TIAA White Paper on Fixed Annuities and SPIAs in Retirement Portfolios

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Garco
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Re: TIAA White Paper on Fixed Annuities and SPIAs in Retirement Portfolios

Post by Garco »

I think the premise of many studies and much of this discussion is that the central purpose of annuities -- particularly "lifetime" annuities -- is to avoid running out of money in your lifetime. Almost every post here seems to assume that this is the overriding goal.

People live in families. Spouses, children, grandparents, grandchildren, and other relatives. The MAIN REASON why I my wife and I have not chosen a lifetime annuity for ourselves is that we want to provide a financial legacy for our children, and our children's children. We also learned from our own parents, who had not annuitized but left legacies for their families (for us and our sibs). In fact just about when I retired, we received inheritances from both sides of the family. All of my siblings and my spouse's siblings received a proportionate share of our parents'- and parents-in-laws' estates.

We have a goodly amount money, about 80% of it derived from our own working careers, our investing in TIAA and the general stock market, and our real estate. We've been retired for 7 years. We have an estate plan -- a legal document -- concerning the distribution of our resources when we pass. The "kids" will do well by us. No way were we going to spend it all on ourselves.
Last edited by Garco on Sun Jun 13, 2021 8:24 am, edited 1 time in total.
student
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Re: TIAA White Paper on Fixed Annuities and SPIAs in Retirement Portfolios

Post by student »

ResearchMed wrote: Sun Jun 13, 2021 6:58 am
student wrote: Sun Jun 13, 2021 6:01 am At least one reply above mentioned that TIAA wants to convince institutions to move away from the 3% guarantee product. It is true. In current interest rate environment it is tough for TIAA to maintain it. For whatever reasons, our university decided to hire a consultant to review our 403B offerings and they agreed to let TIAA switch us from the 3% guarantee to something lower. I was not happy and I confronted the consultant at the meeting.
Can you determine what your employer (and employees!) "got" in return for giving up that 3% guarantee?
Was that for both EmployER- and EmployEE-contributed money?

Also, I assume that's now a 1% guarantee (even if it is temporarily above 1%, and if so, what is it currently)?

Is there anything in terms of the TIAA "guarantee" that is between 1% and 3% for employer/403b plans?

RM
The consultant told us that it would be the 1% version. I don't think we got anything in return. The current TIAA plan is excellent with access to institutional mutual funds. We do not have any detail yet and we don't know when it will come. We were told during university senate with the presentation from the consultant and I told him that I was disappointed. I emailed my 2 cents to the provost and to the VP of HR. I was told it has not been finalized yet and we will be given more details. This was several months ago.
grok87
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Re: TIAA White Paper on Fixed Annuities and SPIAs in Retirement Portfolios

Post by grok87 »

Wrench wrote: Sun Jun 13, 2021 7:26 am
Horton wrote: Sat Jun 12, 2021 8:08 pm
grok87 wrote: Sat Jun 12, 2021 5:44 pm i would love to start harassing my 401k plan managers about this. but my plan is not that large and the reality is none of the leading 401k plans for the megacorps have done this yet.
Immediate income inflation-indexed annuities do not currently exist, so I wouldn’t recommend harassing your 401k plan sponsor. Instead, you should start harassing insurers to offer them. There was one insurer that offered them up until a couple years ago. They discontinued them because no one bought them. :P
My guess is that if a megacorp with many 10s or 100s of thousands of employees went to an insurance carrier and said, we want to offer this in our 401K, will you do it? The answer would be "yes", and there would have multiple carriers willing to so so because the demand would be "built in", and they could charge the fees required to cover their overhead.

Wrench
i would hope you are right and that we will start seeing in-plan immediate annuities (i.e. plain vanilla payout annuities) being offered at institutional pricing (i.e. better than what a retail invest could get on their own)

but i doubt it.

cheers,
grok
RIP Mr. Bogle.
seajay
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Re: TIAA White Paper on Fixed Annuities and SPIAs in Retirement Portfolios

Post by seajay »

Garco wrote: Sun Jun 13, 2021 8:20 am I think the premise of many studies and much of this discussion is that the central purpose of annuities -- particularly "lifetime" annuities -- is to avoid running out of money in your lifetime. Almost every post here seems to assume that this is the overriding goal.

People live in families. Spouses, children, grandparents, grandchildren, and other relatives. The MAIN REASON why I my wife and I have not chosen a lifetime annuity for ourselves is that we want to provide a financial legacy for our children, and our children's children. We also learned from our own parents, who had not annuitized but left legacies for their families (for us and our sibs). In fact just about when I retired, we received inheritances from both sides of the family. All of my siblings and my spouse's siblings received a proportionate share of our parents'- and parents-in-laws' estates.

We have a goodly amount money, about 80% of it derived from our own working careers, our investing in TIAA and the general stock market, and our real estate. We've been retired for 7 years. We have an estate plan -- a legal document -- concerning the distribution of our resources when we pass. The "kids" will do well by us. No way were we going to spend it all on ourselves.
First hand experience and dementia care home costs can be upward of $125K/year each around our way. "Everyone has a plan until they get punched in the mouth." [Mike Tyson].
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Re: TIAA White Paper on Fixed Annuities and SPIAs in Retirement Portfolios

Post by Ron »

grok87 wrote: Sun Jun 13, 2021 8:28 ami would hope you are right and that we will start seeing in-plan immediate annuities (i.e. plain vanilla payout annuities) being offered at institutional pricing (i.e. better than what a retail invest could get on their own)

but i doubt it.

cheers,
grok
Funny that you mention that.

The company I retired from did not provide a regular pension, but a "cash balance" plan in which you had the option of a lump sum or an SPIA provided through the company from a third party provider.

Just before retirement, I investigated if I could get a better deal by taking the cash balance proceeds and purchasing an SPIA on my own.

The results were that I could get a slightly better monthly payout and much better terms going out on my own (e.g. 100% survivor payments, guaranteed term, etc.).

The difference I suspect on the payout was the company getting a bit of "vig" (e.g. kickback) from the SPIA provider they were using.

Just because the company you work for provides a salary doesn't mean that they are looking out for you in all facets of your relationship, IMHO.

FWIW,

- Ron
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Garco
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Re: TIAA White Paper on Fixed Annuities and SPIAs in Retirement Portfolios

Post by Garco »

@ Seajay: We have that contingency covered: Long-term Care Insurance (LTCI). The insurance isn't cheap but we subscribe to it preserve our estate, as well as to have a place to go when we can't take care of ourselves.
Rex66
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Re: TIAA White Paper on Fixed Annuities and SPIAs in Retirement Portfolios

Post by Rex66 »

Ron wrote: Sun Jun 13, 2021 8:47 am
grok87 wrote: Sun Jun 13, 2021 8:28 ami would hope you are right and that we will start seeing in-plan immediate annuities (i.e. plain vanilla payout annuities) being offered at institutional pricing (i.e. better than what a retail invest could get on their own)

but i doubt it.

cheers,
grok
Funny that you mention that.

The company I retired from did not provide a regular pension, but a "cash balance" plan in which you had the option of a lump sum or an SPIA provided through the company from a third party provider.

Just before retirement, I investigated if I could get a better deal by taking the cash balance proceeds and purchasing an SPIA on my own.

The results were that I could get a slightly better monthly payout and much better terms going out on my own (e.g. 100% survivor payments, guaranteed term, etc.).

The difference I suspect on the payout was the company getting a bit of "vig" (e.g. kickback) from the SPIA provider they were using.

