Welcome to the webinar. I'm Heidi Tennant, NAPFA's Senior Coordinator of Membership and Continuing Ed. Thanks for joining NAPFA for this program on TIAA Traditional, What You Need to Know About TIAA's Traditional Fixed Annuity, with Paul Balin, who is a CIMA and RMA, and a Senior Director on TIAA's Institutional Financial Services Group. Paul builds TIAA's Product and Solutions Proficiency Program to ensure that TIAA delivers industry-leading financial planning and solutions to participants. Thank you, Paul, for joining us today. Thank you, Heidi. And good afternoon, everybody. Again, thanks for that kind introduction. As a Senior Director at TIAA, I work very closely with our Advisor Services Team, as Heidi described, webinar sessions like these, developing programs and content that's aimed to build success, right, in the key Advisor partnerships that we have with Advisors like yourselves. So I focus quite a bit on our firm's unique capabilities in the areas of lifetime income and annuity solutions, and then overall in retirement readiness. I also would note that I've been in the Advisor role, working directly with clients here at TIAA, as well as outside firms, so hopefully I'll come back to the session today with that context as well. As Heidi noted, this is the second session of five. We think a really, really important and valuable one, and we're going to cover traditional, as Heidi talked about, which is our flagship product. It's a key area of expertise for each of you to develop for your practice and to deliver value for your clients who are TIAA participants. I will say that I'm going to cover a lot of information today, and we're going to try to move pretty quickly. I grew up in New Jersey, so I can speak quickly. I'll try to do that as best I can and stay clear, but we'll also, as we said, leave time for Q&A, which you can absolutely please submit. So I look forward to encouraging you to absorb what you can today, but as always, contact Advisor Services here at TIAA. They can address your questions. You can learn more through them and enable you to serve your clients at the very highest level. So with that, our agenda. So we're going to, and actually, Heidi, can we just pull that back for a moment, the polling? I'm going to do the agenda first, and then we'll do that. Thank you. So first, we're going to look at TIAA from a long-term goal perspective in terms of how we've worked for over a century to secure retirement for millions of participants in TIAA plans. We're going to start out with the basics around annuities and then talk about how that extends to TIAA in terms of how we share profits. We'll drill down into the guaranteed growth that clients can earn through TIAA traditional while they're saving, as well as the guaranteed lifetime income that they have the option to start if they decide to in the distribution phase and the retirement phase. We're then going to return back to sharing the profits because it's such a critical differentiator for TIAA as it relates to the potential for a loyalty bonus in payouts. It's all backed in the end by the general account, and so we'll touch on the strengths of the general account. It's very, it really are sort of our bedrock as a company. And then we'll wrap up with Q&A. So Heidi, before we jump in, let's actually do post the first polling question, if you would. And the question here is, how familiar are you with the TIAA traditional guaranteed annuity account? Right. You'll see the answer is highly knowledgeable, knowledgeable, minimal knowledge, or not familiar at all. Just trying to get a sense for the audience, it'll give me a kind of a perspective there. So let's do that pretty quickly and there we go. Okay. So we've got a few that are experts that'll probably try to stump me and we'll do our best to do that, to do that around. I've got Bill Heath here with me. He's a senior director also on our TIAA traditional product team. So I can always pull a, whatever that is called in the TV show, a safety card or whatever that is, call a friend. But we see a lot of knowledgeable folks here. So that's excellent to see. All right. So let's look at TIAA. We've been around for over a century. And if you look at the really remarkable growth of our firm, Andrew Carnegie proceeded with the company in 1918 with a million dollar grant from the Carnegie Corporation. It is now a $1.2 trillion assets under management business, right? Our most, our current CEO, who joined us not too long ago, is a huge champion for lifetime income. In fact, one of our tenants is to lead with lifetime income. So this is really at our core. And in partnering with you, we really want to have that partnership so that's going to extend how we, what our mission is to make it also a sort of a joint mission with all of you. So let's start out, as I said, in the agenda with the basics, right? What is an annuity? Essentially, an annuity is simply a contract between a client and an insurance company like TIAA. And essentially, it is the only financial product that can pay you lifetime income. We've done surveys asking client participants, does a, say, a target date fund provide guaranteed lifetime income? And interestingly, we've got a lot of people who believe it does. And all of us as financial professionals know, no, it does