SYSTEMATIC WITHDRAWALS AND TRANSFERS FROM TIAA TRADITIONAL

Transcription

1 SYSTEMATIC WITHDRAWALS AND TRANSFERS FROM TIAA TRADITIONAL

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3 THE TIAA TRADITIONAL ANNUITY The TIAA Traditional Annuity is a guaranteed annuity backed by TIAA s claims-paying ability. In the accumulation stage, TIAA Traditional guarantees your principal and a minimum interest rate between 1% and 3%. TIAA Traditional also offers the opportunity for additional amounts in excess of the guaranteed rate. These additional amounts, when declared by the TIAA Board of Trustees, remain in effect for the declaration year that begins every March 1. Because TIAA additional amounts are supported by the general account, which invests in long-term, relatively illiquid investments in an effort to obtain increased yields, money can be moved out of TIAA Traditional through withdrawals or transfers only over an 84-month period. * In this booklet, you ll learn about the withdrawal and transfer process from Retirement Select and Retirement Choice plans so you can determine how it fits into your retirement planning. * If you have a Retirement Annuity contract, the TIAA annuity contract does not allow lump-sum cash withdrawals from the TIAA Traditional Annuity and transfers must be made in 10 annual payments. If you have a Group Retirement Annuity contract, lump-sum withdrawals are available from the TIAA Traditional Annuity only within 120 days after termination of employment and are subject to a surrender charge. All other withdrawals and all transfers to the Real Estate Account or to CREF must be made in 10 annual payments (five years for withdrawals after termination of employment). 1

4 HOW DO I MOVE FUNDS OUT OF TIAA TRADITIONAL? As you review your portfolio throughout your career or at retirement, you may decide to start receiving income earlier than you planned or you may want to adjust your asset allocation to better meet your goals. Your TIAA Traditional accumulation in Retirement Select and Retirement Choice contracts is available for systematic withdrawals or transfers through the following methods. You can: receive your TIAA Traditional accumulation as a cash payment or directly roll over the proceeds to an IRA at TIAA-CREF, or to another employer s plan;* transfer the funds to any of the accounts available to you under your employer s plan; and directly transfer the funds to other annuities or mutual fund custodial accounts at another company.* HOW DO SYSTEMATIC WITHDRAWALS AND TRANSFERS WORK? Through the systematic withdrawal and transfer process, you receive monthly installments over the 84-month period, based on the interest rates credited to the accumulation in prior months. The initial amount represents 1/84 of your accumulation at the time of the installment. The subsequent installments are based on a factor using the remaining months in the payment stream. For example, the second month represents 1/83 of the remaining accumulation; the third month represents 1/82 of the remaining accumulation and so on through the final installment, which will represent 1/1, or the full remaining accumulation. The accumulation from which you are making withdrawals or transfers remains in your original contract and is credited with the interest at the rates then currently in effect. As the monthly payments are made, your TIAA Traditional accumulation is reduced accordingly. * The ability to receive payments in cash or transfer to other companies is subject to the terms of your employer s plan. Also, if you have a TIAA Traditional Retirement Choice or Retirement Select annuity and your employer s plan permits, you can receive the entire TIAA Traditional accumulation in cash within 120 days following termination of employment, subject to a 2.5% surrender charge; after the 120-day period, these funds can only be withdrawn through the 84-month option. 2

