TIAA Traditional Interest Rates Rise 21%, Boosting Value of Annuities – InsuranceNewsNet
TIAA is increasing interest rates on its TIAA Traditional offering by an average of 21%, bolstering retirement security for the more than 2 million savers who accumulate in the company’s flagship fixed annuity.
TIAA will credit more than $7 billion in 2022 for its flagship offering: “Helping Americans have a dignified retirement is in our DNA.”
With this latest increase, TIAA will share $2.3 billion in interest on top of the $5 billion in interest it has already guaranteed, bringing the total amount credited to traditional investors to well over $7 billion. This year. The increase comes just weeks after the TIAA increased lifetime income payments to annuitants.I In total, TIAA paid out more lifetime income than any other insurer – almost 60% more.ii
“Helping Americans have a dignified and secure retirement is in our DNA,” said Colbert Narcisse, director of product and business development at TIAA. “Our unique, mission-based ownership structure has allowed us to return benefits to our clients and deliver superior retirement results for more than 100 years.”
TIAA Traditional has paid out more in lifetime income than its contractually guaranteed minimum amounts every year since 1949, providing clients who choose to monetize a solid foundation of stable, guaranteed lifetime income payments regardless of market conditions.iii TIAA has paid out more than half a trillion dollars in retirement benefits since its inception, never missing a payment during depressions, world wars, financial crises and pandemics.
“The recent sky-high market volatility has highlighted one of the most important advantages of TIAA Traditional,” said Bill Griesser, head of institutional managed solutions at TIAA. “Working in a portfolio, TIAA Traditional can offer real-world differences by delivering reduced volatility, stable returns without sacrificing performance, and guaranteed income you can never outlive.”
TIAA Traditional is different from other fixed annuities. It offers:
- Guaranteed growth and incomeiv: TIAA Traditional offers guaranteed growth over the working years, which means that the value of the money contributed is guaranteed to increase every day, even in the most volatile markets. It also provides guaranteed lifetime income by offering the ability to turn savings into regular monthly income to help meet day-to-day expenses in retirement. It’s like receiving a “paycheck”v for life when you stop working.
- Additional amounts: In addition to providing a guaranteed fixed rate, TIAA Traditional offers the option of receiving additional interest and income, declared annually at the discretion of the company’s board of directors. As noted above, TIAA has consistently paid out supplemental amounts for more than 70 consecutive years.
- Loyalty Bonus: TIAA Traditional also offers a unique opportunity for growth and additional income for long-term contributors – a loyalty bonus that rewards savers with additional income based on the length of their investment.vi Contributing regularly to TIAA Traditional throughout a career can significantly increase retirement payouts, with an average lifetime income benefit of 22.4%.viii
Return the benefits to the customers
TIAA is a private company whose mission is to provide retirement security for educators, healthcare workers, researchers, government employees and other service people. This unique structure and heritage allows it to focus solely on serving its plan clients and participating employees.
TIAA can raise rates through its disciplined approach to managing the TIAA General Account, which supports TIAA Traditional and invests in a broadly diversified portfolio that enables long-term returns.
TIAA is a leading provider of secure retirement and results-driven investment solutions for millions of people and thousands of institutions. It is the premier not-for-profit provider in the retirement marketviiihas paid over $3.6 billion to retired clients in 2020 and has nearly $1.4 trillion in assets under management (as of 12/31/2021).ix For more information, visit www.tiaa.org.
i TIAA Actuarial as of 02/18/2022.
ii Source: NAIC 2020 annual statement, page 27 annuities, sum of individual and collective income to be paid.
iii TIAA can share profits with TIAA traditional annuity holders by declaring additional interest and increasing annuity income throughout retirement. These additional amounts are not guaranteed.
iv Warranties are subject to TIAA’s claims-paying ability. TIAA Traditional is a guaranteed insurance contract and not an investment for purposes of federal securities law.
v Paycheck” is the annuity income received at retirement. Fixed monthly payment guarantees are only associated with TIAA’s fixed annuities.
vi Interest credited to TIAA traditional annuity accumulations includes a guaranteed rate, plus such additional amounts as may be established on an annual basis by the TIAA Board of Directors. Additional amounts, when declared, remain in effect until the “declaration year”, which begins on March 1 of each year for accumulating annuities and January 1 for payout annuities. Additional amounts are not guaranteed for periods other than the period for which they are declared.
TIAA may offer a loyalty bonus based on the length of time funds are held in TIAA Traditional. The fidelity bonus is provided by increasing annuity income throughout retirement and is only available at the time of annuity. The amount of the bonus is discretionary and determined by the TIAA Board of Directors on an annual basis.
vii Source: TIAA Actuarial Department, based on a study comparing the amount of initial lifetime income that would have been received by two hypothetical participants commencing lifetime income, for each of the 301 months from January 1, 1997 to January 1, 2022. Both hypothetical participants are the same age, 67, and they choose a single life annuity with a guaranteed period of 10 years using TIAA’s standard immediate annuity. The Career Contributor has made level monthly contributions to TIAA Traditional under the Retirement Annuity Contract over a 30-year career prior to his retirement date. The new contributor transferred the same terminal accumulation as the career contributor to TIAA Traditional shortly before selecting lifetime income. Over the study period, the career contributor’s initial lifetime income exceeded that of the new contributor for 291 of the 301 months of retirement with an average lifetime income advantage of 15.1%. Their biggest advantage was 29.8% and their smallest advantage was -2.9% (a disadvantage). Over the last decade of the study, the career contributor’s initial lifetime income exceeded that of the new contributor during the 120 months of retirement with an average lifetime income advantage of 22.4%. Their biggest advantage was 29.8% and their smallest advantage was 17.1%. In the most recent month of the study, the career contributor’s initial lifetime income exceeded that of the new contributor by 17.2%. Past performance is not indicative of future results.
viii As of December 31, 2020. Based on data from PLANSPONSOR’s 403(b) market research, published August 2021.
As of December 31, 2021, assets under management of Nuveen Investments affiliates and TIAA investment management teams were $1.375 trillion.