Just because the company you work for provides a salary doesn't mean that they are looking out for you in all facets of your relationship, IMHO.

FWIW,

- Ron
Several I nsurance products like term insurance as well are frequently cheaper or better if purchased individually. So no guarantee that the pricing is better.
TN_Boy
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Re: TIAA White Paper on Fixed Annuities and SPIAs in Retirement Portfolios

Post by TN_Boy »

Garco wrote: Sun Jun 13, 2021 8:49 am @ Seajay: We have that contingency covered: Long-term Care Insurance (LTCI). The insurance isn't cheap but we subscribe to it preserve our estate, as well as to have a place to go when we can't take care of ourselves.
LTCi is not necessarily a bad idea in the context of providing a buffer against a catastrophic LTC problem, but it has limitations. In particular, the per-day limit may keep it from helping as much as you'd like in some situations (look at cost of skilled nursing in your area, or perhaps assisted living or memory care with extra paid helpers; both scenarios can exceed daily limits). Unless the max payout is well into six figures, it doesn't cover long stays as well as you'd like.

Add in the cost of the insurance over 20+ years (a total cost that is well into five figures and could hit six), the exclusion period (usually 90 days but sometimes more or less) and it may or may not help much overall. Obviously the details of the policy and its cost partly determine how good a deal it might be (you won't know until you die whether it really was a good deal or not :-).

That said, I agree that LTCi is a potentially useful tool for someone with strong legacy concerns.
seajay
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Re: TIAA White Paper on Fixed Annuities and SPIAs in Retirement Portfolios

Post by seajay »

Garco wrote: Sun Jun 13, 2021 8:49 am @ Seajay: We have that contingency covered: Long-term Care Insurance (LTCI). The insurance isn't cheap but we subscribe to it preserve our estate, as well as to have a place to go when we can't take care of ourselves.
A good plan/tip :beer. Given parental history something that I should also do (age 60). Present plan was DIY annuity + own home as backstop for longevity/late-life-care.
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ResearchMed
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Re: TIAA White Paper on Fixed Annuities and SPIAs in Retirement Portfolios

Post by ResearchMed »

Rex66 wrote: Sun Jun 13, 2021 8:59 am
Ron wrote: Sun Jun 13, 2021 8:47 am
grok87 wrote: Sun Jun 13, 2021 8:28 ami would hope you are right and that we will start seeing in-plan immediate annuities (i.e. plain vanilla payout annuities) being offered at institutional pricing (i.e. better than what a retail invest could get on their own)

but i doubt it.

cheers,
grok
Funny that you mention that.

The company I retired from did not provide a regular pension, but a "cash balance" plan in which you had the option of a lump sum or an SPIA provided through the company from a third party provider.

Just before retirement, I investigated if I could get a better deal by taking the cash balance proceeds and purchasing an SPIA on my own.

The results were that I could get a slightly better monthly payout and much better terms going out on my own (e.g. 100% survivor payments, guaranteed term, etc.).

The difference I suspect on the payout was the company getting a bit of "vig" (e.g. kickback) from the SPIA provider they were using.

Just because the company you work for provides a salary doesn't mean that they are looking out for you in all facets of your relationship, IMHO.

FWIW,

- Ron
Several I nsurance products like term insurance as well are frequently cheaper or better if purchased individually. So no guarantee that the pricing is better.
One advantage of employer-sponsored health insurance (or life insurance), regardless of whether self-funded or not, for many employees is that there is usually some sort of "guaranteed acceptance at regular rates", albeit perhaps after a modest time delay (or requirement that one actually show up for that first day of work, etc.).

That was a really useful perk for those with health problems who may have been uninsurable on the open market, for either the health or life insurance.

However, that pooling that *includes* the less healthy (those more likely to have [expensive] claims) also has the "problem" that those costs are included in the rates for those who are really healthy and thus lower risk.

So, as is often the case, it's that "mixed bag" effect, perhaps better for some, but not so much for others.

RM
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tibbitts
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Re: TIAA White Paper on Fixed Annuities and SPIAs in Retirement Portfolios

Post by tibbitts »

student wrote: Sun Jun 13, 2021 6:01 am At least one reply above mentioned that TIAA wants to convince institutions to move away from the 3% guarantee product. It is true. In current interest rate environment it is tough for TIAA to maintain it. For whatever reasons, our university decided to hire a consultant to review our 403B offerings and they agreed to let TIAA switch us from the 3% guarantee to something lower. I was not happy and I confronted the consultant at the meeting.
So to be clear the money you previously had in the plan at 3% will now earn only 1% guaranteed? Even former employees are affected by this change? This is not just affecting future contributions?
Rex66
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Re: TIAA White Paper on Fixed Annuities and SPIAs in Retirement Portfolios

Post by Rex66 »

Except with annuities in general they don’t do underwriting.

They also use different life tables vs life insurance partly bc unhealthy typically don’t purchase

If I were an insurance company I’d factor in the selection issues if I were to guarantee the option.
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Re: TIAA White Paper on Fixed Annuities and SPIAs in Retirement Portfolios

Post by 7eight9 »

seajay wrote: Sun Jun 13, 2021 9:06 am
Garco wrote: Sun Jun 13, 2021 8:49 am @ Seajay: We have that contingency covered: Long-term Care Insurance (LTCI). The insurance isn't cheap but we subscribe to it preserve our estate, as well as to have a place to go when we can't take care of ourselves.
A good plan/tip :beer. Given parental history something that I should also do (age 60). Present plan was DIY annuity + own home as backstop for longevity/late-life-care.
Long-term care abroad can be relatively affordable. This is a place in Thailand:

Ban Sabai Village, Chiang Mai care home resort. Full care services for seniors.
Offering soft care to full 24 hour ‘close care’.
We also provide specialist care for Alzheimer’s and other dementia.
Perfect for recuperation and rehab after a stroke.
With on site nursing this is the perfect nursing home to enjoy quality assisted living.
https://bansabairesorts.com/senior-care ... hiang-mai/

Pricing --- https://bansabairesorts.com/senior-care ... ce-prices/
I guess it all could be much worse. | They could be warming up my hearse.
student
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Re: TIAA White Paper on Fixed Annuities and SPIAs in Retirement Portfolios

Post by student »

tibbitts wrote: Sun Jun 13, 2021 9:16 am
student wrote: Sun Jun 13, 2021 6:01 am At least one reply above mentioned that TIAA wants to convince institutions to move away from the 3% guarantee product. It is true. In current interest rate environment it is tough for TIAA to maintain it. For whatever reasons, our university decided to hire a consultant to review our 403B offerings and they agreed to let TIAA switch us from the 3% guarantee to something lower. I was not happy and I confronted the consultant at the meeting.
So to be clear the money you previously had in the plan at 3% will now earn only 1% guaranteed? Even former employees are affected by this change? This is not just affecting future contributions?
I was told that money in the old plan will still be under the 3% min contract. It will affect only new money.
seajay
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Re: TIAA White Paper on Fixed Annuities and SPIAs in Retirement Portfolios

Post by seajay »

7eight9 wrote: Sun Jun 13, 2021 9:18 am
seajay wrote: Sun Jun 13, 2021 9:06 am
Garco wrote: Sun Jun 13, 2021 8:49 am @ Seajay: We have that contingency covered: Long-term Care Insurance (LTCI). The insurance isn't cheap but we subscribe to it preserve our estate, as well as to have a place to go when we can't take care of ourselves.
A good plan/tip :beer. Given parental history something that I should also do (age 60). Present plan was DIY annuity + own home as backstop for longevity/late-life-care.
Long-term care abroad can be relatively affordable. This is a place in Thailand:

Ban Sabai Village, Chiang Mai care home resort. Full care services for seniors.
Offering soft care to full 24 hour ‘close care’.
We also provide specialist care for Alzheimer’s and other dementia.
Perfect for recuperation and rehab after a stroke.
With on site nursing this is the perfect nursing home to enjoy quality assisted living.
https://bansabairesorts.com/senior-care ... hiang-mai/

Pricing --- https://bansabairesorts.com/senior-care ... ce-prices/
Thanks. I have heard similar in the past and quality/comfort is suggested as being superior. Less than $60K/year for a Villa Superior, full board food and entertainment/fun, plus one-on-one care is indeed great value. A issue in my mothers case however would be the language barrier. That said here in the the UK most of the care workers have English as their second language or strong accents that she can find to be confusing. Regular family visits and outings (in the absence of Covid lockdowns) would also be a issue.
tibbitts
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Re: TIAA White Paper on Fixed Annuities and SPIAs in Retirement Portfolios

Post by tibbitts »

student wrote: Sun Jun 13, 2021 9:24 am
tibbitts wrote: Sun Jun 13, 2021 9:16 am
student wrote: Sun Jun 13, 2021 6:01 am At least one reply above mentioned that TIAA wants to convince institutions to move away from the 3% guarantee product. It is true. In current interest rate environment it is tough for TIAA to maintain it. For whatever reasons, our university decided to hire a consultant to review our 403B offerings and they agreed to let TIAA switch us from the 3% guarantee to something lower. I was not happy and I confronted the consultant at the meeting.
So to be clear the money you previously had in the plan at 3% will now earn only 1% guaranteed? Even former employees are affected by this change? This is not just affecting future contributions?
I was told that money in the old plan will still be under the 3% min contract. It will affect only new money.
That's encouraging for retired employees like me, but I can definitely sympathize with your situation as a currently-contributing employee. I'm hoping that at least none of the existing Traditional funds lose their 3% guarantee. With IRAs TIAA provided some notice, and people could reallocate existing funds accordingly; hopefully that would be the case with 403b plans as well.
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ResearchMed
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Re: TIAA White Paper on Fixed Annuities and SPIAs in Retirement Portfolios

Post by ResearchMed »

tibbitts wrote: Sun Jun 13, 2021 9:57 am
student wrote: Sun Jun 13, 2021 9:24 am
tibbitts wrote: Sun Jun 13, 2021 9:16 am
student wrote: Sun Jun 13, 2021 6:01 am At least one reply above mentioned that TIAA wants to convince institutions to move away from the 3% guarantee product. It is true. In current interest rate environment it is tough for TIAA to maintain it. For whatever reasons, our university decided to hire a consultant to review our 403B offerings and they agreed to let TIAA switch us from the 3% guarantee to something lower. I was not happy and I confronted the consultant at the meeting.
So to be clear the money you previously had in the plan at 3% will now earn only 1% guaranteed? Even former employees are affected by this change? This is not just affecting future contributions?
I was told that money in the old plan will still be under the 3% min contract. It will affect only new money.
That's encouraging for retired employees like me, but I can definitely sympathize with your situation as a currently-contributing employee. I'm hoping that at least none of the existing Traditional funds lose their 3% guarantee. With IRAs TIAA provided some notice, and people could reallocate existing funds accordingly; hopefully that would be the case with 403b plans as well.
It's worth checking, but it would seem that money already in an existing 403b plan's Trad Ann with the 3% guarantee would be subject to those same contractual obligations to the *investor* as I mentioned above.
In any event, that was what we were told when our 403b plan that was entirely at TIAA was moved to Vanguard or Fidelity [it has since been moved back after > 10 years].

Almost ALL of the TIAA holdings in each account were moved, with notice and with some choices about where they would be mapped at least at first. Once moved, they could be re-allocated, including into the then-new Brokerage Window.
Only the CREF mutual funds, TREA, and Trad Ann remained with TIAA. We were told by several different people that this was because those holdings had been contractual with the individual investor, and not with the institution (employer). We could no longer add "new money" to those, except for Trad Ann (and still at the 3% guarantee for both liquid and illiquid).

Indeed a few of the CREF mutual funds then became, and remain, unavailable to investors within the plan unless one already owned some... and did not sell all of it.

One exception thus far: When the 403b plan moved back to TIAA, one could continue to hold existing TREA monies, but NO new money could be invested again in TREA. Note that this is entirely separate from the TIAA/TREA general limits of $150k for newly invested money (although money already there can continue to grow as expected/hoped/etc.). NO one in our 403b plan can invest more money into TREA, at least not withIN the 403b plan. (Other ways to purchase, such as within IRAs aren't relevant to the 403b plan rules.)

I still do not understand why there is this restriction for TREA, but I am trying to find out. (There has been some major turnover in the HR/Benefits Admin this past year, so this type of issue is not high on their priority list for now.)

Does anyone else have a 403b plan at TIAA with "no more money allowed into TREA" (other than growth)? If so, is there a reason given?

RM
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TN_Boy
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Re: TIAA White Paper on Fixed Annuities and SPIAs in Retirement Portfolios

Post by TN_Boy »

7eight9 wrote: Sun Jun 13, 2021 9:18 am
seajay wrote: Sun Jun 13, 2021 9:06 am
Garco wrote: Sun Jun 13, 2021 8:49 am @ Seajay: We have that contingency covered: Long-term Care Insurance (LTCI). The insurance isn't cheap but we subscribe to it preserve our estate, as well as to have a place to go when we can't take care of ourselves.
A good plan/tip :beer. Given parental history something that I should also do (age 60). Present plan was DIY annuity + own home as backstop for longevity/late-life-care.
Long-term care abroad can be relatively affordable. This is a place in Thailand:

Ban Sabai Village, Chiang Mai care home resort. Full care services for seniors.
Offering soft care to full 24 hour ‘close care’.
We also provide specialist care for Alzheimer’s and other dementia.
Perfect for recuperation and rehab after a stroke.
With on site nursing this is the perfect nursing home to enjoy quality assisted living.
https://bansabairesorts.com/senior-care ... hiang-mai/

Pricing --- https://bansabairesorts.com/senior-care ... ce-prices/
Having dealt with relatives who needed long term care, I can state that the most important thing the family can do is ..... visit a lot. And you'll get that same statement from others as well.

It's kinda hard to frequently visit Thailand from the states.

LTC is a hard problem. But no way I'd put a parent in a care facility thousands of miles away. You simply cannot monitor the situation.
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ResearchMed
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Re: TIAA White Paper on Fixed Annuities and SPIAs in Retirement Portfolios

Post by ResearchMed »

TN_Boy wrote: Sun Jun 13, 2021 10:18 am
7eight9 wrote: Sun Jun 13, 2021 9:18 am
seajay wrote: Sun Jun 13, 2021 9:06 am
Garco wrote: Sun Jun 13, 2021 8:49 am @ Seajay: We have that contingency covered: Long-term Care Insurance (LTCI). The insurance isn't cheap but we subscribe to it preserve our estate, as well as to have a place to go when we can't take care of ourselves.
A good plan/tip :beer. Given parental history something that I should also do (age 60). Present plan was DIY annuity + own home as backstop for longevity/late-life-care.
Long-term care abroad can be relatively affordable. This is a place in Thailand:

Ban Sabai Village, Chiang Mai care home resort. Full care services for seniors.
Offering soft care to full 24 hour ‘close care’.
We also provide specialist care for Alzheimer’s and other dementia.
Perfect for recuperation and rehab after a stroke.
With on site nursing this is the perfect nursing home to enjoy quality assisted living.
https://bansabairesorts.com/senior-care ... hiang-mai/

Pricing --- https://bansabairesorts.com/senior-care ... ce-prices/
Having dealt with relatives who needed long term care, I can state that the most important thing the family can do is ..... visit a lot. And you'll get that same statement from others as well.

