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