5 IF I WANT TO RECEIVE CASH PAYMENTS OR MAKE TRANSFERS FROM THE TIAA TRADITIONAL ACCUMULATION IN MY RETIREMENT SELECT PLUS, RETIREMENT CHOICE PLUS OR IRA, DOES IT HAVE TO BE OVER AN 84-MONTH PERIOD? No. The TIAA Traditional accumulation in Retirement Select Plus, Retirement Choice Plus or IRAs may be withdrawn or transferred in a lump sum, subject to the Internal Revenue Service (IRS) rules. WHAT INTEREST RATES ARE USED TO DETERMINE MY WITHDRAWAL OR TRANSFER AMOUNT? Each installment received as a cash payment or transferred represents a return of principal and interest. TIAA Traditional guarantees your principal and a certain interest rate established under the contract. There is also the opportunity for additional amounts declared by the TIAA Board of Trustees, which remain in effect for the declaration year that begins every March 1. A Hypothetical TIAA Traditional Systematic Payment This table illustrates the initial payment assuming monthly installments from a TIAA Traditional accumulation of $50,000 beginning on September 1, The initial amount represents 1/84 of the accumulation as of the payment date. The total payment includes a return of principal, the guaranteed interest and any additional amounts in effect at the time. Future payments will vary depending on the total interest credited. DATE OF INITIAL REMAINING FIRST PAYMENT PAYMENT ACCUMULATION September 1, 2005 $ $49, Please note that the above illustration is hypothetical. To request a projection of your initial payment, please contact our Telephone Counseling Center at Monday to Friday from 8 a.m. to 10 p.m., and Saturday from 9 a.m. to 6 p.m. (ET). 3

6 CAN I MAKE CHANGES ONCE PAYMENTS OR TRANSFERS BEGIN? During the period in which you are making withdrawals or transferring funds from TIAA Traditional, your needs and objectives may change, so you may want to make some adjustments. By calling our Telephone Counseling Center, you can: receive the payments in cash or directly roll over payments,* transfer future payments to other accounts available under your employer s plan, transfer the payment back to TIAA Traditional,** transfer the payments to annuity or mutual fund custodial accounts at another company.* In addition, if you retire and are ready to begin receiving lifetime annuity income, you can convert your remaining TIAA Traditional accumulation into a lifetime annuity. WHY 84 MONTHLY INSTALLMENTS? TIAA Traditional s primary objective is to guarantee your principal and a specified interest rate. It also offers greater growth through additional amounts. These objectives are met through the general account s portfolio of long-term investments in publicly traded bonds, commercial mortgages, private placement loans to business and industry, and to a lesser extent, real estate. * Receiving payments in cash or transferring funds to another company is subject to the terms of your employer s plan. Also, if your contract is Retirement Select or Retirement Choice and you now want to receive payments in cash, you may be able to receive the entire TIAA accumulation in a lump sum if you make your request within 120 days of termination of employment. ** Payments redirected to TIAA Traditional will be credited with the current interest rate for new contributions when the transfer is made. Annuity account options are available through contracts issued by TIAA or CREF. These contracts are designed for retirement or other long-term goals, and offer a variety of income options, including lifetime income. Payments from the variable annuity accounts are not guaranteed and will rise or fall based on investment performance. Mutual funds do not offer the range of income options available through annuities. 4

7 Long-term investments generally provide a higher return than shortterm instruments. The 84-month payout schedule enables TIAA to invest in long-term instruments, thereby helping TIAA to meet its goal of increasing the return to all participants. The 84-month payout minimizes the likelihood that sudden and unpredictable outflows of funds could disrupt this long-term strategy, jeopardize the guarantee of principal and contractual interest, and reduce the earnings credited to TIAA Traditional. TIAA Traditional strives to provide for maximum safety of your funds with guaranteed growth. For its stability, sound investments, claims-paying ability, and overall financial strength, TIAA currently holds top ratings from all the leading insurance company ratings agencies: A.M. Best Co., Fitch, Moody s Investors Service, and Standard & Poor s. At present, only four companies demonstrate this level of financial strength. (These ratings of TIAA as an insurance company do not apply to the TIAA Real Estate Account, CREF or mutual funds.) DO I NEED TO TERMINATE EMPLOYMENT TO START THE PROCESS? You do not need to terminate employment to make transfers to any of the accounts available in your employer s plan. However, to receive payments in cash or make a direct rollover to an IRA or other plan, you generally must have terminated employment from your contributing employer. If you choose cash payments, remember that they are subject to mandatory 20% federal income tax withholding unless you make a direct rollover. WHAT HAPPENS IF I DIE? If you die before all payments or transfers are made, your beneficiary(ies) can receive the commuted value the present value of the remaining payments in a variety of ways. When the time comes, we ll provide your beneficiary(ies) with all the information they ll need to select the most suitable payment method. WILL I RECEIVE UPDATED INFORMATION ON THE BALANCE OF MY TIAA TRADITIONAL ACCUMULATION? Your TIAA Traditional accumulation will appear in your quarterly reviews. For more current information on all of your TIAA-CREF contracts, you can visit our website at or call our Automated Telephone Service at , 24 hours a day, 7 days a week. You can also call our Telephone Counseling Center at , Monday to Friday from 8 a.m. to 10 p.m., and Saturday from 9 a.m. to 6 p.m. (ET). 5