not. Really the only financial instrument that does that is an annuity contract. The two flavors, there are other retail flavors out there, but fundamentally are fixed and variable. Fixed annuities provide guaranteed growth, right, regardless of what's going on in the marketplace. Variable annuities, based on some index below, but let's assume in this case, an equity index, are going to provide the potential for growth and potentially they'll fight inflation, right? So it's an inflation hedge type of instrument. Now, annuities are available through employer-sponsored plans, TIAA plans, for example, or within an IRA account, particularly in our TIAA IRA. You can access both the traditional fixed annuity, all of our CREF annuities, and the real estate account, which we'll be covering in future sessions. That account, we have a new development, which is that the eligibility rules that used to require you to have some affiliation and association with a TIAA participant are going to be removed. I'm not 100% sure on the timing, but that's coming, if not, like, you know, this week in a very, very short amount of time. And so that, those eligibility rules will no longer be an obstacle, and you can make any of these annuities available to any client that you work with. Of course, there are annuities that are available through personal savings as well on the retail side, on the after-tax side. Now today, we're going to be talking about traditional, which, of course, is in the fixed annuity bucket there. Okay, so pretty simple on the fixed annuity side. Protected goes before retirement. Your principal and your earnings grow every day guaranteed, again, regardless of market volatility that might be occurring. If a client decides to convert that balance or a portion of that balance to a guaranteed lifetime income stream, they can do so and receive monthly income payments, although whatever frequency they'd like, in order to rely on those payments to meet their everyday expenses. That's really the basics in a nutshell, right? Now, we know that there are biases out there in the marketplace, understandably so. And I would say that if we look at it through our lens from TI's perspective, right, we'll look at people who feel like, and advisors or investors, that their annuities are expensive, they've got high fees, they've got complexity around them, or that they're a one-size-fits-all solution. Perhaps some believe, right, annuities aren't necessary, you can just do withdrawals. Now, to be candid, I believe that there are annuities out there. A lot of them are on the variable side in the retail marketplace that do have expensive riders that are highly complex, right, and really difficult to understand. And sometimes the way that fees are calculated on those are, you know, I've reviewed my fair share of contracts and it's very tough sometimes to decipher those. We, you know, certainly on the fixed annuity side, when we talk about institutional pricing, that really translates into crediting rates and payout rates. And ours, the way we're structured, we're going to talk about profit or how we share profits, are really built with the advantages of the participant, of your client, right, that's a TI participant in mind. We don't have any new commissions or loads on any of our annuities, and so that's really kind of our perspective on how our products are designed. In addition, right, from a one-size-fits-all perspective, right, you have many payout options that are available. We're going to talk about those and the flexibility in terms of how you utilize these annuity accounts in an overall financial plan or really just in a retirement income plan. As it relates to their necessity, you know, there are clients where they have such a large balance, maybe it's not necessary, but the advantages that can be afforded by utilizing them with even a well-funded client can become apparent once you understand the value within the contract. And for many clients, having a guaranteed stream of income within the plan can also be quite valuable, both financially as well as behaviorally. The last thing that I don't see, we don't have on this slide, is that notion of it's all, it's an all or nothing decision. That in fact is not the case. It's always a right and not an obligation to decide to convert or annuitize. And in most cases or many cases, we see clients that are partially annuitizing to fill a particular need. So this notion of all or nothing that we've heard from participants throughout the years I've been at TIA is a misnomer, if you will. So not only guaranteed growth that we touched on and not only the option to generate guaranteed lifetime income are things you can look to TIA Traditional for, but also based on how TIA operates as a firm, there is the opportunity for more growth in income through the fact that TIA shares profits. Now if we look at how that actually occurs, we share profits in three distinct ways. First, right, you can receive interest credited to your account while you're saving. That's greater than the guaranteed interest rate. So more growth. And in fact, we've been crediting greater interest than what we're required to contractually every year since 1948 in at least one of the contracts that we issue. So we have a long history of paying interest above