Hello, HigherEd retirees! Greg Shepard here from S&A Financial Services, your go-to resource for unraveling the complexities of higher education retirement plans. Today, I'm bringing you a valuable insight into TIAA in-service transfers, a strategy that can significantly impact your TIAA accounts. As always, this blog is tailored specifically for those navigating the nuances of TIAA retirement plans.
Understanding In-Service Transfers:
In-service transfers are a powerful tool available to individuals in higher education. However, they come with specific conditions that vary depending on your institution's plan documents. Typically, you need to reach a minimum age threshold, often 59 and a half, to be eligible. Additionally, in-service transfers are usually applicable to voluntary employee accounts rather than mandatory employer-funded accounts. It's crucial to check your plan's rules and consult your vendor to ensure this strategy aligns with your circumstances.
Now, let's delve into two recent scenarios that highlight the diverse ways in-service transfers can be utilized to optimize retirement plans.
- Scenario One: Escaping Poor Investment Choices
In the first scenario, an individual contacted me because their employer-sponsored retirement plan had limited and unappealing investment choices. This is not an uncommon issue, and it can significantly impact your ability to grow your retirement savings effectively.
Given that this individual was over 59 and a half, making them eligible for in-service transfers, we devised a strategy. Recognizing their preference for aggressive investing, we restructured their current account. We shifted funds from less desirable bond choices within TIAA's liquid contract into TIAA traditional, taking advantage of the attractive rates available in December 2023. Simultaneously, we transferred their equity investments to a Charles Schwab Rollover IRA (custodian of your choice will do), providing them with a broader range of investment options.
This scenario highlights how in-service transfers can be leveraged to overcome the limitations of an employer-sponsored plan, ensuring that your investment choices align with your risk tolerance and financial goals.
- Scenario Two: Conservative Investor Navigating Options
In the second scenario, a conservative investor was aware of in-service transfers but sought advice on whether it was the right strategy for her.
After assessing her situation, it became clear that the conservative investor, who was over 59 and a half, could benefit from an alternative approach. Instead of opting for an in-service transfer, we utilized a 120-day reinvestment rule for the liquid contracts within her ex-employer's plan. By strategically allocating funds into TIAA traditional and implementing a different strategy for her RA contracts, we achieved the desired outcome without initiating an in-service transfer.
Not every situation warrants an in-service transfer. This scenario emphasizes the importance of tailoring strategies to individual needs, considering factors like risk tolerance, investment choices, and specific plan rules.
- Scenario Three: Navigating Multiple Vendors
In a third scenario, an individual had accounts with both Fidelity and TIAA and sought guidance on optimizing their retirement savings.
Given the flexibility of combining Fidelity and TIAA accounts, we strategically moved conservative investments from Fidelity to TIAA's liquid contract, taking advantage of the favorable rates. Simultaneously, we rolled over the remaining funds in Fidelity to an IRA. This multi-vendor approach allowed for a comprehensive and efficient strategy.
Sometimes, the most effective solutions involve utilizing multiple vendors to cater to diverse financial needs, ensuring that each account serves its specific purpose.
In-service transfers within TIAA accounts can be powerful tools, but their suitability depends on various factors. These real-life scenarios demonstrate the importance of customizing strategies based on individual circumstances. Whether you're navigating poor investment choices, exploring alternatives as a conservative investor, or optimizing multiple vendors, in-service transfers should be approached with careful consideration.
As you contemplate your retirement strategy, remember that education is key. Gather information, consult with experts, and ensure that any decision aligns with your financial goals. Feel free to reach out to me if you have questions or need assistance. Now, I'm off to enjoy the unexpected 60-degree weather in December on the golf course!
Greg Shepard, signing off from S&A Financial Services. Take care, and until next time…..
*Disclosure* S&A Financial Services, Inc. is a registered investment advisor. Content presented is for informational purposes only and should not be considered as investment advice or as an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. Always consult with your tax advisor or attorney regarding your specific situation.