5.75% and 5.00%

:-)

Jack

You got it, Jack!

Tell me TIAA hasn't taken full advantage of its strong cash position!

That's some kinda juice, even if you're in an SRA.  Bob U. 

And a lot better than the REA thus far, and I project through the end of, this year.

Ray
 

What accumulations do those rates apply to? New deposits? What about the so-called vintages? I was always confused about that...

Henry

Good for money deposited in May.  The rate is good until Feb 28, 2009.  The rate for money deposited today, April 30, is 5.25% or 4.50% (again until Feb 28, 2009).

Al 

Got it! Thanks, Al. But I wonder why retirees would be affected by this rate. The new rates apply only to accumulations, right? Would annuity income based on Traditional be affected?

Henry

 Henry,

Retirees can and do have investments in the Traditional Account just like those not yet retired. In an IRA or an SRA or a GSRA one can move funds into and out of the Traditional Account freely. As far as annuities that are in place are concerned, I believe the payout rates change once a year but as I do not have one I can guarantee this is correct. The simplest way to find out is to phone the counseling center and ask.

Ray 

Hi All,

Well now that's a far happier reason to bail on TREA : )

While I still personally expect it to perform significantly better than 6-8% per annum long term, that's obviously getting pretty close to 6-8% per annum long term!

So I'll sleep on it and then most likely go from 80/20 "all" the way down to 40/60, though I wonder if that's still going to be the highest allocation to TREA among us?

All best,

Pete 

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. 

Bob U and Ray,

Thanks for the feedback. I'm still in the accumulation phase, with some funds going to Traditional in my GRA and SRAs.  I understand now that the new rates will apply to those funds over the next year.

Henry

Here's something for the already retired. We can't take advantage of the new rates unless we are contributing new money. If we move out of TIAA Traditional and then back in; there will be no change in the rate. There would only be a change to the new rate if we wait 120 days to reinvest in the TIAA Traditional account.

There is a way however, which I may use. It's a bit complicated, and I'm not positively sure yet, but I'm pretty sure. I spoke to 3 different Wealth Management Advisors today, and got 3 different answers, but you can usually tell the difference if someone knows what they're talking about, or if someone is just shooting in the dark.

Sy

There is one very small use of the new rates for the "already retired but not annuitized."  To the extent that old money earns more than the contractual minimum, the extra interest becomes new money. 

For example, you deposited money in the past that is earning 5%; your contractual rate is 3%.  The extra 2% (or one month's worth of the extra 2%) is deposited into the current vintage and will earn the 5.75% (assuming an RA, not an SRA).

(I have looked this up before, but don't want to do it again - this is from memory).

Al 

Al,

I believe you're correct.  See Calculating TIAA Traditional Annuity Earnings.  This is a quote from page 5, "What does Roll Foward Mean."

This means that interest — above the guaranteed amount (usually 3%) — credited to an accumulation in a certain vintage is “rolled forward” and treated like a new contribution. Thus, the additional amounts credited are applied to the newest or “current” vintage, rather than the vintage containing the accumulation on which the additional amounts were earned.

- Alec

[quote user="raywax"]In an IRA or an SRA or a GSRA one can move funds into and out of the Traditional Account freely. [/quote]

When one holds the TIAA Traditional Account in an IRA, is it similar to holding a money market fund in terms of liquidity restrictions?  [Sorry for my dumb question]

Thanks :) 

Ludwig Van Girl--

Yes, or it was when once upon a time I held Traditional in an IRA.

The price you pay for the greater liquidity is the 75 basis point difference between IRA/SRA and GRA/RA.   Bob U. 

In many instances the IRA TIAA Traditional account is superior to Money Market. Like now, for example, because the interest rate is double that of money market.

An important difference is that if you wish to use the Traditional to make transfers to other funds, you're allowed 3 transfers out per month, while Money Market has no restrictions at all. There are also new restrictions on what they may consider "timing" or excessive trading. The company considers your timing as destructive, while theirs is just fine.

