Be careful when you read this and do not misinterpret what I am saying; it can be confusing but it can also be important - to some at least. Also keep in mind this is based on my situation and experience with T-C and this goes back to Fall of 1969 when I started with a T-C based retirement plan.
For most of the 31 years I was employed under that plan I contributed 25% of my university employer's retirement contributions to the Traditional Account and as a result I accumulated a substantial investment in the Traditional Account in a RA. Also understand that a few years ago, I created two TPA's which transferred of all of my Traditional Funds in my RA into the two TPAs. It was necessary to create two TPAs because I had funds invested in the Traditional Account in my RA that fell under different tax codes. It is the large TPA, which goes back to 1969, where my "old" vintages exist with their associated surprisingly high payout interest rates lie. Finally understand that when one creates a TPA, the Traditional Account vintages and associated payout interest rate transfer in tact and in fact they ARE FROZEN FOR THE LIFE OF THE TPA - nine years and one day.
For this to apply to the reader you would also have to have had a long history of contributions going into the Traditional Account. If you did you likely remember there were years when the Traditional Account earned interest rates of 11% and more. Did you know that those vintages and interest rates (to a degree) still exist? They do but only as payouts derived from an annuity based on the annuitization of Traditional Funds with such a long history of accumulation.
What are payout interest rates? Well, consider the interest rate table below which I copied and pasted from within my own account (you have to be within your T-C account to access this table).
| Interest Rates for the TIAA Traditional Annuity |
|---|
| Accumulating Stage Interest Rates1 |
|
From 03/01/08 to 02/28/09 |
|---|
| For Premiums Applied2 |
RA, GRA & RC |
SRA, GSRA & RCP,
IRA & Keogh |
|---|
| 07/01/08 - 09/30/08 |
6.00% |
5.25% |
| 05/01/08 - 06/30/08 |
5.75 |
5.00 |
| 10/01/06 - 04/30/08 |
5.25 |
4.50 |
| 04/01/06 - 09/30/06 |
5.50 |
4.75 |
| 01/01/03 - 03/31/06 |
5.00 |
4.25 |
| 07/01/02 - 12/31/02 |
5.50 |
4.75 |
| 01/01/02 - 06/30/02 |
5.75 |
5.00 |
| 01/01/01 - 12/31/01 |
6.00 |
5.25 |
| 01/01/00 - 12/31/00 |
6.25 |
5.50 |
| 01/01/94 - 12/31/99 |
5.75 |
5.00 |
| Pre-1994 |
5.50 |
4.75 |
| Payout Stage Interest Rates for Lifetime Annuities Issued During September 20083
|
| For Benefits Arising From: |
Interest Rates |
| 2003 - 2008 vintages |
5.25% |
|
| 1992 - 2002 vintages |
6.00 |
|
| Pre-1992 vintages |
8.25 |
Most people who access the above table are interested in the first set of interest rates, those which apply while you are in the accumulation stage. The Payout Interest Rates I am talking about are the second set in the above table. Note that the table only shows three vintages; not also however, that the earliest has a payout interest rate of 8.25%.
As useful as the second set of vintages and interest rates may be, there is a finer (one with more vintages and associated interest rates) that exist though they are not accessible to a participant in viewing her/his account. Nor, do I believe, are they accessable to a T-C counselor/WMA when you phone into the counseling center though I am not sure of this. How do I know this? Well because T-C sent me a list that contains 17 vintages and associated payout interest rates. And incidentally, my oldest vintages pay 8.5% not 8.25%!
Why is this important to me (granted it may not be to most who have read this far!)? Because these old vintages and their associated 8.5% payout rate form a goodly part of the projected monthly payment I might receive from annuitizing my large TPA. Assuming the figures I have been given by T-C are correct, for a given annuitization two-life option with a 20 year guarantee period, the payout from the TPA is at least (and it is likely a bit larger) 33.6% more than I would get if I were to annuitize and equal amount from with the same set of options used in developing the TPA annuitization illustration based on Traditional Account funds invested in my IRA. And note that since we are talking about monthly and annual payments over the life of my self and my wife, this is a sizable difference!
This post is dedicated to Henry1 and to Bob U who has hinted at the above in previous posts he has made. I thought it was about time it was posted for all to read.
Ray
