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TIAA CREF = teachers annuity side
Old 07-01-2005, 06:15 PM   #1
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TIAA CREF = teachers annuity side

Anyone here have experience with the annuity-side from an education institution?

I like the low fees and ease of getting to a person with TIAA-CREF as well as the long-term view. However, another circumstance has me considering a slight shift.

In KY, a state worker (or teacher, or county govt worker, or police) needs to work a total of 27 years within one or all of the govt retirement systems w/in the state (each system reciprocates w/the others). At 27 years, regardless of whether or not you've reached 59.5, you start collecting your monthly pension the month after you retire.

They currently have a benefit which will likely not be renewed when it expires in 2008. At 15 years, you can buy up to 5 years worth of "ghost-time" or "air-time". This would give one 20 years if you bought all five years. However it does not count towards your insurance elgibility (100% eligible for state kick-in at 20 years of WORKED time).

Anyhoo... I've been saving in a 401(k) to transfer funds to the retirement system when eligible. The legislature in its infinite wisdom decided too many people were taking advantage of it and raised SUBSTANTIALLY the cost of purchasing time. It was already substantial enough, but the latest increase will cost me another $18,000. However, the good side is that it would start a 7-year clock ticking that would allow me to collect a check for the rest of my life...and before 50! Not huge, but more than SS!!! And the first $41,000 and change from annual retirement monies is exempt from state tax.

So... in order to make it happen now that they jacked-up the rates, I'll need to dip into my small retirement pool I have from my university days...the TIAA-CREF. We like them, and would consider new Roths with them as soon as this payout is made. I'm afraid if I wait, the politicians will take the thing away, or increase it ever more. My monies under the university retirement have an annuity option. Our Roths would not. Is anyone currently using the T-C annuity side from retirement accounts from an educational field? I'm wondering what I'd really be missing.

Also, any thoughts by others on any aspect?

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Re: TIAA CREF = teachers annuity side
Old 07-02-2005, 07:35 AM   #2
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Re: TIAA CREF = teachers annuity side

I think the smart thing to do would be to run the numbers on a spreadsheet and see if it is still a good deal to buy the pendion credit at the higher prices. It may well be a great deal that is worth cashing in your TIAA money for.

You'll have to ultimately make the decision, but if you are buying an annuity with TIAA money, you aren't really loosing the annuitization feature, right? FWIW, TIAA is a stand-up organization that has a lomg record of treating customers well.
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Re: TIAA CREF = teachers annuity side
Old 07-02-2005, 09:57 AM   #3
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Re: TIAA CREF = teachers annuity side

There some retired prof's and soon to be retired prof's that have discussed this issued over at the TIAA-CREF forum on M*. I believe the most recent discussion was this conversation.

As brewer said, I'd run the numbers. For comparing whether or not to use the TIAA money, I'd compare the benefit $$ you'd get from buying the annuity from the state vs benefit $$ you'd get from buying the annuity from TIAA-CREF. For example, for the $X you'd give to the state, you'd get $Y in a yearly/monthly benefit, and for the $X you'd give to TIAA, you'd get $Z in a yearly/monthly benefit. Of course, you'd want to compare the numbers at the same age of starting to receive the annuity. You may not be able to receive an annuity from TIAA before a certain age [like 55 or 59.5].

Another consideration is if the KY annuity is COLA'd at all.

TIAA has a couple of annuitization options. The first is the straight annuity that doesn't increase in payouts. The second is the "graded annuity" that increases the payouts if the interest rate on the TIAA fixed account is more than 4%. The third are the variable immediate annuities where you annuitize the money in the stock, bond, and Real estate accounts, and the payout increases only when the return of your mix of stocks, bonds, and RE is over 4% [of course the payout will decrease if the return is less than 4%].

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Re: TIAA CREF = teachers annuity side
Old 07-02-2005, 10:42 AM   #4
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Re: TIAA CREF = teachers annuity side

a few things I didn't add:

I will be buying the 5 years. Locking in the check 5 years earlier makes sense. The payoff starts 15 years before I'd otherwise start it. The pension is increased for COLA by the legislature... not a sure thing, but they've never prevented a COLA increase.

Additionally, there isn't a large amount in the CREF acct, but I kind wanted it to stay where it was as an option. I won't be back in acadamia (I don't think) so I'm interested to see if I'm really harming how I can use the CREF money...that is, I'll replace what is there in a few years, but would do so with a Roth. So, it isn't so much a Q over whether I'll buy the time, but if I use the CREF money, will I limit an option. It doesn't look like it would be a huge deal considering the responses here.

The other thing is that in 7 years my health insurance benefit is locked in. While we're healthy and don't use it, we're chickens&#!s and don't like being w/o it. My wife works in healthcare and has almost daily stories about people having to lose everything before medicare/medicaid kicks in.

This is basically driving my portion of our RE plan in the short-term. After December, I plan on retooling to attack other options. We'd like a little real estate, but well...that will wait a little while.

Thanks all.
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