our guaranteed rate. Secondly, higher payout rates, whether it's from a long-term contributor versus a new contributor, someone who puts money into a contract and then annuitizes the very next day or week or within that month, long-term contributors have seen at least a 20 percent advantage over the last decade versus those new contributors. And long-term contributors, we typically are looking at as an example of somebody who's had a long career at a university, say, and has made level contributions over, say, a 30-year period. But we've been paying out higher payout rates than our guarantees every year since 1949. So we're talking about 75 years, 74, 75 years where TI is continually doing that. And the third way that we share profits is actually by giving raises in retirement, where we can increase income above the initial amount of the initial payout that was calculated upon converting the contract. And that's highly unique for a fixed annuity, right, which many of them are fixed annuities are just going to give you that constant stream of income. Our track record there is also excellent. Fifteen times in the past 25 years, we've increased payouts for participants. That happens each January 1st, where we declare what that increase might be. In the other 10 of those 25 years, we stayed level. Now that's important to understand because 15 increases and 10 staying level years in the last 25 where we saw a secular decline or decrease in rates is pretty impressive. And we, again, that's really kind of a key tenet of profit sharing is where can we possibly, when appropriate, when we're able to, based on the general accounts performance and other factors, raise income payouts on January 1st of each year. So, now that we're, now we're going to focus on the accumulating side, right, as clients are saving in TI traditional, and that's where we provide guaranteed growth regardless of what financial markets do. And I'd like to cover a couple of basic things that we'll touch on over the next few slides that'll be helpful to understand in terms of a couple of distinctions. The first is that TI traditional is offered in two different types of plans, essentially. One are base retirement plans, which is the primary plan from the employer, and the second is a supplementary retirement plan, which is a secondary plan. In the base plans, that's really going to consist mostly of contributions that are made by the employer on the employee's behalf. They are, those contracts are structured to maximize growth and to maximize income for life in retirement, again, if someone elects to convert. And so, we see contracts versus the supplemental that are 50 or 75 basis points higher in terms of crediting rates, but you do have a tradeoff in terms of liquidity, right? That's intentionally established for, again, greater growth, greater income. On the other hand, we've got the supplementary retirement plans, right? These are basically voluntary employee contributions that also often include an employer match. These contracts or these, excuse me, plans balance the increase or the growth of the balance plus lifetime income, but also with access to the funds. So, full liquidity on transfers and withdrawals, and although the interest rates are very competitive, right? They're going to be, again, a little bit lower to reflect the enhanced liquidity that those plans offer. Now, if you look at what the contract types are associated with those, up on the left you see RA, GRA, RC. Those are retirement annuities and group retirement annuities we're going to focus on today. The RC contracts are our newer contracts. To the right, the SRA and GSRA. So, let's just focus, again, base is the RA and GRA, supplemental is the SRA and GSRA, right? For those of you familiar, great. If you're not familiar, again, nothing to memorize here. You'll have this as a reference, and again, we're here to answer questions as we go. Now, the other thing to know about the contributions is that as plan participants save through monthly contributions to their plans, TI tracks the contributions and uses what we call a vintage system, which creates these interest rate buckets that you see reflecting the prevailing interest rate when each contribution is made. You can think of it as sort of a dollar cost averaging in terms of the rate environment or the rate market, as we're going to cover shortly, historically, these older buckets of money that were previously contributed years ago have purchased more lifetime income. So, again, we have this system that credits based on what the rate is and over time, historically, the older buckets have become more valuable in terms of producing income. So, now let's bring this all together in this table. To the left, you see the contribution dates. Those are essentially the buckets. You'll see they're a little bit different than we talked about in terms of monthly. We'll get to that in a moment. The middle column is the RA, GRA. Those are the base contracts and their crediting rates with those in those different buckets. And then to the right, the SRA, GSRA, those are the supplementary contracts, and you can see the rate differentials between those two columns. They all have a minimum guaranteed rate of 3%, with the exception of the 2020-21 time period. So, the supplemental