Hello there, educators of higher learning! I'm Greg Shepard from S&A Financial Services, and my mission is to help you unravel the mysteries of
your often bewildering higher education retirement plans. Today, on November
2nd, I bring you tidings of great financial joy. TIAA, in an early Christmas
gesture, has given you a gift that's too good to pass up. What gift, you ask?
An opportunity to take advantage of unprecedented high-interest rates within
TIAA Traditional. In this blog post, I'm going to guide you through three
strategic ways to leverage these remarkable rates to your benefit.
The Significance of TIAA Traditional's High Rates
TIAA Traditional is a beloved and trusted retirement vehicle for
many educators in higher education. This annuity option has a long history of
providing stable returns and a degree of predictability in an otherwise
unpredictable financial world. But here's the kicker: TIAA Traditional has
recently bestowed you with an early Christmas gift in the form of
extraordinarily high interest rates.
The TIAA board routinely evaluates and adjusts the rates
associated with TIAA Traditional, and as of November 1st 2023, these
rates have surged to levels that haven't been seen in years. Among these rates,
there's a stunning 7% in an illiquid contract that catches the eye. Yes, you
read that right, a whopping 7%!
Now, before you pass this off as just another piece of financial
news, understand this: the interest rate you can secure within TIAA Traditional
directly impacts your retirement savings and income. If you haven't already
explored this opportunity, I implore you to take notice, because this is a
game-changer. It's not just an incremental increase; it's a substantial leap in
Now, let's dive into the strategies to seize this opportunity.
Strategy 1: The 120-Day Reinvestment Rule
A strategy that's relatively simple but can have a significant
impact on your returns is the 120-Day Reinvestment Rule. It involves moving
your money from one TIAA contract, a liquid account like a GSRA (Group
Supplemental Retirement Annuity), and reinvesting it.
Here's how it works:
If you have Traditional money
in a liquid account within TIAA, like GSRA or other similar contracts, you can
Once you've sold it,
consider moving the proceeds into a money market fund. As of now, these money market funds are
offering returns of over 5% (November 2023).
Leave the funds in the
money market for a minimum of 120 days, or roughly four months.
On the 121st day, or
after the 120-day period, reinvest this money back into TIAA Traditional. By
doing so, you'll benefit from the new, higher interest rates offered, which
could be 6% or even higher.
For those who initiated this strategy 120 days ago, you're in for
a real treat when reintroducing your money to TIAA Traditional. Your new interest
rates can be as high as 6%. That's a significant improvement over older rates.
Those who have held TIAA Traditional for decades might find this strategy
especially rewarding because they're unlikely to be earning anywhere close to
Strategy 2: Redirect Underperforming Funds to TIAA Traditional
Another strategy revolves around scrutinizing your current TIAA
investment portfolio and identifying underperforming funds, particularly bond
funds. It's as straightforward as moving money from your underperforming
investments to TIAA Traditional or even a money market fund.
Here's a step-by-step guide:
Examine your current
investments in TIAA. Focus on funds that aren't performing as well as you'd
like, particularly bond funds.
Compare the returns on
these underperforming funds with the new, high-interest rates within TIAA
Traditional, which can be 6% or higher.
Evaluate whether it
makes financial sense to divest from these lagging investments and redirect the
proceeds to TIAA Traditional or a money market fund.
If the returns from TIAA
Traditional or the money market fund are more attractive than your existing investments,
take the plunge and make the necessary changes.
Please note that this isn't investment advice but a strategy you
can explore. Every individual's financial situation is unique, and it's vital
to consult with a financial advisor to tailor a plan that aligns with your
specific goals and needs.
Strategy 3: Contract-to-Contract TPA
The third strategy in our arsenal is Contract-to-Contract TPA
(Transfer Payout Annuity), a slightly more complex yet equally rewarding
tactic. With this strategy, you can move money from one illiquid TIAA contract
that contains TIAA Traditional with a low interest rate to another contract
that offers a higher rate. This can make a substantial difference in the return
on your investment.
Here's a breakdown:
Identify an illiquid
TIAA contract that holds TIAA Traditional with a relatively low interest rate.
Initiate a 7 or 10-year
Transfer Payout Annuity (TPA) within this contract.
Choose the option to
direct the payments from this TPA to another TIAA contract - liquid. Ensure
that the new contract offers a higher interest rate on Traditional than what
you already have.
By implementing this
strategy, you are essentially reallocating your investments from a
lower-interest-rate contract to one with a higher rate.
While this strategy requires a bit more coordination and planning,
the potential gains in terms of returns on your investment make it a compelling
option for anyone holding TIAA Traditional in an underperforming contract.
Bonus Strategy: Transferring External Accounts
If you hold external accounts that don't belong to your current
educational or professional institution, there's another bonus strategy you can
consider. Even if you've transitioned away from your original employer, you can
utilize these external accounts to move money into specific contracts within
the TIAA platform.
This approach requires detailed coordination with TIAA and a clear
understanding of how it can work for your unique situation. Make sure to
consult with TIAA or a financial advisor to navigate this option efficiently.
In a world where high-interest
rates are often scarce, TIAA Traditional's new, unprecedented rates present a golden
opportunity. By exploring these strategies, you can leverage these rates to
maximize your retirement savings. Each strategy offers a unique path to secure
more robust returns on your investments.
However, remember that these strategies should be approached
with a clear understanding of your financial goals, and it's highly recommended
to seek advice from a financial advisor. Your financial future is too important
to leave to chance, and these strategies are valuable tools to shape it
according to your desires and aspirations. Don't let this opportunity slip by;
take action today to reap the benefits of these exceptional interest rates.