Source: TIAA-CREF Actuarial Department calculations.
You may want to consider taking advantage of these valuable benefits by contributing to TIAA Traditional early and often.
The blue line depicts a participant (Participant A) who contributed $87.59 each month over the thirty-year period from January of 1965 through December of 1994 to a hypothetical investment option that provided returns matching TIAA Traditional's Retirement Annuity contract interest crediting rates and did not take any withdrawals. If this 65 year-old participant transferred the final balance of $131,875 to TIAA Traditional to purchase a single life annuity with a 10 year guarantee period with payments beginning on January 1, 1995, they would have received approximately $929 per month in 1995. The blue line shows how Participant A’s monthly payment amount would have increased over the first 20 years of their retirement. By 2015 Participant A would have been receiving approximately $1,107 per month, representing 19% more than their original payment amount. This benefit is the result of TIAA’s return of “contingency reserves” or rainy day funds which TIAA did not need to use to cover adverse experience. Therefore these reserves were able to be returned to participants that choose lifetime income. Although this is not a cost of living adjustment-type annuity and past performance is no guarantee of future results, these periodic increases made possibly by TIAA Traditional can help offset the negative effects of inflation during retirement.Long-Term Contributor Advantage:
In addition to the benefit above, it is also important to be aware that long-term contributors to TIAA Traditional may receive even higher lifetime income amounts than participants that accumulate outside of TIAA Traditional and then transfer to TIAA Traditional shortly before beginning lifetime income like Participant A above. This additional valuable benefit is also, in part, because of TIAA’s release of unneeded reserves and the fact that the amount of the reserves associated with older contributions has typically been larger than the reserves associated with newer contributions.
The purple line depicts the monthly income paid to such a long-term contributor. This participant (Participant B) contributed the same amount each month to TIAA Traditional under the Retirement Annuity contract over the same thirty-year period and did not take any withdrawals. Based on actual interest crediting rates under the contract, the participant’s accumulation would also have been the same $131,875 on December 31, 1994. If this 65 year-old participant also used the entire amount to purchase the same type of annuity as Participant A with payments beginning on the same date, they would have received $1,000 per month in 1995 or over 7.5% more than the $929 that Participant A received. By 2015 Participant B would have been receiving approximately $1,244 per month, representing almost 25% more than their original lifetime income payment amount. Therefore the purple shaded area above the blue line illustrates the potential advantage of contributing to TIAA Traditional early and often.
Although this illustration does not represent specific individuals and past performance is no guarantee of future results, the amount of monthly lifetime income payments shown are what participants would have experienced had they taken the actions on the dates described in this example.