Getting money into an RA that earns the .75% higher rate is much more difficult than I thought. The WMA that approved the method I was going to use, called back apologetically to tell me it wasn't possible. Basically, for it to be acceptable, it has to be done institutionally (it filters through your employer), or after-tax money into a Self-remitter account (which is the equivalent of an RA).

Sy

Apparently this is not well understood. But the restriction Sy mentions is no longer in effect in any fund/account; it has been replaced by the new rules which are a bit confusing but are laid out in the Prospectus for each fund/VA. But as there is no Prospectus for the Traditional that may be why Sy is confused.

I assure you that there are NO restrictions on the number of moves from the Traditional Account in an IRA! I am quite sure this is also true for such moves from a SRA and a GSRA. Thus I would argue that the Traditional Account now is superior to the MM account.

I have moved a large amount of money from the REA to the Traditional Account in my IRA and I also have been slowly but quite consistently moving funds out of the latter into a number of mutual funds and I have made many, many more than three in a month!

The "glitch in T-C software" post I made was about the old rule. While it had changed no one had removed the old three move per month code out of their computer program and that was why I posted my note.

I any case THERE ARE NO RESTRICTIONS ON NUMBER OF MOVES FROM THE TRADITIONAL ACCOUNT WITHIN AN IRA!

Ray 

[quote user="raywax"]But as there is no Prospectus for the Traditional that may be why Sy is confused.[/quote]

This has been frustrating me for weeks.  I spoke to a TIAA-CREF representative and asked if TIAA-CREF could send me a prospectus for the Traditional with all the rules spelled out in black and white, since I got the impression that holding the Traditional in a GRA has rather onerous liquidity restrictions, so I was nervous, esp as I'm a novice investor who typically considers annuities to NOT be like money market funds.  But, I never got the prospectus, and I've been unable to find anything in writing that clearly states the lack of liquidity restrictions when the Traditional is held in an IRA.

The rules for the Traditional Account in a GRA are NOT onerous when compared to that in an RA. (I would not call either set of rules onerous but that was the post). The advantage of a GRA over an RA is that one CAN withdraw one's Traditional Account investments out but I believe it can only be done within 90 days of retirement. If this is of interest, do phone the counseling center and ask about it. There is a charge for this but it completely by-passes the TPA rule in place in a RA Account.

Ray 

Check your T-C contract; the rules for the Traditional Account may well be in there.

Ray 

 TIAA Traditional GRA Rules

Annuity Income Options: Fixed period annuities are available from TIAA Traditional, for periods of 5 to 30 years only after termination of employment and subject to employer’s plan.

TIAA Traditional transfers: In 10 annual payments (the total amount to be transferred must be a minimum of $10,000 or the entire balance of your TIAA accumulation) through a Transfer Payout Annuity (TPA).  Or within 120 days after separation  from service with a 2.5% surrender charge for accumulations greater than $2,000.

Ray,

Thanks for the new info about no longer limiting TIAA traditional to 3 moves per month. That's a relief, because I'm very gradually building up a diversified portfolio.

There's still the restriction on moving out of TREA more than once per quarter, though. (Tell me they've changed that as well, please.)

Sy

No, the restriction in the REA to one move from it remains at one per quarter.

Ray 

In case anyone is wondering why there is not prospectus for TIAA traditional, see Section 3(a)(8) of the Securities Act of 1933:

a. Exempted securities

Except as hereinafter expressly provided, the provisions of this title shall not apply to any of the following classes of securities:...

8. Any insurance or endowment policy or annuity contract or optional annuity contract, issued by a corporation subject to the supervision of the insurance commissioner, bank commissioner, or any agency or officer performing like functions, of any State or Territory of the United States or the District of Columbia.

In any case THERE ARE NO RESTRICTIONS ON NUMBER OF MOVES FROM THE TRADITIONAL ACCOUNT WITHIN AN IRA!

Ray,

I don't remember if it has been discussed, but if you happen to move any amount back into the Traditional account, and then move any amount out of the Traditional again within a 60 day period; SLAM! the door is locked. You're blocked! You are reclassified as a dirty old timer! (Even if you're a young girl pianist).

