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University Perspectives

A Journal For Planning Your Ideal Future

Get More Out of the Sleeping Giant

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TIAA has been a primary investment provider in university retirement plans since Andrew Carnegie founded TIAA in 1918. TIAA is now offered in many university retirement systems in the U.S.

How to Leverage TIAA

With its long history, one would think that university retirement plan participants would have a reasonable, if not good, understanding of the strengths and weaknesses of TIAA. However, our experience indicates university professionals have a difficult time understanding TIAA and which investments to use to optimize their retirement portfolios. In this context, TIAA seems almost like a sleeping giant—very large and visible, but relatively quiet and mysterious.

TIAA is a life insurance company – and not just any life insurance company. It is one of the strongest life insurance companies in the United States. Because of this distinction, it is totally different from Fidelity and Vanguard, which are mutual fund and investment companies.

Life insurance companies exist to provide death benefits. As a result, they are generally more conservative with their investments because of state regulatory systems’ reporting requirements. In turn, life insurance companies generally are focused on investing in fixed-income investments such as bonds and fixed annuities.

The Potential Benefits of Investing in TIAA Traditional

TIAA Traditional, a fixed annuity, is one of the many choices TIAA provides its university retirement plan participants. It is unique, not only within the TIAA offerings, but also when compared to choices offered by competitors. The following are the unique benefits of having a portion of a retirement account invested in TIAA Traditional:

  • TIAA Traditional is an asset of TIAA Life Insurance Company. This is different from an investment in the CREF Bond or Stock fund, which are not assets of TIAA Life Insurance Company.
  • A unique benefit of TIAA Traditional (as an asset of TIAA Life Insurance Company) is the principal sum is guaranteed by the full faith and creditworthiness of the insurance company. Regardless of what the stock market or the bond market does, the participant’s investment in TIAA Traditional will not fluctuate in value and can only be lost if the insurance company goes out of business.
  • The interest rate on TIAA Traditional, in most university retirement plans, is guaranteed by TIAA not to go below 3 percent. This is an advantage over money market accounts, savings accounts, and other interest-bearing accounts that have no interest guarantees.
  • The interest attributable to a TIAA Traditional account compounds income-tax deferred. This is an advantage over personally held savings accounts and certificates of deposit, where interest paid is subject to ordinary income tax immediately.
  • For estate planning purposes, at the death of the account owner, the TIAA Traditional account can be paid in one lump sum to the beneficiary, free of probate expense.
  • The internal costs of TIAA Traditional are very low when compared to other major insurance companies. In addition, there is no penalty for moving money from a TIAA Traditional account into another investment.

TIAA Offers Preservation of Principal

TIAA Traditional can potentially be an excellent choice for plan participants seeking preservation of principal. However, it is important to note there are certain restrictions on TIAA Traditional when it is purchased within primary retirement accounts. Consult a TIAA representative or a fiduciary advisor who has specific knowledge of university retirement plans and benefit systems to learn more.

This is intended for informational purposes only and should not be construed as personalized financial or investment advice. Please consult your financial and investment professional(s) regarding your unique situation.

Wise Counsel for University Professionals

Our advisors have specific and in-depth knowledge about university employee benefit programs and retirement plans. We work with university faculty, physicians, and other professionals. We are not associated with any university or any retirement vendor, and we have no access to your private retirement or personnel information.

Savant Wealth Management (“Savant”) is an SEC registered investment adviser headquartered in Rockford, Illinois. Past performance may not be indicative of future results. Different types of investments involve varying degrees of risk. Therefore, it should not be assumed that future performance of any specific investment or investment strategy, including the investments and/or investment strategies recommended and/or undertaken by Savant, or any non-investment related services, will be profitable, equal any historical performance levels, be suitable for your portfolio or individual situation, or prove successful. Savant is neither a law firm, nor a certified public accounting firm, and no portion of its services should be construed as legal or accounting advice. You should not assume that any discussion or information contained in this document serves as the receipt of, or as a substitute for, personalized investment advice from Savant. A copy of our current written disclosure Brochure discussing our advisory services and fees is available upon request or at www.savantwealth.com. The scope of the services to be provided depends upon the needs of the client and the terms of the engagement.

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