TIAA Traditional Lifetime Annuity Income Steady for 2009
December 11, 2008
Each December, the Board of Trustees of TIAA sets the rates that determine TIAA Traditional’s income levels for the next year.
Based on the board’s decision this week, in 2009 all annuitants with TIAA Traditional lifetime income will receive at least as much total income (guaranteed income plus additional amounts) as in 2008, and some annuitants will see modest increases.1
Please note that these payments apply only to annuitants of TIAA Traditional. Payments for TIAA Transfer Payout Annuity and Interest-Only Income, as well as CREF and TIAA Real Estate Variable Annuity Accounts will be announced at a later date, as described below.
Participants who receive lifetime income from the TIAA Traditional Annuity have been able to rely on its stability to help protect their finances from the volatility in the market. TIAA Traditional helps stabilize the income of annuitants through the guaranteed monthly income it provides, which is paid regardless of how the financial markets are performing. Participants may also receive additional amounts, which are determined by the TIAA Board of Trustees each year and aren’t guaranteed for future years.
Launched with the founding of TIAA in 1918, the TIAA Traditional Annuity is a guaranteed fixed annuity.
Participants who annuitize should consult the Outreach newsletter, which will be mailed to you later this month. The newsletter can be viewed here (PDF).
Methods of Taking Income
Below we describe the payments TIAA Traditional annuitants will receive next year depending on the method by which they are taking income. The new payments go into effect January 1.
Standard Payment Method: Despite low prevailing interest rates, monthly payments will stay the same in 2009 for lifetime annuity income received under the TIAA Standard Payment Method. The 2009 total payment levels are based on interest rates ranging from 4.0% to 9.5%, depending on when the underlying funds were applied to TIAA and when the annuitant began receiving lifetime income.
Graded Payment Method: Those participants who began receiving TIAA lifetime annuity income before 2008 will see a moderate increase in 2009. Those who started receiving Graded income during 2008 will see a smaller increase in 2009, reflecting when their funds were applied to TIAA and when, during the year, they began receiving lifetime income. But in 2010 they will receive a full year’s increase.
Also, guaranteed asset returns from TIAA Traditional historically had little or no correlation with those from other asset types, such as equities and bonds. (Correlation is a measure of how two different investments perform in relation to each other.) Such a lack of correlation can help reduce portfolio volatility.
To help lower risk, the TIAA General Account, which backs the returns of the TIAA Traditional Annuity, has a highly diversified portfolio with less than 1% of total assets in any single investment. The portfolio includes bonds, commercial mortgages, private stock and directly owned real estate. 2
Participants who receive annuity income decide how their assets would be allocated among the TIAA and CREF Variable annuity accounts. The income they receive is based on the performance of those accounts. However, those participants can modify that strategy in response to current market or economic conditions or changes in your financial situation. If you’re concerned about the ongoing volatility in the financial markets, you should revise your portfolio allocation to ensure it is appropriate for your needs and goals.
Other Types of Annuity Payments
TIAA Transfer Payout Annuity and Interest-Only Income: For those participants receiving Interest-Only income or income from a Transfer Payout Annuity, any payment changes will take effect on April 1, 2009.
CREF and TIAA Real Estate Variable Annuity Accounts: For those participants receiving annuity income, that is, a stream of lifetime income, from the CREF or TIAA Real Estate accounts who chose the payment method that calculates income changes once a year, changes will be based on account performance through March 31, 2009 and will take effect on May 1, 2009. For those who chose the payment method the percentage change in income monthly will see that change each month. Please note that the income from these accounts will reflect the underlying market performance of the equity, fixed income or other securities in which they invest.
Participants who receive annuity income will be sent the December issue of our Outreach newsletter with more information on annuity income and a 2009 tax calendar later this month. Those participants wishing for more information or guidance can call us at 800 842-2776.
All guarantees are based on the claims paying ability of TIAA.
You should consider the investment objectives, risks, charges and expenses carefully before investing. Please call 877 518-9161, or go to www.tiaa-cref.org for a current prospectus that contains this and other information. Please read the prospectus carefully before investing. All TIAA-CREF investment vehicles are subject to market and other risk factors, which could result in loss of principal.
Annuity products are issued by TIAA (Teachers Insurance and Annuity Association), New York, NY. TIAA-CREF Individual & Institutional Services, LLC and Teachers Personal Investors Services, Inc., members FINRA, distribute securities products.
1 This information doesn’t apply to income annuitants are receiving under defined benefit pension plans, principal and interest contras, or the TIAA Transfer Payout Annuity or interest-only payments from TIAA Traditional.
2 The investment returns of the TIAA General Account do not flow directly to the TIAA Traditional Annuity but support the payment obligations and the fulfillment of returns provided for under these contracts.