contracts, all of those rates are above the minimum guarantee. Now, as it relates to a couple of notes, as it relates to the contribution dates on the left, you'll see that we've combined sometimes months and sometimes earlier years. If you can imagine, if we were to maintain monthly buckets, monthly vintages, we'd have a very long column on the left. So, over time, we can press those into multi-years and sometimes multi-months. Again, that's done in consultation with our board, with our actuaries, to do that with a rational approach. That's the first thing. The second is, you can see these rates are all as of December of 2022, and they're guaranteed, in this case, through February of 2023. We reset our crediting rates every February to then kind of reset that March 1st. So, for the December rates of 6.25 and 5.5, again, you've seen those come up quite a bit in this interest rate environment, the December contribution would be credited, those rates, December, January, February. In March, they will reset, versus, say, let's look at the March-April 2022 line. Four and a quarter, three and a half, respectively. That March contribution would go all the way through the following February and, again, get reset. And these buckets are all reset every February 28th for March 1st. So that's a little bit of a wrinkle and a nuance to understand in terms of how that works. If you go into your client's online access that you have and click on the rates tab, what you're going to see is these buckets. And every participant's crediting rate, which is a weighted average of depending on when the contributions went in, will result in a kind of weighted average rate that their account is being credited, both on the base RA-GRA and the supplemental SRA-GSRA. Said a lot there. Again, we're here for questions to address those, whether today or advisory services as well. So now looking at traditional interest rates credited over time, we can see that for both the base RA-GRA and the supplemental contracts, we have credited above the minimum over these timeframes. Again, this is in an exceeding of this last decade, other than the last year, exceedingly low rate environment that we experienced. As we saw on the prior slide, even though rates were low prior in the decade, as rates have precipitously increased, the current rates for January 2023, again, six and a quarter, five and a half to reflect that. And we're in the business to maximize our crediting rates, as we'll talk about as well as payout rates for our participants. And then the certainty that the traditional annuity provides over career savings has turned out interestingly to produce returns that are very similar to historical returns of the Barclays Aggregate Bond Index. Now it's important to note a couple of things. One is that relative to the bond index, the lifetime income that can be generated from an annuity contract, quite a bit higher than what you can generate dependably from a bond investment or a bond index. Secondly, you start to focus in on that yellow line, which has a lot more variability. And if we focus in on that line a little bit more clearly, what you end up seeing is this type of volatility, which is almost zero, by the way, for the TI traditional annuity, the SRA contract we're showing here in the blue line. But the volatility over the last 30 years of the monthly returns for the Barclays Ag Index, shown in yellow, quite a bit more volatile than TI traditional. So like we like to say, similar gains without the pains. Far smoother ride in bonds to the same destination. We always are looking for less volatility, certainly as we near retirement. So I always find this very interesting because the volatility in bonds is quite high, although maybe recently all of us would say that the volatility, certainly the downside volatility in 2022, maybe shines a different light on that versus recent past years. So that's what I wanted to cover today on accumulating in TI traditional. I know we're moving along quickly because I have a lot to cover, and I want to make sure we leave time for Q&A. But the accumulating in traditional and the advantages of maintaining exposure to the guaranteed account within the portfolio, and what that can also mean for generating lifetime and what that can also mean for generating lifetime income. So before we move on to the next section, Heidi, could you do our second polling question? And so this is as we talk about the payout side. At age 65, what's the probability that a retiree or one of two retirees, so one or two of a couple, will be alive at age 95, 30 years later? The probability is there are 20% for the single retiree versus one of two at a 40% probability that one or the other will live to 95. Is it 25% for the one and 46% for one or the other, 20%, 35%, and 25%, and 38%. Why don't we give everybody about 10 seconds, 15 seconds, and we'll see what people's guesses are. Great. This is a smart audience because that's the correct answer, 25% and 46%. We can close that up and let's go to the next slide and show you the cover. So I'm impressed. Over half, that's the correct answer. The answers were a little bit tricky there. So yes, the answer is that, in fact, TIA participants at age 65 today, one in four, if you're a single participant, will be alive at age 95. That's