Sy 

Yes but that was not the topic being discussed. Note it is AFTER the second move in the 60 day window that is critical. For the moment, this is not a problem for me as I am building both ILB and mutual fund holdings. What is not clear is whether this rule applies to  more than one Account. If it does it makes life very difficult for those of us like myself who have several active accounts.

Ray 

" What is not clear is whether this rule applies to  more than one Account."

Ray,

I spoke to a couple of WMAs yesterday and received a couple of different interpretations. Each WMA was adamant that his/her interpretation was the correct one. (Even though one had to put me on hold while she consulted an "authority on the subject".) Incidentally, the authoritative interpretation was different than yours, although the second person agreed with your definition.

Sy

Sy,

I do not care what N number of WMAs have said as the proof of the pudding is in the eating and I continue to make transfers from my Traditional Account and they do go through without a hitch! There is no question - what I tell you is what is. Now if you think it is only for me, well  you can think that but I certainly do not!

Ray 

PS, there is no penalty even if I am wrong as your transfers will not be executed and in the morning you will have a note to that effect. But this will not happen as that glitch was fixed when it happend to me. So go ahead and make four transfers from the Traditional Account in a SRA or IRA and it will work (I make mine from my IRA so I will qualify it working in an SRA; it should but .....!).

Ray 

"Now if you think it is only for me, well  you can think that but I certainly do not!"

Ray,

I don't think that. I'm just pointing out how screwed up things can possibly get, because of poor training of their counselors and mishandling in the accounting department. When rules change, people have to be careful of what they're told by the counselors (or call them advisors if you like). I went through a bad time with them for four months last year when 10% of my portfolio disappeared when I consolidated my IRA accounts. When I finally got it worked out after I had to apply a lot of pressure, it turned out that the consolidation was unnecessary because it was based on incorrect information given me by three advisors (ducks) in a row!!

I wanted to put it all back where it originated after that, but it would have been a nightmare, so I left well enough alone.

Sy 

"So go ahead and make four transfers from the Traditional Account in a SRA or IRA and it will work (I make mine from my IRA so I will qualify it working in an SRA; it should but .....!)."

If you noticed; when you're making a transfer from the Traditional account in an IRA (which I did today), it still warns: ONLY 3 TRANSACTIONS ALLOWED OUT OF TRADITIONAL ACCOUNT IN ONE MONTH. (Not the exact wording.)

Sy

Sy,

I admit, you have good reason to be cynical about T-C rules and WMA advice. It is a shame the rules are as complex as they are but there is no excuse for the bad advice. You really should send a letter outlining your unfortunate history to Ferguson and suggest he do something about the quality of advice the WMAs distribute.

Ray 

Sy, I do NOT get that warning! I cannot explain why you do and I do not but I don't and my trades execute.

Ray 

Gentlemen,

In several of the above posts, it has been mentioned that there may be some restrictions on moving $$ in and out of the TIAA Traditional Account invested via SRA's and GSRA's.  In one post it is mentioned that if one moves $$ from the TIAA Traditional and then back into TIAA Traditional, one does not get the new rates unless some conditions are met.  Can anyone specifically address the following situation?

I have divided my TIAA Traditional assets between my RA and my SRA in order to obtain exposure to both long-term and short-term bonds.  I have accepted the lower yield in my SRA in return for the privilege of being able to move funds from the TIAA account when I wish.  My question is this.  My funds currently invested in TIAA Traditional in my SRA are earning a lower interest rate than what is now being credited for new funds.  If I move funds from TIAA Traditional to another account (e.g. money market), can I move them back into TIAA Traditional at the new rate, or is there some waiting period or other restrictions on such movements?

 Thank you in advance for any information you can provide.

 
Philip
 

I have been disturbed by some of the posts here about the interest rate one earns on the Traditional Account after a move. I do not believe what has been posted is in fact correct so I phoned in and spoke with a WMA a few minutes ago. Keep in mind that the fact that she and I agree does not mean we are right but I do believe we are.

Under current rules you can moved Traditional Funds out of the SRA to another account and move them back after 24 hours. If you do that and you only move some Traditional Funds from your holding of this account in your SRA, there is a catch; the oldest funds, which MAY have a higher rate than currently being paid, are moved first. Having said that you can move the funds out and later move them back. When moved back the funds do earn the POSTED INTEREST RATE; the guaranteed rate does not entering into the equation.