It's kinda hard to frequently visit Thailand from the states.

LTC is a hard problem. But no way I'd put a parent in a care facility thousands of miles away. You simply cannot monitor the situation.
About those visits: Make sure that they are at least occasionally withOUT advance notice to anyone there (not even relative, lest they mention something). You'll want to see how things are going when they are not expecting you.

RM
This signature is a placebo. You are in the control group.
tibbitts
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Re: TIAA White Paper on Fixed Annuities and SPIAs in Retirement Portfolios

Post by tibbitts »

ResearchMed wrote: Sun Jun 13, 2021 10:15 am
Does anyone else have a 403b plan at TIAA with "no more money allowed into TREA" (other than growth)? If so, is there a reason given?

RM
Not me, but my 403b is still at 3% so it must not have been updated yet. Again it would concern me if there was no advanced notice of the policy, and it does seems strange, given the existing general $150k limitation. I understand and mostly agree with the steps TIAA took with TREA after the financial crisis, but don't understand limits more restrictive than the $150k.
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ResearchMed
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Re: TIAA White Paper on Fixed Annuities and SPIAs in Retirement Portfolios

Post by ResearchMed »

tibbitts wrote: Sun Jun 13, 2021 10:25 am
ResearchMed wrote: Sun Jun 13, 2021 10:15 am
Does anyone else have a 403b plan at TIAA with "no more money allowed into TREA" (other than growth)? If so, is there a reason given?

RM
Not me, but my 403b is still at 3% so it must not have been updated yet. Again it would concern me if there was no advanced notice of the policy, and it does seems strange, given the existing general $150k limitation. I understand and mostly agree with the steps TIAA took with TREA after the financial crisis, but don't understand limits more restrictive than the $150k.
Your "403b is still at 3%" ... have you already been told that the 3% IS going away for your plan?
If not, perhaps you have nothing to worry about, at least not for the near future.

In our case, we were given very adequate notice about any such changes each time, and lots of opportunities to ask questions. How much of that is due to steps our Employer took, on their own or with TIAA... no idea.

RM
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seajay
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Re: TIAA White Paper on Fixed Annuities and SPIAs in Retirement Portfolios

Post by seajay »

ResearchMed wrote: Sun Jun 13, 2021 10:20 am About those visits: Make sure that they are at least occasionally withOUT advance notice to anyone there (not even relative, lest they mention something). You'll want to see how things are going when they are not expecting you.
As of more recent I'm allowed two half hour visits/week, pre-booked times, where you have to arrive a hour beforehand to have a cotton bud on a stick rammed up into your brain through your nose (or so it feels) that is then tested (that takes half hour) before you are then allowed to enter to don a plastic apron, surgical gloves and face mask before being permitted to see each other from a two yard+ distance with no physical contact. Since Covid and its keeping family out of care homes/hospitals I suspect that there's a lot more 'freedom' for staff to get away with things that otherwise they wouldn't.
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Northern Flicker
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Re: TIAA White Paper on Fixed Annuities and SPIAs in Retirement Portfolios

Post by Northern Flicker »

seajay wrote: If you convert (swap out) bond holdings into a annuity holding then yes as a percentage you may hold more equity exposure, be in the "I'm 100% stock in retirement" camp. Broadly no difference, $1M in a stock/bond portfolio versus $600K stock and having spent $400 to buy a annuity. Consider however rather than buying a annuity you roll-your-own, where you retain access to the capital.
The point is that when you roll your own, you have to cover up to your best case longevity (worst case from a funding perspective) but with a SPIA you only have to cover the expected case. Rather than 60% stock/40% bonds, you may be something like 68% stock/32% SPIA or 64% stock/18% bonds/18% SPIA.
My postings are my opinion, and never should be construed as a recommendation to buy, sell, or hold any particular investment.
student
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Re: TIAA White Paper on Fixed Annuities and SPIAs in Retirement Portfolios

Post by student »

tibbitts wrote: Sun Jun 13, 2021 9:57 am
student wrote: Sun Jun 13, 2021 9:24 am
tibbitts wrote: Sun Jun 13, 2021 9:16 am
student wrote: Sun Jun 13, 2021 6:01 am At least one reply above mentioned that TIAA wants to convince institutions to move away from the 3% guarantee product. It is true. In current interest rate environment it is tough for TIAA to maintain it. For whatever reasons, our university decided to hire a consultant to review our 403B offerings and they agreed to let TIAA switch us from the 3% guarantee to something lower. I was not happy and I confronted the consultant at the meeting.
So to be clear the money you previously had in the plan at 3% will now earn only 1% guaranteed? Even former employees are affected by this change? This is not just affecting future contributions?
I was told that money in the old plan will still be under the 3% min contract. It will affect only new money.
That's encouraging for retired employees like me, but I can definitely sympathize with your situation as a currently-contributing employee. I'm hoping that at least none of the existing Traditional funds lose their 3% guarantee. With IRAs TIAA provided some notice, and people could reallocate existing funds accordingly; hopefully that would be the case with 403b plans as well.
I don't think you need to worry. The contract is between you and TIAA, and I do not think they can change the 3% min to money that is already there, and I have never heard of a case that indicates otherwise.
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Re: TIAA White Paper on Fixed Annuities and SPIAs in Retirement Portfolios

Post by student »

tibbitts wrote: Sun Jun 13, 2021 10:25 am
ResearchMed wrote: Sun Jun 13, 2021 10:15 am
Does anyone else have a 403b plan at TIAA with "no more money allowed into TREA" (other than growth)? If so, is there a reason given?

RM
Not me, but my 403b is still at 3% so it must not have been updated yet. Again it would concern me if there was no advanced notice of the policy, and it does seems strange, given the existing general $150k limitation. I understand and mostly agree with the steps TIAA took with TREA after the financial crisis, but don't understand limits more restrictive than the $150k.
They will have to let you know because they will have to issue you a new contract stating the 1% min. I do not think they can change it on the old contract.
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Northern Flicker
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Re: TIAA White Paper on Fixed Annuities and SPIAs in Retirement Portfolios

Post by Northern Flicker »

grok87 wrote: i would hope you are right and that we will start seeing in-plan immediate annuities (i.e. plain vanilla payout annuities) being offered at institutional pricing (i.e. better than what a retail invest could get on their own).
The in-plan annuity would not be eligible for state guaranty pool coverage. 401K plans are pension plans from a legal perspective. The 401K plan would become a hybrid of a defined-contribution and defined-benefit plan-- essentially a pension plan without a payout option based on years of service. The annuity payout stream would either be uncovered (as is the case with TIAA Traditional lifetime income AFAIK), or would have to be covered by the Federally administered Pension Benefit Guaranty Corporation, which would layer an additional fee onto the 401K. If that fee were 25bp, it would just take 12 years to pay the equivalent of a 300bp commission on a retail SPIA covered by a state guaranty pool (and some are available with a 200bp commission).
My postings are my opinion, and never should be construed as a recommendation to buy, sell, or hold any particular investment.
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ResearchMed
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Re: TIAA White Paper on Fixed Annuities and SPIAs in Retirement Portfolios

