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