Greetings, HigherEd retirees! Greg Shepard here from S&A Financial Services, your dedicated guide through the intricate world of higher education retirement plans, with a specific focus on TIAA accounts. In today's blog post, we'll address a crucial aspect that often gets overlooked – ensuring liquidity in your TIAA accounts. But before we dive in, let me share a recent scenario that emphasizes the importance of understanding the nuances of TIAA investments.
The Tale of Group Retirement Annuity (GRA):
Recently, I encountered a situation involving a savvy individual within higher education who possessed a substantial Group Retirement Annuity (GRA) within TIAA. This individual, like many of you, was aware of TIAA's competitive new rate of 6.75% (2023) on deposits into TIAA Traditional. Seeking to capitalize on this favorable rate, he decided to initiate a trade, moving funds from an underperforming ABC bond fund to TIAA Traditional.
However, what he didn't realize was the illiquidity that came with this move. With a deposit exceeding $250,000, the funds transferred into TIAA Traditional became essentially tied up and illiquid. The individual stumbled upon my videos, highlighting the potential pitfalls of such decisions, and reached out to TIAA for clarification.
Navigating the Waters:
Now faced with an illiquid situation, the individual sought guidance to rectify the mistake and prevent such missteps in the future. As a financial advisor, I stress the importance of doing your due diligence before making any substantial moves into TIAA Traditional. This incident serves as a reminder to understand the liquidity aspects thoroughly.
Options for Rectification:
Fortunately, there are avenues to address this issue. For GRA accounts exceeding $5,000, a Transfer Payout Annuity (TPA) to reinvest can be considered while still in service. Less than $5,000 while still in service, you’re out of luck – must wait till separation. Post separation, prior to 120 days thereafter, you can opt to take a TIAA Traditional 2.5% penalty on the monies inside TIAA Traditional given the balance is over $5,000. Typically, when folks opt for the 2.5% penalty strategy, they’ll direct those funds to a Rollover IRA.
Caution and Consultation:
While these options might not be suitable for everyone, they underscore the importance of being well-informed. I always advocate caution and emphasize the significance of understanding the implications before making any financial moves, especially when it comes to TIAA Traditional.
In conclusion, my fellow HigherEd retirees, consider this a Public Service Announcement (PSA) on the importance of understanding the liquidity dynamics within TIAA accounts, particularly when venturing into TIAA Traditional. Don't let illiquidity catch you off guard – take the time to educate yourself, and if needed, consult with TIAA or reach out to me for personalized guidance.
Your retirement journey is a significant chapter of your life, and ensuring the liquidity of your investments is paramount. As you navigate the complexities of TIAA accounts, remember to tread carefully, ask questions, and make informed decisions.
Wishing you all a secure and prosperous retirement journey!
*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.