Post by ResearchMed »

seajay wrote: Sun Jun 13, 2021 10:51 am
ResearchMed wrote: Sun Jun 13, 2021 10:20 am About those visits: Make sure that they are at least occasionally withOUT advance notice to anyone there (not even relative, lest they mention something). You'll want to see how things are going when they are not expecting you.
As of more recent I'm allowed two half hour visits/week, pre-booked times, where you have to arrive a hour beforehand to have a cotton bud on a stick rammed up into your brain through your nose (or so it feels) that is then tested (that takes half hour) before you are then allowed to enter to don a plastic apron, surgical gloves and face mask before being permitted to see each other from a two yard+ distance with no physical contact. Since Covid and its keeping family out of care homes/hospitals I suspect that there's a lot more 'freedom' for staff to get away with things that otherwise they wouldn't.
Ah, right... the pandemic has indeed changed the chance to do this.
I forgot about that, even though we went through it with MIL until she passed last fall.
It probably didn't bother us as much as it might have, given that she'd been at that same facility for several years and we knew it well (and have decided it's where we'll go if/when/etc.).
However, she was moved from Assisted to Skilled for the last couple of months, and there was limited opportunity to visit. But the staff encouraged phone calls almost any time (to them or to her), and they tried to arrange a few special visits when there was a more general lockdown (given her suddenly deteriorating condition), but still... yeah, not the same...

So, for whenever life becomes at least a bit more normal... (sigh).

RM
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Northern Flicker
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Re: TIAA White Paper on Fixed Annuities and SPIAs in Retirement Portfolios

Post by Northern Flicker »

student wrote: Sun Jun 13, 2021 11:06 am
tibbitts wrote: Sun Jun 13, 2021 9:57 am
student wrote: Sun Jun 13, 2021 9:24 am
tibbitts wrote: Sun Jun 13, 2021 9:16 am
student wrote: Sun Jun 13, 2021 6:01 am At least one reply above mentioned that TIAA wants to convince institutions to move away from the 3% guarantee product. It is true. In current interest rate environment it is tough for TIAA to maintain it. For whatever reasons, our university decided to hire a consultant to review our 403B offerings and they agreed to let TIAA switch us from the 3% guarantee to something lower. I was not happy and I confronted the consultant at the meeting.
So to be clear the money you previously had in the plan at 3% will now earn only 1% guaranteed? Even former employees are affected by this change? This is not just affecting future contributions?
I was told that money in the old plan will still be under the 3% min contract. It will affect only new money.
That's encouraging for retired employees like me, but I can definitely sympathize with your situation as a currently-contributing employee. I'm hoping that at least none of the existing Traditional funds lose their 3% guarantee. With IRAs TIAA provided some notice, and people could reallocate existing funds accordingly; hopefully that would be the case with 403b plans as well.
I don't think you need to worry. The contract is between you and TIAA, and I do not think they can change the 3% min to money that is already there, and I have never heard of a case that indicates otherwise.
They can change it for new investment of funds, including reinvestment of interest/dividends.
My postings are my opinion, and never should be construed as a recommendation to buy, sell, or hold any particular investment.
student
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Re: TIAA White Paper on Fixed Annuities and SPIAs in Retirement Portfolios

Post by student »

Northern Flicker wrote: Sun Jun 13, 2021 1:24 pm
student wrote: Sun Jun 13, 2021 11:06 am
tibbitts wrote: Sun Jun 13, 2021 9:57 am
student wrote: Sun Jun 13, 2021 9:24 am
tibbitts wrote: Sun Jun 13, 2021 9:16 am
So to be clear the money you previously had in the plan at 3% will now earn only 1% guaranteed? Even former employees are affected by this change? This is not just affecting future contributions?
I was told that money in the old plan will still be under the 3% min contract. It will affect only new money.
That's encouraging for retired employees like me, but I can definitely sympathize with your situation as a currently-contributing employee. I'm hoping that at least none of the existing Traditional funds lose their 3% guarantee. With IRAs TIAA provided some notice, and people could reallocate existing funds accordingly; hopefully that would be the case with 403b plans as well.
I don't think you need to worry. The contract is between you and TIAA, and I do not think they can change the 3% min to money that is already there, and I have never heard of a case that indicates otherwise.
They can change it for new investment of funds, including reinvestment of interest/dividends.
Yes but they will issue a new contract for new money. Money that is already in the old contract within TIAA Traditional should not be affected.
NiceUnparticularMan
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Re: TIAA White Paper on Fixed Annuities and SPIAs in Retirement Portfolios

Post by NiceUnparticularMan »

Garco wrote: Sun Jun 13, 2021 8:20 am I think the premise of many studies and much of this discussion is that the central purpose of annuities -- particularly "lifetime" annuities -- is to avoid running out of money in your lifetime. Almost every post here seems to assume that this is the overriding goal.

People live in families. Spouses, children, grandparents, grandchildren, and other relatives. The MAIN REASON why I my wife and I have not chosen a lifetime annuity for ourselves is that we want to provide a financial legacy for our children, and our children's children. We also learned from our own parents, who had not annuitized but left legacies for their families (for us and our sibs). In fact just about when I retired, we received inheritances from both sides of the family. All of my siblings and my spouse's siblings received a proportionate share of our parents'- and parents-in-laws' estates.

We have a goodly amount money, about 80% of it derived from our own working careers, our investing in TIAA and the general stock market, and our real estate. We've been retired for 7 years. We have an estate plan -- a legal document -- concerning the distribution of our resources when we pass. The "kids" will do well by us. No way were we going to spend it all on ourselves.
Obviously this is a valid consideration, but I note self-insuring against longevity means your family has to wait until you die to get whatever extra that means for them, if in fact you don't live unusually long in which case they may have done better if you used some SPIAs.

And if in fact some SPIAs give you enough longevity security, you might then be able to spend more on family while alive, and when they most need it in some cases.
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Re: TIAA White Paper on Fixed Annuities and SPIAs in Retirement Portfolios

Post by tibbitts »

ResearchMed wrote: Sun Jun 13, 2021 10:38 am
tibbitts wrote: Sun Jun 13, 2021 10:25 am
ResearchMed wrote: Sun Jun 13, 2021 10:15 am
Does anyone else have a 403b plan at TIAA with "no more money allowed into TREA" (other than growth)? If so, is there a reason given?

RM
Not me, but my 403b is still at 3% so it must not have been updated yet. Again it would concern me if there was no advanced notice of the policy, and it does seems strange, given the existing general $150k limitation. I understand and mostly agree with the steps TIAA took with TREA after the financial crisis, but don't understand limits more restrictive than the $150k.
Your "403b is still at 3%" ... have you already been told that the 3% IS going away for your plan?
If not, perhaps you have nothing to worry about, at least not for the near future.

In our case, we were given very adequate notice about any such changes each time, and lots of opportunities to ask questions. How much of that is due to steps our Employer took, on their own or with TIAA... no idea.

RM
No changes that I know of are in the works for my plan, but it seems like the older plans are being gradually replaced. As long as there's some notice and existing contributions in Traditional don't lose their 3% guarantee, I'm happy.
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Re: TIAA White Paper on Fixed Annuities and SPIAs in Retirement Portfolios

Post by ResearchMed »

tibbitts wrote: Sun Jun 13, 2021 2:26 pm
ResearchMed wrote: Sun Jun 13, 2021 10:38 am
tibbitts wrote: Sun Jun 13, 2021 10:25 am
ResearchMed wrote: Sun Jun 13, 2021 10:15 am
Does anyone else have a 403b plan at TIAA with "no more money allowed into TREA" (other than growth)? If so, is there a reason given?

