I hear you, too, Ray! I recall my WMA mentioning that 8.5% vintage during one of our meetings. As I recall, I was a 50-50 man some 30 years ago, and I'm amazed at how much those early accumulations now weigh in to my total retirement holdings.

Thanks for the post!

Henry I

Henry,

Then you are a prime candidate to do an annuitization. If you have not done so, use the on-line calculator and set it to do the annuitization on the Traditional Funds in your RA or GRA and see what sort of payout you get. If you want to see those vintages and associated interest rates, phone in to the counseling center and have them do a run according to your specifications and have it sent to you - or ask your WMA to have it done. If you do this you would have a record from which you could watch for changes in the vintages and interest rates.

If you have problems running the calculator, I could probably help you as I have run it quite a bit. Initially it is a bit overwhelming - the details can be frustrating - but it is accurate.

Ray

Ray,

I use the calculator from time to time, mostly to see if I'm on track. The way it looks now, I do plan to annuitize  the funds in several of my plans, using the graded method for the Traditional pieces. The way I'm looking at it, maybe 60-70% of the annuitized funds will be RA and GRA Traditional, the rest being CREF stock and RE. I plan to leave the funds in other plans alone and take RMDs later. Those funds are largely CREF stock and RE, but there is some SA Traditional funds in there. My WMA is Ok with the SA Traditional accumulations over ILBs.

I can make ends meet using the graded approach, so for me it makes sense to do that. I have in mind making sure that my wife has a permanent income stream, inflation protected, in case she outlives me.

My yearly meeting with my WMA is in October. We'll see what he says.

Thanks for your comments and offer to help. Much appreciated!

Henry

Ray,

Thanks for the explanation.  The 'rents have about 60% of their retirement money in TIAA RA/GRA/GSRA/SRA.

Question: These old high interest rates only apply to those who annuitize the money in TIAA, correct?  They don't apply to those who do the interest only option.

- Alec

Alec,

Best you check with your WMA but they are termed payout rates. Your question boils down to what is the definition of payout and I do not know the answer. I tend to think the payout rates only refer to payments from an annuity and if this is correct, then the answer to your question is that they do not apply to the interest only option.

Do check on it and if you would post the result here; it is a good question and is undoubtedly of interest to others.

Thanks for the post!

Ray

I just had a most interesting phone conversation with a WMA in the counseling center all about annuity payout rates.

First I know why my annuitization income illustration shows my oldest vintages have 8.50% rates versus the current 8.25%. The 8.5% was the Aug. payout rate and the 8.25% is the Sept. payout rate. This year there have been substantial changes in the payout rates at for some vintages, most notably the oldest (pre 1992 ones) and the most recent post 2006 rates.

I also found out that the phone counselors, including those that are WMAs, do not have access to the oldest vintages for "old" participants like myself. So you cannot get the information for your oldest vintages via a phone call. Your personal WMA could (mine did) but it took some effort.

I also found that there has been "substantial" (my terminology not the WMA I spoke with) in the payout rate for my two "old" (pre 1992) vintages this year. They have been changing monthly for most (not sure if for all) months of 2008. The change this month has been a decline of .25 from 8.50% to 8.25%.

In addition, I found that the phone counselor (at least a WMA) has access to the payout rates by month and if you want to know them, you should be able to get them by a phone call.

We talked about the "spread" in an annuitization income illustration between the "contractural payout" and the "with dividend" payout; the former being the guaranteed 2.5% based payout and the latter being the actual declared payout with all declared dividends. After talking about the difficulty of making a decision on whether to annuitize or not to annuitize given the wide spread bewteen the two payout amounts (contractural and with dividend) I formally requested a historic record of annual changes in the payout rates for all vintages to an annuity that was in existence on Dec. 31, 1989, and that the historic data be provided to me for each year from 1990 to date. The WMA was most willing to place my request; we discussed whether or not I will get the requested data! 

All very enlightening! Annuitization decisions are lots of fun! :-( 

Ray

Correct, Alec.  I annuitized.  My wife hasn't.  She did IPRO, and on a couple of occasions, during the period of very low interest rates, she took hits. 

My annuity payments have never gone down (which isn't to say they can't, as spelled out in the contract).  The payments have gone up about half the time, even with the standard payout. 

For what little it's worth, I think we've seen interest rates hit their bottom for a long long time.  I wouldn't hesitate to do an IPRO under the current (credit-crunch) circumstances if your parents are hesitant to annuitize monies.

By the way, unless the rules have changed recently, an IPRO contract is an annuity contract.  You can't cash out.  If you stop an IPRO (minimum stay used to be one year) you will have to cash out a la TPA--e.g., over a specified period of time.  Bob U.

Note that if you have both a RA and a SRA, and decide to annuitize only one of them, it might make sense to choose the SRA since it would "bump up" to the same payout rate as that for the RA.

Dick 

No, I do not believe Dick is correct. I discussed this yesterday with the WMA I spoke with on-line and he disagrees with Dick. The higher return from the RA is because the Traditional Funds in my case had a 8.50% in Aug. (actually 8.25% now in Sept.) interest rate for my pre-1992 vintages. It is impossible for the SRA to have that rate as in my case my SRA did not start anywhere near as early as my RA did. The only way Dick would be right is the SRA had old vintages old enough to have the very high interest rate and then the old vintages with the high rate would have to be a very large proportion of the value of the SRA. In my RA, the old vintages with the 8.50% interest rate accounted for about 56% of the total value in the large TPA - the one I have been considering annuitizing.

Ray