Now, she did say the above is the case under existing rules but that T-C is considering placing some new rules in place. When asked what the rules under consideration were, she did not know. She did mention the change from the three moves per month to the 60-day rule for equity investments that I have posted elsewhere but neither I nor her know what the new rules may be or when they will be placed in effect, if ever.

Call in yourself; see what they tell you. Read the relevant part of your post and ask an answer for it. The counseling number if 1 8000 842 2776. 

Ray 

[quote user="PhilipT"]I have divided my TIAA Traditional assets between my RA and my SRA in order to obtain exposure to both long-term and short-term bonds.  I have accepted the lower yield in my SRA in return for the privilege of being able to move funds from the TIAA account when I wish.[/quote]

Philip, I don't have the personal experience to comment on the specific question you asked.  But I wanted to separate the two sentences quoted above from your statement.

The second sentence makes good sense.  People who feel hemmed in by the TIAA Traditional withdrawal restrictions would be happier using non-RA accounts, all other factors being equal.

The first sentence is not correct.  While there have been many times when some older vintages of TIAA Traditional are paying lower interest than some newer vintages,  it is not correct to think of an SRA account as providing "exposure" to shorter-term bonds. I think it is an illusion to see the difference in interest rates between RA and IRA accounts (which is a fixed number for years at a time) as a response to short-term interest rates.  There is only one "General Account" of the TIAA Insurance company, not two accounts, one for each group of TIAA Traditional Annuities.  And it's not a Bond Mutual Fund, in any case.

I do not have any special insight into how the TIAA Traditional rates are set.  But I think the difference between RA and IRA rates is probably more related to such issues as interest rate volatility, liquidity needs, and trends in investor behavior.  And we are never going to learn exactly how either the absolute rates or the difference are decided upon.

Isn't the most important factor in the "riskless" portion of your portfolio the actual amountof interest your earn?  That is, someone who has sleepy old money in the Pre-1992 vintage of TIAA Traditional RA (5.5%) is still earning more than you will be if you manage to shift your IRA funds out and back into the 5/1/2008 to 5/31/2008 Vintage of TIAA Traditional IRA (5.0%).  I'm sure you can find a one or two-year period when this was briefly untrue.  But that Pre-1992 RA has been doing better than the corresponding IRA money for 2008-1992=16 years or more.

We're talking about a long-term retirement account here. 

Tim

the oldest funds, which MAY have a higher rate than currently being paid, are moved first. 

[/quote]

If so, this would be a change.  When funds are withdrawn from a SRA account, the amount withdrawn from each vintage is based upon the percentage of your funds that you have in each vintage.

So, if your average "weighted" interest rate in your SRA is less than the current rate, it would make sense to withdrawal all funds and then reinvest at the current vintage.  I made such a move back in 2000.

Note that your average return over all vintages would have to be less than 5% in order to make this move profitable.

Dick 

Dick,

It would do more if the oldest funds are taken out first. It would, for those who have been in the system more than 22 years, take out the grandfathered funds that do not require RMD withdrawals at age 70.5. This is probably not a great sum because most of the accumulation in the Traditional Account probably comes through the compounding effect over the decades. Also, all the grandfathered funds provide is another 4.5 years of accumulation without the need for RMD withdrawals as they are subject to RMD at age 75.

Ray 

"Under current rules you can moved Traditional Funds out of the SRA to another account and move them back after 24 hours. Call in yourself; see what they tell you."

Right on, Ray!

I called in today and got a knowledgeable WMA. All of a sudden, the answer is different! That is; we are still able to transfer Traditional to Money Market (or any other fund), then back again the next day to Traditional to receive the new higher rate. She did point out that there is the possibility that the newer vintage may not be treated as well as the older vintage in the future, but nothing is definite about that.

Anyway, there is no waiting period, as I was misinformed by several TIAA-CREF counselors earlier this week.