RM
Not me, but my 403b is still at 3% so it must not have been updated yet. Again it would concern me if there was no advanced notice of the policy, and it does seems strange, given the existing general $150k limitation. I understand and mostly agree with the steps TIAA took with TREA after the financial crisis, but don't understand limits more restrictive than the $150k.
Your "403b is still at 3%" ... have you already been told that the 3% IS going away for your plan?
If not, perhaps you have nothing to worry about, at least not for the near future.

In our case, we were given very adequate notice about any such changes each time, and lots of opportunities to ask questions. How much of that is due to steps our Employer took, on their own or with TIAA... no idea.

RM
No changes that I know of are in the works for my plan, but it seems like the older plans are being gradually replaced. As long as there's some notice and existing contributions in Traditional don't lose their 3% guarantee, I'm happy.
Then... :happy

Also, IF you want to put more into that 3% guarantee version, now is probably the time to start that process, if you can.
We had plenty of time, both before the move away from TIAA and then when the plan moved back to again be entirely TIAA (except for outside funds in the Brokerage Window).
But that's not a guarantee that your plan would have lots of time (or maybe any time at all??).
But you should be safe wrt any monies already in the 3% Trad Ann, from everything I've ever read or heard from TIAA specifically about this, etc.
OTOH, IANAL and my opinion is worth the paper it's written on. (Note: NO paper at all was used. :twisted: )

RM
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Re: TIAA White Paper on Fixed Annuities and SPIAs in Retirement Portfolios

Post by tibbitts »

ResearchMed wrote: Sun Jun 13, 2021 2:36 pm
tibbitts wrote: Sun Jun 13, 2021 2:26 pm
ResearchMed wrote: Sun Jun 13, 2021 10:38 am
tibbitts wrote: Sun Jun 13, 2021 10:25 am
ResearchMed wrote: Sun Jun 13, 2021 10:15 am
Does anyone else have a 403b plan at TIAA with "no more money allowed into TREA" (other than growth)? If so, is there a reason given?

RM
Not me, but my 403b is still at 3% so it must not have been updated yet. Again it would concern me if there was no advanced notice of the policy, and it does seems strange, given the existing general $150k limitation. I understand and mostly agree with the steps TIAA took with TREA after the financial crisis, but don't understand limits more restrictive than the $150k.
Your "403b is still at 3%" ... have you already been told that the 3% IS going away for your plan?
If not, perhaps you have nothing to worry about, at least not for the near future.

In our case, we were given very adequate notice about any such changes each time, and lots of opportunities to ask questions. How much of that is due to steps our Employer took, on their own or with TIAA... no idea.

RM
No changes that I know of are in the works for my plan, but it seems like the older plans are being gradually replaced. As long as there's some notice and existing contributions in Traditional don't lose their 3% guarantee, I'm happy.
Then... :happy

Also, IF you want to put more into that 3% guarantee version, now is probably the time to start that process, if you can.
We had plenty of time, both before the move away from TIAA and then when the plan moved back to again be entirely TIAA (except for outside funds in the Brokerage Window).
But that's not a guarantee that your plan would have lots of time (or maybe any time at all??).
But you should be safe wrt any monies already in the 3% Trad Ann, from everything I've ever read or heard from TIAA specifically about this, etc.
OTOH, IANAL and my opinion is worth the paper it's written on. (Note: NO paper at all was used. :twisted: )

RM
In the last 8mo I've moved a large amount for me into Traditional (403b) from outside of TIAA. I was a little hesitant but also moved my TIAA IRA with 3% Traditional into my TIAA 403b, just with the idea of eventually getting rid of my post-tax IRA contributions (now down to about $7k.) I was pretty sure I'd be allowed to keep the 3% as I was in the IRA - but that was less than $50k so not the hugest issue if I don't.
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Re: TIAA White Paper on Fixed Annuities and SPIAs in Retirement Portfolios

Post by grok87 »

Northern Flicker wrote: Sun Jun 13, 2021 11:22 am
grok87 wrote: i would hope you are right and that we will start seeing in-plan immediate annuities (i.e. plain vanilla payout annuities) being offered at institutional pricing (i.e. better than what a retail invest could get on their own).
The in-plan annuity would not be eligible for state guaranty pool coverage. 401K plans are pension plans from a legal perspective. The 401K plan would become a hybrid of a defined-contribution and defined-benefit plan-- essentially a pension plan without a payout option based on years of service. The annuity payout stream would either be uncovered (as is the case with TIAA Traditional lifetime income AFAIK), or would have to be covered by the Federally administered Pension Benefit Guaranty Corporation, which would layer an additional fee onto the 401K. If that fee were 25bp, it would just take 12 years to pay the equivalent of a 300bp commission on a retail SPIA covered by a state guaranty pool (and some are available with a 200bp commission).
Im prettysure state guarantee funds would apply
RIP Mr. Bogle.
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Re: TIAA White Paper on Fixed Annuities and SPIAs in Retirement Portfolios

Post by Dottie57 »

Northern Flicker wrote: Sat Jun 12, 2021 3:18 pm
Dottie57 wrote: Sat Jun 12, 2021 10:06 am
grok87 wrote: Sat Jun 12, 2021 7:21 am
Northern Flicker wrote: Fri Jun 11, 2021 7:54 pm
Horton wrote: Fri Jun 11, 2021 6:53 pm

My stable value option currently yields about half TIAA Traditional, so I’d rather the TDF in my 401k use a bond fund.

(I’m basing this on my FIL’s minimum yield of 3% in TIAA Traditional.)
Well sure, a product needs to have a competitive yield/return to be effective. The white paper also discusses lifetime income annuities, which can be purchased in an IRA or taxable account. MYGA's and are another type of fixed annuity. Annuitizing some of one's fixed income assets with a SPIA may improve portfolio efficiency for a retiree.
the trouble is the pricing. still waiting to see insitutional pricing for immediate income inflation-indexed annuities offered as in-plan options in 401k plans
It would be great to have the option for an SPIA within a 401k.
You can roll 401K funds to an IRA and hold a SPIA in an IRA. However I think offering it within a 401k
Yes I can do this of course. However being able to create a pension within your 401k really makes retirement real. I consider a pension the gold standard. I believe it might really focus people n preparing for retirement. Friends with a pension are very happy they have it.
Wrench
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Re: TIAA White Paper on Fixed Annuities and SPIAs in Retirement Portfolios

Post by Wrench »

7eight9 wrote: Sun Jun 13, 2021 9:18 am
seajay wrote: Sun Jun 13, 2021 9:06 am
Garco wrote: Sun Jun 13, 2021 8:49 am @ Seajay: We have that contingency covered: Long-term Care Insurance (LTCI). The insurance isn't cheap but we subscribe to it preserve our estate, as well as to have a place to go when we can't take care of ourselves.
A good plan/tip :beer. Given parental history something that I should also do (age 60). Present plan was DIY annuity + own home as backstop for longevity/late-life-care.
Long-term care abroad can be relatively affordable. This is a place in Thailand:

