional can
continue at 5.75% or higher then in about a year her interest/dividend
payments will rise for the following year.
The dramatic 50 basis
point hike in the Traditional RA/GRA tells me that TIAA found
some golden long-term opportunities (as an insurance co. they are
looking for long-term paper) and made a sizable investment. In
this respect, TIAA must have seen what PIMCO has talked about since the
beginning of the year, and of courrse PIMCO is tied to an insurance
company, Allianz.
Sorry to be so long-winded. Bob U.