Sy

Ray, Tim, Dick, and Sy,

You have very directly answered my question.  Thank you.  I have long followed this discussion group and have learned from many of your previous posts as well as those of other regulars on this board.   

 
Tim, you are correct in that I was not accurate when I wrote

"I have divided my TIAA Traditional assets between my RA and my SRA in order to obtain exposure to both long-term and short-term bonds." 

Let me know whether the following statement which more accurately reflects my approach seems logical to you, given what we know about TIAA Traditional.  I came of "financial age" in the late 70's during the height of stagflation, and because of the pounding that long-term bonds had during that time, I have been cautious about holding them.  Of course, this limited my gains during the great extended rally in long-term bonds as inflation and bond yields subsided during the 80's and 90's.  That being water under the bridge, I am now concerned that our country's massive debt and "imbalance" of international payments will ultimately result in higher long-term bond yields.  I thus attempt to divide my fixed income assets between long-term bonds and other investments which are not as sensitive to inflation and rising interest rates.  I view an investment in the TIAA Traditional account within an RA as being similar (although not identical) to buying and holding long-term bonds until maturity, and a portion of my fixed income assets are invested there within an RA.  On the other hand, funds invested in the TIAA Traditional account within an SRA can be withdrawn at any time without loss of principal even if interest rates rise, and such funds could be invested in a higher yielding MMF should we experience a jump in inflation and interest rates.  In this regard, I tend to think of the SRA as being similar (although not identical) to a money market fund or an ultra-short bond fund (hence my inaccurate reference to "short-term bonds" in my previous post).  In my mind this provides me with an investment vehicle for a portion of my fixed income assets which currently pays more than a MMF, which will not be adversely affected by a jump in interest rates, and which will allow me an immediate exit without loss of principal if other investments look more promising.  I view the difference in rates between the RA and SRA investments as the price of this flexibility and potential inflation protection.  If you or others have any comments on this line of reasoning, I would appreciate hearing them.

 
Thanks, Philip
        

Your description of how you see and use the Traditional Account in your SRA is fine. It will do what you want. As you may know from my recent posts I have moved quite a bit of money out of the REA in my IRA to the Traditional in the IRA because I believe the latter will outperform the former through the remainder of 2008. What I am doing in my IRA can be done in your SRA - you can move into the Traditional and out again as you see fit. It is in my opinion superior to a MM account because it has the guaranteed rate. There indeed may be times, recently was one, when a MM may pay more than the Traditional Account in the SRA and so if that does happen you can move from the latter to the former - just as Sy had moved from the REA to the MM. You have a great deal of flexibility with little restriction on your funds.

However, note the WMA told me that they (T-C) are CONSIDERING some changes in the rules affecting moves from the Traditional in an SRA, IRA and GSRA. They may or may not be implemented. But be watchful and before you make any move phone into the counseling center and check if any rule has changed.

Ray 

"just as Sy had moved from the REA to the MM"

No, Sy moved his REA to Traditional; then reconsidered and returned 10% to REA, thus blocking his escape until July. He also moved his Traditional yielding 4.5% to Money Market, followed by an immediate move back to Traditional yielding 5%.

Sy wishes that he wasn't still so optimistic about REA and had left all of his REA in Traditional.

His Traditional round trip was discouraged by incorrect information provided by several poorly trained TIAA-CREF counselors, delaying the move by a week.

Sy is now very gradually acquiring diversified equities, but is nowhere near the quantity needed to consider himself truly diversified.

Sy

Phil,

I like your reasoning about how to use a combo of TIAA TRAD within both an RA/GRA and an IRA/SRA. 

As you doubtless know, we do now have a steepening yield curve, and TIAA TRAD (in whatever form) needs to go long because of its long-term liabilities (e.g., future retirees' needs).  Higher rates at the long end are precisely what TIAA desires, and as I've said at this site before during my career (now over) TIAA TRAD, in the RA guise, kept ahead of inflation.