the probability. And almost half the time, 46%, one or the other of a couple will be alive at age 95. If we dial that back to age 90, three quarters of the time, one or the other is going to be alive and half the time a single participant. So look, it's very clear that as advisors, we need to be providing a perspective. And again, the TIA Institute just did a study around participants or investors' understanding of longevity risk, and they don't understand it, quite candidly. So it's incumbent upon us to really make sure they're clear how long they're going to have to plan for. And it is a 25 or 30 year retirement, generally in the TIA participant world, which may be a little bit longer than the general population. But let's look to the right and really make this real in terms of the numbers to give you some context. If you look at the end of 2021, there were almost 33,000 participants receiving lifetime income that were 90 or older. Again, you go to 95, you're talking about a little over 9,400 of them that were 95 or older. And if you go to 100 or older, the full 1,321 at that time were 100 or older receiving lifetime income. So that makes what we're talking about, the probabilities on the left, an actual real occurrence in terms of TIA participants and what we need to help our clients plan for. Also, I would say from a fiduciary perspective for our clients, understanding the advantages the client has built over time is a very important service to provide to the clients we work with. Whether you're comparing it to RMDs, and this is at age 72, by the way, we're looking at a single life with a 10 year guarantee period. So, and this is as of the, at the end of last year, whether it's the RMD that was required at 72 or a 4% rule of thumb, where I found very interesting what the fixed period annuity would be if you made the payments less until age 97 and set that up. You can see to the right that whether it's a new contributor who's putting money in and then annuitizing the next day or that, you know, that same month, or the long-term contributor, again, the 30-year monthly, level monthly contributions TIA holder, much of the comparison is pretty stark and really impressively strong for a component of a client's lifetime income plan. And then one more illustration that we thought was interesting was, based on actual historical numbers, if two retirees were to put the same, to have the same $100,000 balance and begin taking equal income based on what they could get out of the annuity, right, one annuitizing, the other withdrawing from a bond investment the same amount, we can see that, depending on the year you start, that somewhere between, you know, 15, 16 years and 20, 21 years, we would exhaust that bond balance, right? And it's really, really critical that, again, your job as an advisor is to maintain a portfolio and to utilize fixed income within that portfolio. So we totally understand it in that context. But the fact of it is, is that all pre-2003 retirees withdrawing the equivalent income from traditional, right, from a bond investment would have run out of money as of December 2020, again, showing the strength and the power of risk pooling and relying on a strong insurer like TIA Traditional for much higher guaranteed lifetime income. So very, very simply, we've kind of started to touch on this, right? You do have options, whether it's just single life annuitizing for one participant or two lives where you're doing a joint annuity. What I want to focus on here is guarantee periods. We absolutely encourage you as advisors to be aware of those guarantee periods that are available. We make a 10-, a 15-, and a 20-year guarantee period available so that should the single life annuitant pass away or both, the second annuitant pass away, that if there are years remaining of payments, that a named beneficiary will continue to receive those. Really important consideration. I think, statistically, we see a lot of our participants electing or advisors, working participants, electing a guarantee period. Now, if we look at the protection versus income trade-off, it's very, very interesting for the two-life annuity because if we convert, again, this is an example of a 67-year-old converting about $200,000 in a hypothetical example to get us to exactly $1,000 withdrawal with a 20-year, excuse me, not withdrawal, $1,000 monthly guarantee payment with a 20-year guarantee period, look at the difference that you would get if you reduce that to a 10-year or to no guarantee period. Under 2% difference. So, again, from an actuarial standpoint, they're equivalent, but for us, we believe clients are going to be much more comfortable with that 20-year guarantee period and not having to give up really much income. I would also note that the 20-year guarantee period almost always results in total payments greater than the amount originally converted. So, that's why, again, we really strongly encourage that. That's also important from a state planning or a value that's left to beneficiaries' perspective that you consider the guarantee period. We can't emphasize that enough. Very, very important. Okay. So, I want to circle back now to TIA's sharing the profits approach. Long-term contributors, as we talked about, have certainly benefited and built significant income