8 TAX ISSUES * ARE THE WITHDRAWALS OR TRANSFERS TAXABLE? Since the withdrawals are cash payments from your contract, they are reported to the IRS. Most retirement plan contributions are made on a tax-deferred basis, so withdrawals are usually fully taxable as ordinary income.** You should keep in mind that taking withdrawals from your annuities may significantly increase your tax liability in the year you receive the funds. Withdrawals of earnings are subject to ordinary income tax and a federal 10% penalty may apply prior to age 59 1 /2. However, the 10% penalty will not apply if you: are age 55 or older when you terminate employment, are disabled, as defined by the Internal Revenue Service Code, use the distribution to pay unreimbursed medical expenses exceeding 7.5% of your adjusted gross income, or take the distribution as lifetime income or a series of payments based on your life expectancy (which would require you to convert the accumulation into a lifetime annuity option). The amounts transferred to any of the accounts available to you under your plan are non-taxable events and are not reported to the IRS. CAN I ROLL OVER MY CASH PAYMENTS TO AN IRA? Yes. If cash payments from your contract are available to you, you can make direct rollovers into an IRA. ARE TAXES WITHHELD FROM CASH PAYMENTS? We are required to withhold 20% from the taxable portion of your payment for federal income tax, unless you request that the payment be directly rolled over. * Neither TIAA-CREF nor its affiliates offer legal or tax advice. Please consult your advisors regarding your particular situation. ** If you ve contributed with after-tax dollars, the portion of your withdrawal representing these contributions won t be subject to income taxes. This applies to U.S. citizens residing in the United States and resident aliens. Non-resident aliens are generally subject to mandatory 30% withholding and are not eligible to make direct rollovers to IRAs. 6

9 STARTING SYSTEMATIC WITHDRAWALS OR TRANSFERS REVIEW YOUR SITUATION AND CONSIDER WHETHER THIS OPTION IS RIGHT FOR YOU. The choices you make for your accumulation payout will affect your financial planning during retirement. Knowing and understanding as much as you can about the income options available to you will help you make the right choices when the time comes. We ll now look at the issues you will need to consider with each type of systematic withdrawal and transfer. CONSIDER SYSTEMATIC WITHDRAWALS IF YOU NEED CASH PAYMENTS FOR A LIMITED PERIOD OF TIME. The systematic withdrawals provide monthly payments for an 84- month period. During this period when you are receiving cash, you also have the option to convert your payments to lifetime income. Otherwise, your payments will stop after the final installment. For more information about our income options, you may want to read our booklet, Reviewing Your TIAA-CREF Income Choices. For a copy, call us at or go online at CONSIDER SYSTEMATIC TRANSFERS TO OTHER ACCOUNTS IF YOU RE INTERESTED IN REBALANCING YOUR RETIREMENT PORTFOLIO. You get the choice and flexibility you need to create a personalized retirement portfolio by using the accounts available to you under your employer s retirement plan. Rebalancing does not protect against loss or guarantee that an investor s goals or objectives will be met. To help you evaluate your portfolio, you may want to review our booklet, Building Your Portfolio with TIAA-CREF. For a copy, call us at or go online to 7