Here's a link to the latest fund facts on TIAA TRAD where, if you look at the second page of "Fund Facts" (you'll have to download) , you can get some sense of what TIAA TRAD delivers versus inflation.  http://www.tiaa-cref.org/performance/retirement/profiles/tiaa_traditional_annuity.html

On the other hand, so long as TIAA TRAD, in an IRA/SRA, provides greater liquidity (for a price!) it has a good chance of outperforming a MM fund, again simply because it can go long--e.g., risk/reward.  Even with the 75 basis point difference between RA/GRA and SRA/IRA you still have an excellent chance of meeting or exceeding a MM rate.

However, if you are greatly (and understandably) concerned about inflation, might you not want to divert some monies toward TIPS or I-bonds, or some (less effective) proxy like a TIPS fund?

In any event, I wish you every success with your perfectly comprehensible strategy.  Bob U. 

Ray, Sy and others,

As some of you may know, I transferred all of my TIAA holdings to the TIAA Tradional account early this year at 4.5%.  Earlier this week, I switched out and then back into the account, and I can confirm that I'm now getting the new 5.0% rate.

I had previously spoken with a WMA, and she told me that it was possible to make the transfer to get the new rate.  She said that she had received an internal email that spoke to this issue, saying that although TIAA didn't encourage switching, there were currently no restrictions on doing so.  She also said the email stated that the policy was now "under review," which she interpreted as meaning that it was possible that a 90 or 120 day restriction might be placed on such transfers in the future.

Jared

Hi Bob,

Thank you for your comments.  I do have some TIPS (TIAA-CREF VA) as part of my fixed income AA, although I am not adding further to them at this time because of what I perceive to be abnormally low real rates of return. 

 I have a question about TIAA Traditional's ability to keep up with inflation.  The fund facts show that TIAA Traditional has outpaced inflation over the past ten years, and as I recall, back into the early 90's when I first started investing with them.   That entire period of time, however,  was part of  a long-term downward trend in long-term interest rates.  One would expect that investment in early vintages at relatively higher rates during this period  would  do well as interest rates generally declined.  I am a bit concerned that the upcoming period could look more like the 60's and 70's when long-bond rates were generally rising.  If so, I am not so confident that the return from early vintages in such a period of rising rates would keep pace with inflation.  I do understand that any dividends above the 3% guaranteed would earn rates at new vintages which would over time protect one's overall return somewhat from the effects of inflation.  I will only be making further contributions through my RA for several more years and do not have the luxury of long-term averaging to ride out any trends in interest rates.  Do you have any information as to how TIAA Traditional performed during the late 60's through the 70's?  

 
Phil 
 

I have records going back quite a while but not to the beginning of my investments with T-C way back. My records show I earned as much as 11% on my Traditional Account, presumably then in my RA. However, I do believe the Traditional Account paid a higher rate of return, perhaps as much as 15%. I do not know its payout rates compared to the inflation rate. That might be a bit tough to say even with data as the measure of inflation has changed over time and that is a complex and controversial topic which I do not want to get into. In general I would say it did very well in hedging inflation but I do not have comparative statistics to back this opinon up with "facts." Again how you measure inflation can get to be very muddy and though I use to follow the topic I have not done so in the past few decades.

I do believe inflation was at its peak in the 70s and that it was not that much of an issue in the 60s. There is a lot of data on inflation in the Bureau of Economic Research - at least that use to be the name of the Office within the Treasury that dealt with it; you can go look for it if it is of that much interest to you. It no longer is so for me. 

Ray 

Phil, this (Your 5/9/2008) is not an easy question to answer in a way that is helpful to everyone and comparable to other "performance" figures people might look at.  Luckily, I'm not licensed, nor do I work for TIAA, so I don't have to meet any standards(!)  This table is from a 4/86 bound pamphlet Some Thoughts about the CREF Transfer-to-TIAA Option.  (That title doesn't make much sense to anyone who became a participant after 1987, I'm sure.)  But I think it substantially answers Phil's last question.

This chart shows "Total Interest Rate (Including Dividends) Credited on New Premiums and Funds Transferred from CREF to TIAA Annuities Issued on and after July 1, 1941"

Another version of this data, which is harder to scan, OCR, and post shows Average Annual Compound Rates of Return Over Specified Periods for each Dollar of Accumulation at Start of Period, TIAA and CREF Stock Account.  I chose to work on the table below because we seem to be talking, for the moment, about the short-term figure of "What rate do new dollars get in TIAA Traditional?" 