advantages. And as I mentioned, payments also have, or annuitants also have the opportunity to increase or raise their payouts. But the question is, if you look under the hood, how does TIA do this? Well, like all insurers, our claims and guarantees are backed by a general account. All insurers have a general account. That general account generates an earned rate from those earnings. TIA credits the accounts while participants are accumulating and saving. And we also pay out guaranteed income to those who convert to lifetime income. That's the first layer. The second thing is we may retain reserves for a rainy day, right? So, we have to do that. We're required to do so by the insurance regulators. As I'll mention later, we put far greater emphasis on reserves and go far beyond what's required by insurance regulators. So, again, we maintain our commitments to crediting, our commitments to payouts, and then we pay above those, right, wherever we can, wherever possible. So, then the question then is, what does the insurer do with any remaining returns that are generated by the general account? If an insurer is a publicly traded company or perhaps we see a lot of private equity activity in the insurance industry, right, they're going to distribute those dollars to either the shareholder or to the fund investor, right, in the private equity fund. Now, TIA, based on our original charter, we don't have shareholders, right? So, instead, we're going to share those profits with our participants in those three ways that I described earlier. Again, I don't know if I mentioned earlier, $3 billion in profits on average with participants over the last 10 years. And I think I might have not mentioned that earlier, but that's the level at which we're sharing profits in those three different ways with participants over the last decade, average annual. So, pretty impressive and substantial profit sharing that the TIA does produce for our participants. So, on the payoff side, how does this profit sharing work mechanically? And so, I wanted to kind of spend a little time and explain how that breaks out. So, if we look at the purple box on the bottom, that's the guaranteed minimum payment. Here, the example of 67 single life, 10-year guaranteed period of starting in October 2022. At that time, the guaranteed minimum would have been 5.1%. Income can never go below that amount. Now, if you go above the dark purple to the light purple, all of that area, both the highlighted one and the not highlighted, those are additional amounts. And that's where there's the potential for higher amounts of income for all annuitants, regardless of whether you put the money into traditional for a day, a month, or 30 years, everybody's going to get some additional amounts. In this case, if you look at this example, an additional 2.1% to get to that 7.2%. So, that is what we would call the new money rate for putting money in. All annuitants would have gotten that are 67 years old, single life, 10-year, 7.2%. Now, where the profit sharing comes in beyond that is through a loyalty bonus for the long-term contributor. In this case, again, 30 years of monthly contributions, that kind of history would have yielded 8.7% for that participant, right? That's largely what drives it. There are other factors, but largely it's the personal history of contributions and our sharing of the profits approach that's going to produce that 8.7% payout. Again, the advantages on a percentage basis are really, really stark. We've seen, again, if you get older in even recent months, payouts have increased more, payouts where you're getting in the nines and tens and elevens. Even for a client that's well-funded, wow, you can say to yourself, we can generate that income out of that contract rather than leave it in the pool for others to benefit from, and maybe do some shifting of the portfolio over to maybe some more aggressive positions that you're managing on behalf of clients. That would not be an irrational thing to do going into the, in the market environment we're in, and depending on the timeframe for the client. Again, up to you guys to practice your discretion with regard to that. Everybody's got a different viewpoint, but it would not be irrational. Okay, so let's look at the advantage over the long-term. Again, pretty impressive. In this case, we're looking at a 1998, excuse me, retiree, annuitizing $100,000. They would have started again in the, well, for the new money contributor, about $8,500, right around the industry average at the time. The career contributor, 30-year contributor, would have been a little shy of $9,000. What do we see in this chart? First of all, right, the distance between the light blue and the dark blue lines is that advantage, about 22% over the last decade of that long-term contributor versus the new money contributor. So, and critical for you when you're looking at contracts to understand what does the client own, right? What do they have in that contract that I can potentially leverage for the client? The second thing you notice is that they're both upwardly sloping lines, as opposed to the average, the industry average starting in 1998, which as a fixed annuity has stayed in fact fixed and flat. But these are upwardly sloping lines, again, reflecting the 15 annuity