10 REMEMBER: If you re still employed, review your contribution allocation periodically. You ll want to make sure it reflects your retirement and investment objectives. Your systematic transfer will move your TIAA Traditional accumulation in monthly installments to the accounts you specify it will not automatically change your allocation for your future contributions. To change your allocation, you can go to our website at 24 hours a day, 7 days a week, or call our Automated Telephone Service at CONSIDER TRANSFERS TO ACCOUNTS AT ANOTHER COMPANY IF YOU WANT THEM TO MANAGE YOUR RETIREMENT MONEY. You should carefully evaluate the other company s retirement investing expertise, performance, investment philosophy and objectives, expenses, management experience and the variety of payment flexibilities available. To help you make a comparison between TIAA-CREF and other retirement investment companies, ask for our booklet, Experience Matters. It provides you with information on what to look for. You can also use the Retirement Company Comparison Charts in the booklet to make a comparison. To obtain a copy of this booklet, call or go to 8

11 DECIDE HOW MUCH OF YOUR TIAA TRADITIONAL ACCUMULATION YOU WANT TO USE FOR SYSTEMATIC WITHDRAWALS OR TRANSFERS. You can choose the systematic withdrawal or transfer method for either a portion of, or all of your TIAA Traditional accumulation. If you don t want to use your entire TIAA Traditional balance, you can use any partial amount (minimum $10,000). If your TIAA Traditional accumulation is less than $10,000 (and more than $5,000), you must use the entire accumulation to set up your systematic withdrawal or transfer. If your TIAA Traditional accumulation is less than $5,000, you may be able to withdraw or transfer the entire amount in a lump sum (if your contributing employer s retirement plan allows). The suitability of the systematic withdrawals or transfers from TIAA Traditional depends on your unique retirement needs. We can help you evaluate your retirement strategy to choose the most suitable options. NEXT STEPS. If you have questions, or need the forms to start a series of systematic withdrawals or transfers, you can call our Telephone Counseling Center at , Monday to Friday from 8 a.m. to 10 p.m., and Saturday from 9 a.m. to 6 p.m. (ET). You should consider the investment objectives, risks, charges and expenses carefully before investing. This publication must be preceded or accompanied by a prospectus. Please call or go to for additional copies that contain this and other information. Please read the prospectus carefully before investing. 9

12 POINTS OF CONTACT ON THE INTERNET TIAA-CREF website: Create or change your own website User ID and password Sign up for TIAA-CREF s electronic communications Check your account balances and make transfers and/or allocation changes Generate illustrations of retirement income See and update your beneficiary designations, mailing address, and telephone numbers View a TIAA-CREF seminar calendar and make a reservation Get the status of service requests Apply online for IRAs, life insurance and certain other products Download and print certain business forms and request publications* * Systematic withdrawal forms for cash or rollover payments are not available through the Automated Telephone Service or our website. To request the forms, please call our Telephone Counseling Center at

13 TOLL-FREE TELEPHONE NUMBERS* TELEPHONE COUNSELING CENTER: Monday to Friday 8 a.m. to 10 p.m. Saturday 9 a.m. to 6 p.m. (ET) Ask about your allocation choices and income options Request retirement illustrations Find out more about your benefits and taxation issues AUTOMATED TELEPHONE SERVICE: hours a day, seven days a week Obtain account performance, accumulation unit values and your current accumulation value Change your premium allocation for future contributions Transfer funds among the TIAA-CREF variable annuity accounts and to TIAA Traditional or other investments available under your plan Order certain booklets and forms** * If outside the United States, use AT&T s International Access Code. ** Systematic withdrawal forms for cash or rollover payments are not available through the Automated Telephone Service or our website. To request the forms, please call our Telephone Counseling Center at

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15 TIAA-CREF Individual & Institutional Services, LLC, and Teachers Personal Investors Services, Inc., distribute securities products. TIAA (Teachers Insurance and Annuity Association) New York, NY issues annuities Teachers Insurance and Annuity Association College Retirement Equities Fund (TIAA-CREF), New York, NY Retirement Annuity (RA) contract form series and ; Group Retirement Annuity (GRA) contract form series G and G ; Supplemental Retirement Annuity (SRA) contract form series and ; Group Supplemental Retirement Annuity (GSRA) contract form series G1250.1, (GSRAs are not available in all states); IRA annuity contract form series ; Roth IRA annuity contract form series ; Keogh annuity contract form series G1350, (Keoghs are not available in all states)

16 C33810 A11025 (10/05)