Ban Sabai Village, Chiang Mai care home resort. Full care services for seniors.
Offering soft care to full 24 hour ‘close care’.
We also provide specialist care for Alzheimer’s and other dementia.
Perfect for recuperation and rehab after a stroke.
With on site nursing this is the perfect nursing home to enjoy quality assisted living.
https://bansabairesorts.com/senior-care ... hiang-mai/

Pricing --- https://bansabairesorts.com/senior-care ... ce-prices/
Wow! That's one I had never heard of, or thought about. Of course, it might be a problem arranging it when i need it, since I may not be able to remember the day, date or who is president at that point... :happy
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Northern Flicker
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Re: TIAA White Paper on Fixed Annuities and SPIAs in Retirement Portfolios

Post by Northern Flicker »

grok87 wrote: Sun Jun 13, 2021 3:54 pm
Northern Flicker wrote: Sun Jun 13, 2021 11:22 am
grok87 wrote: i would hope you are right and that we will start seeing in-plan immediate annuities (i.e. plain vanilla payout annuities) being offered at institutional pricing (i.e. better than what a retail invest could get on their own).
The in-plan annuity would not be eligible for state guaranty pool coverage. 401K plans are pension plans from a legal perspective. The 401K plan would become a hybrid of a defined-contribution and defined-benefit plan-- essentially a pension plan without a payout option based on years of service. The annuity payout stream would either be uncovered (as is the case with TIAA Traditional lifetime income AFAIK), or would have to be covered by the Federally administered Pension Benefit Guaranty Corporation, which would layer an additional fee onto the 401K. If that fee were 25bp, it would just take 12 years to pay the equivalent of a 300bp commission on a retail SPIA covered by a state guaranty pool (and some are available with a 200bp commission).
Im prettysure state guarantee funds would apply
Insurance is state regulated. State regulated insurance products are underwritten in the guaranty pool by the state requiring insurers doing business in the state to chip in for shortfalls of an insurance company as part of the regulations. So the group of insurers doing business in a state essentially cover each other as part of the cost of doing business in a state, a cost presumably embedded in the premiums paid by insured customers.

How would a state regulate products offered in 401K's?

Stable value funds are insurance products not covered by state guarantee pools.
My postings are my opinion, and never should be construed as a recommendation to buy, sell, or hold any particular investment.
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Northern Flicker
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Re: TIAA White Paper on Fixed Annuities and SPIAs in Retirement Portfolios

Post by Northern Flicker »

grok87 wrote: Sun Jun 13, 2021 3:54 pm
Northern Flicker wrote: Sun Jun 13, 2021 11:22 am
grok87 wrote: i would hope you are right and that we will start seeing in-plan immediate annuities (i.e. plain vanilla payout annuities) being offered at institutional pricing (i.e. better than what a retail invest could get on their own).
The in-plan annuity would not be eligible for state guaranty pool coverage. 401K plans are pension plans from a legal perspective. The 401K plan would become a hybrid of a defined-contribution and defined-benefit plan-- essentially a pension plan without a payout option based on years of service. The annuity payout stream would either be uncovered (as is the case with TIAA Traditional lifetime income AFAIK), or would have to be covered by the Federally administered Pension Benefit Guaranty Corporation, which would layer an additional fee onto the 401K. If that fee were 25bp, it would just take 12 years to pay the equivalent of a 300bp commission on a retail SPIA covered by a state guaranty pool (and some are available with a 200bp commission).
Im prettysure state guarantee funds would apply
Insurance is state regulated. State regulated insurance products are underwritten in the guaranty pool by the state requiring insurers doing business in the state to chip in for shortfalls of an insurance company as part of the regulations. So the group of insurers doing business in a state essentially cover each other as part of the cost of doing business in a state, a cost presumably embedded in the premiums paid by insured customers.

I believe TIAA retirement plan products are state-regulated annuity contracts. For instance, I think TIAA Real Estate may not have been offered in California at one time because the state did not authorize it. State guaranty pools probably could cover TIAA Traditional theoretically, but my understanding is that they do not. At least that was the answer I got from a TIAA rep on the phone.

But how would a state guaranty pool cover income annuities in a 401K when states do not regulate products offered in 401K's, which are regulated under Federal pension law by the Federal Dept. of Labor? I'm skeptical that a state has any authority to regulate a pension contract like a 401K. Stable value funds are examples of insurance products in 401K's that are not covered against insolvency by state guaranty pools.
My postings are my opinion, and never should be construed as a recommendation to buy, sell, or hold any particular investment.
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Horton
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Re: TIAA White Paper on Fixed Annuities and SPIAs in Retirement Portfolios

Post by Horton »

Many TDF providers are working on solutions that offer in-plan immediate annuities or QLACs:

https://www.blackrock.com/corporate/new ... e-paycheck

https://www.ssga.com/investment-topics/ ... 0_2018.pdf

It remains to be seen if plan sponsors and/or individuals will have enough interest.
grok87
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Re: TIAA White Paper on Fixed Annuities and SPIAs in Retirement Portfolios

Post by grok87 »

Northern Flicker wrote: Sun Jun 13, 2021 6:44 pm
grok87 wrote: Sun Jun 13, 2021 3:54 pm
Northern Flicker wrote: Sun Jun 13, 2021 11:22 am
grok87 wrote: i would hope you are right and that we will start seeing in-plan immediate annuities (i.e. plain vanilla payout annuities) being offered at institutional pricing (i.e. better than what a retail invest could get on their own).
The in-plan annuity would not be eligible for state guaranty pool coverage. 401K plans are pension plans from a legal perspective. The 401K plan would become a hybrid of a defined-contribution and defined-benefit plan-- essentially a pension plan without a payout option based on years of service. The annuity payout stream would either be uncovered (as is the case with TIAA Traditional lifetime income AFAIK), or would have to be covered by the Federally administered Pension Benefit Guaranty Corporation, which would layer an additional fee onto the 401K. If that fee were 25bp, it would just take 12 years to pay the equivalent of a 300bp commission on a retail SPIA covered by a state guaranty pool (and some are available with a 200bp commission).
Im prettysure state guarantee funds would apply
Insurance is state regulated. State regulated insurance products are underwritten in the guaranty pool by the state requiring insurers doing business in the state to chip in for shortfalls of an insurance company as part of the regulations. So the group of insurers doing business in a state essentially cover each other as part of the cost of doing business in a state, a cost presumably embedded in the premiums paid by insured customers.

I believe TIAA retirement plan products are state-regulated annuity contracts. For instance, I think TIAA Real Estate may not have been offered in California at one time because the state did not authorize it. State guaranty pools probably could cover TIAA Traditional theoretically, but my understanding is that they do not. At least that was the answer I got from a TIAA rep on the phone.

But how would a state guaranty pool cover income annuities in a 401K when states do not regulate products offered in 401K's, which are regulated under Federal pension law by the Federal Dept. of Labor? I'm skeptical that a state has any authority to regulate a pension contract like a 401K. Stable value funds are examples of insurance products in 401K's that are not covered against insolvency by state guaranty pools.
you raise some good points. i did not know about the Stable Value fund situation.

I still think in-plan annuities would be protected by state guarantee funds. i think its similar to when a corporate does a pension risk transfer to an insurance company and replaces company pensions with annuities
http://www.pensionrights.org/publicatio ... ce-company
cheers,
grok
RIP Mr. Bogle.
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Northern Flicker
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Re: TIAA White Paper on Fixed Annuities and SPIAs in Retirement Portfolios

Post by Northern Flicker »

If it were implemented that way, it seems it may be coverable by a state guaranty pool. You likely would not be able to split it up between multiple insurers to increase the guaranty limits.