(From TIAA-CREF document F3334(4/86), Page 9)

While I think it is misleading to quote only some jumbo figures of a single year, the same booklet has the Vintage chart we talk about so often here, for March 1, 1986 through February 28, 1987 - because of the date of publication of the booklet.  It reads:

Premiums prior to 1979: 9.5%

Prem & Addl Amts Credited 1/1/79-12/31/81: 10.5%

Prem & Addl Amts Credited 1/1/82-12/31/1984: 11.75%

Prem & Addl Amts Credited 1/1/85-12/31/85: 11%

Prem & Addl Amts Credited 1/1/86 and after: 10%

Tim

Edit: See also Chuck's chart at the very end of Conversation # 1142 

Edit 2: Link above "Conversation 1142 CORRECTED" tim 

Tim,

Wow, what a gold mine of data.  This will take some time to study and digest. 

However, I do have some first impressions which others may be able to either confirm or disagree with.  It seems likely that during long periods of rapidly rising interest rates (e.g. 1972-1982), the interest rate paid on earlier vintages is likely to lag behind the interest rate paid on later vintages resulting in lower returns on previously invested money.  For example, I suspect (cannot know for sure) that in 1982 when new money was credited at 14%, assets in the 1978 vintage were earning nowhere near that, perhaps only  the 7.75% that had been credited 4 years earlier when the money was added.  This is quite a difference.  While the vintage system allows principal to remain stable and is a benefit to those who invest when rates are high, it does seem that one may experience subpar earnings on previously invested money during times of increasing rates (this is not too surprising as this is an investment in long bonds). 

There seem to be two factors which somewhat ameliorate this.  The first (which is not accounted for in Tim's table) is that I understand that dividends paid above the 3% guaranteed rate are invested at the then current rates, so during times of increasing rates the dividends at least earn higher interest (similar to dividends on a long bond held to maturity).  The second factor is evident in the second chart which Tim presented which indicates that by 1986 (when rates for new money were 10%), all vintages prior to 1979 were earning 9.5%.  So it is not like someone who invested money at 5% in 1970 was still earning that low amount in 1986.  Somewhere along the line, the bonds underlying each vintage must mature and be reinvested at the then current rate (which would be higher during times of increasing rates).  I presume that the lag in rates is a function of the duration of the bonds underlying each vintage (although they probably aren't actually held in separate bins). This is consistent with the mirror image situation in which according to my current statement, all vintages prior to 1994 are now earning 5.5% although for many years they were initially earning much higher rates at the time the money was put in.  Those higher yielding bonds have now matured and the proceeds were reinvested at lower rates.  

So my takeaway message is that one is likely to earn subpar returns on "old" money invested in TIAA Traditional at lower rates during extended periods of rapidly rising rates.  This is similar to what one would expect for an investment in long-duration bonds held to maturity.  There are at least 2 factors which ameliorate this to some extent (and TIAA may well be actively managing their holdings to further ameliorate this if they are successful).  How painful this situation would be is likely to be a function of how fast rates are rising and how long they continue to rise.  I need to give some thought to how much the pain would depend upon where one was in his/her investing lifetime.                 

Thanks again, Tim, for taking the time to post (or repost) these data.  Also I am not particularly facile with navigating these forums (?fora?), and I couldn't find conversation 1142.  Is there an easy way to do this?

 Philip
 

Philip, I'm glad you found my (hard to read) table useful.  I thought I had cleverly posted a hot link to Conv. 1142, but it was wrong. I've fixed it now, but you can also click here:

http://socialize.morningstar.com/NewSocialize/forums/thread/167343.aspx

The answer to your question is that when I "Mouse Over" the Search box on every M* page (Where it says "Enter topic"), a dropdown offers "Advanced Search".  If you select that option (the last of three), and wait for the page to load fully (a booby trap of their molasses server...), you can check the box (upper left) that offers a search by thread number, and select TIAA-CREF in the other box.  In this case, you can just click the link above.

Tim