Today, you can roll 401K assets to an IRA and buy a SPIA. Perhaps a large 401K plan could negotiate more favorable pricing.
My postings are my opinion, and never should be construed as a recommendation to buy, sell, or hold any particular investment.
grok87
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Re: TIAA White Paper on Fixed Annuities and SPIAs in Retirement Portfolios

Post by grok87 »

Northern Flicker wrote: Sun Jun 13, 2021 10:24 pm If it were implemented that way, it seems it may be coverable by a state guaranty pool. You likely would not be able to split it up between multiple insurers to increase the guaranty limits.

Today, you can roll 401K assets to an IRA and buy a SPIA. Perhaps a large 401K plan could negotiate more favorable pricing.
yes i think that is the idea
RIP Mr. Bogle.
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Northern Flicker
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Re: TIAA White Paper on Fixed Annuities and SPIAs in Retirement Portfolios

Post by Northern Flicker »

Turns out that the passsge of the Federal SECURE Act in 2019 may be what will change this.

https://www.investopedia.com/articles/r ... nnuity.asp

Under the new law, there is less risk of the employer being sued if the insurer they pick to make annuity payments goes bankrupt and can't pay claims. This raises a question of whether state guaranty pools would be in place if the employer might take on the insolvency liability before.
My postings are my opinion, and never should be construed as a recommendation to buy, sell, or hold any particular investment.
grok87
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Re: TIAA White Paper on Fixed Annuities and SPIAs in Retirement Portfolios

Post by grok87 »

Northern Flicker wrote: Sun Jun 13, 2021 11:29 pm Turns out that the passsge of the Federal SECURE Act in 2019 may be what will change this.

https://www.investopedia.com/articles/r ... nnuity.asp

Under the new law, there is less risk of the employer being sued if the insurer they pick to make annuity payments goes bankrupt and can't pay claims. This raises a question of whether state guaranty pools would be in place if the employer might take on the insolvency liability before.
thanks. good article. i always thought the insolvency liability meant for sums in excess of state guarantee fund limits.
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Northern Flicker
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Re: TIAA White Paper on Fixed Annuities and SPIAs in Retirement Portfolios

Post by Northern Flicker »

That could be.

Offering through a 401K may also limit the ability to spread assets over more than 1 insurance company if assets exceed the state guaranty pool limit. Another point about state guaranty pools is that the limits vary from state to state so that if the annuitant moves to another state the new limits apply.

I'm also not convinced the lifetime income product in the 401K necessarily will be cheaper than a SPIA in an IRA. There will be the benefit of a large group of annuitants, but once the contract is in place, the individual will not be able to compare different providers. It will depend on the employer's attitude about the product, just like with other aspects of 401K costs. I would expect some to be cost effective, and some not so cost effective.
My postings are my opinion, and never should be construed as a recommendation to buy, sell, or hold any particular investment.
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Horton
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Re: TIAA White Paper on Fixed Annuities and SPIAs in Retirement Portfolios

Post by Horton »

Lots of people roll money out of 401k plans into IRAs. People have the ability to purchase a SPIA today using this method, but very few do. I just don’t see many people (other than actuaries, economists, and BHs) buying SPIAs via an in-plan option.

I wish I had data to show you the percentage of people who elect a lump sum in most cash balance pension plans. It would astonish you. Think >90% in most cases. Pensions are the most efficient way to get an annuity because they use a general mortality table (rather than a healthy mortality table) and there’s no profit or capital load. Yet, within cash balance plans, very very few want the annuity.

As a result, I just don’t see this a solution for the masses. It might be nice for some, but, like everything, the options available depend on the demand.
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Re: TIAA White Paper on Fixed Annuities and SPIAs in Retirement Portfolios

Post by afan »

I have long assumed that we will not annuitize any significant portion of our savings so I have not followed the issue. For those who have been paying attention, a few questions:

Do the simulations of annuitizing take into account the tax consequences? If one were to annuitize from taxable savings, they would have to pay capital gains tax after selling these holdings. The remainder after tax could be used to purchase an annuity. The dividends and capital gains distributions from the taxable account would have been taxed at capital gains rates . The money from the annuity would be taxed at ordinary income rates. These tax differences alone, I suspect, would take this option off the table.

Does anyone know of a study where this was considered and the annuity was still the better financial move?

Second question.
The discussions I have heard suggest that the annuity performs best when one wants to spend all their money in their lifetime. However, I have heard it claimed that even one with bequest motives can benefit by partially annuitizing, living on the annuity payments and protecting the rest of the assets for heirs.I don't see how this would work but does anyone know?

Third.
From the big picture POV mortality credits work to the advantage of those who live a long time at the expense of those who die young. I don't see how everyone can be better off under such a system. Without attempting to work through an example, it seems that the annuity transfers money to the longer lived people at the expense of the shorter lived people, minus the costs of the insurance company and tax consequences. How can it be that an annuity would be appropriate for everyone without money dropping from the skies to make those with short lifespans whole?
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Re: TIAA White Paper on Fixed Annuities and SPIAs in Retirement Portfolios

Post by catdoctor »

afan wrote: Wed Jun 16, 2021 9:23 am If one were to annuitize from taxable savings, they would have to pay capital gains tax after selling these holdings. The remainder after tax could be used to purchase an annuity. The dividends and capital gains distributions from the taxable account would have been taxed at capital gains rates .CG rate and dividend rate The money from the annuity would be taxed at ordinary income rates. only the gains
afan
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Re: TIAA White Paper on Fixed Annuities and SPIAs in Retirement Portfolios

Post by afan »

CG rate and qualified dividends rates are the same.

Taxing only the gains is the same as one would have if the money were kept outside the annuity.

But once the payments are coming from the annuity the tax on the taxable amounts would be at ordinary income rates, not CG.
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NiceUnparticularMan
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Re: TIAA White Paper on Fixed Annuities and SPIAs in Retirement Portfolios

Post by NiceUnparticularMan »

afan wrote: Wed Jun 16, 2021 10:58 am CG rate and qualified dividends rates are the same.

Taxing only the gains is the same as one would have if the money were kept outside the annuity.

But once the payments are coming from the annuity the tax on the taxable amounts would be at ordinary income rates, not CG.
I think you are basically right that selling appreciated assets to buy an annuity rather than selling those assets over time (including not reinvesting dividends and interest, which to me is kinda like selling assets anyway) might result in a higher tax rate on those payments depending on your income tax rate. I note that annuities do defer taxes in a way reinvested dividends and interest do not. But if you assume you are going to be spending your whole dividend/interest yield AND more each period, then that isn't going to matter much.

However, if you "win" your bet and live longer than your actuarial expectation, then even though those payments are now fully taxed as income, they are also extra payments! Meaning a portfolio of assets calculated to reach zero at that point after withdrawals is done paying taxes, but also making payments, and the insurance company in this hypothetical has to keep making payments to you (which are funded by other people who "lost" their longevity bet, of course).

So, I'd guess a DIY approach will be more tax-efficient in scenarios where you only make it to your actuarial lifespan, possibly a bit more. But I'd also guess in scenarios where you significantly outlive your actuarial lifespan, the extra payments outweigh any expected tax inefficiencies.

Which is the whole point of these things, from my view. You should definitely take heed of taxes. But if you can put $X in an annuity to insurance against unexpected longevity, despite the expected tax rate, and you calculate you would have to put more than $X in a DIY portfolio to cover the same unexpected longevity scenarios, you can consider buying the annuity despite the different tax treatment.
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