payment increases since 1998 that our annuitants have enjoyed. And that's been about a 1% average annual increase over the 25 years. You can notice that the payouts numbers compounded over this 25-year 1% average increases have amounted to quite a nice bump in income. So again, we would just look at that and say, let's consider what the client has at their disposal and potentially utilize the rich vintages in these particular contracts, or even the new money relative to what a client could generate otherwise. So, that's really kind of the long-term view in this illustration. Again, upwardly sloping and the significant differences between the career contributor and the new one, the new money contributor. Our friends of disclosures, and again, you'll have access to all these slides and can look at the specifics and ask questions if you have them. Let's see, again, what you'll notice here is that the way payouts are calculated is quite similar to how we credit TI traditional accounts while savings that we looked at earlier, that table that we looked at earlier. But although it's very similar in concept, it's actually a little bit different in that the buckets aren't the same along the left. But like the crediting side, it is a weighted average of each of the buckets. So, for the new money, in this case, again, a 67-year-old single life with a 10-year guarantee as of December 2022, all the money is going to go into that 2022 bucket for the new money, and it's about a 7.8% payout. For the 30-year contributor, they're going to have exposure to all those buckets. And the weighted average, based on how much they have in each of those buckets, in this case, the advantage would be, or the annual income would be $9,300, about a 9.3% payout rate. That reflects, again, that 20% advantage. So that's really, it's the same exercise as the crediting side, a little bit different on the vintage buckets, but same principle in terms of calculating lifetime income. So what we would say is, look, when you build income plans for clients, we can provide through TI traditional, and I would also argue with our other annuity, our variable annuities, guaranteed lifetime income that can really bolster the security of our clients' retirements. On the right side of this slide, again, we combine Social Security with fixed annuities to create those guaranteed sources of stable income, and we can combine that with portfolio withdrawals from the portfolios that you manage on behalf of your clients. We're gonna talk next week a little bit about CREF's variable annuities, and the following week about the real estate accounts. There's also a place for those because you can also enjoy risk pooling and advantages even in the variable annuities, much like the fixed annuities, to generate higher income. But in the end, it's critical to help your clients understand what they own so that they can take advantage of these benefits that are in those contracts. Okay, so I think we're doing pretty good on time. I'm going to finish up really quickly here. General account portfolio, right? It's what underlies all of what we talked about today. It's about $300 billion, and I'll briefly just mention that we come to market each year based on that $300 billion with about $25 or $30 billion. So it's the scale and the access to private investments that enables us to have such an excellent performing general account that diversifies risk, but you see a lot of private investments in there. I also would point out that if we look at the general account in terms of its function, it guarantees the minimum rates. It delivers the additional amounts that we have historically and it's really all at the discretion of our board. But again, our board is looking at the overall picture, which is our charter to maximize payouts and provide those additional interest wherever and whenever possible. The last thing I'll mention is, again, very financially strong. We are one of the only three insurance companies that are rated the highest of ratings from three of the four ratings agencies. So this is a mission-critical thing for us. If you look at our statutory capital, which essentially is the amount by which our assets exceed our liabilities in the $300 billion account was about $52 billion, right? So we are really, really serious about financial strength and you should be looking to TIA and any insurer for their financial strength in terms of backing payouts and crediting rates. Okay, so what's coming next? I think Heidi mentioned that on February 6th, we've got prep annuities, we've got a real estate account session that's coming on the 13th and on the 21st, we're gonna talk more in depth about assessing contracts and using our illustration tool. If you did not provide an APHA list, your email when you registered for today's session, I would encourage you to do that. If you do so, one of the things we wanna provide to all of our attendees today is the TI traditional FAQ document for your reference. So again, if you wouldn't mind, we're happy to send that to you at advisorretirementatia.org. Just in the subject line, you can put TI traditional FAQ and we'll send that out to everybody. We're also gonna have future sessions and one of the ones that I love is when we have the folks that manage our general account explain how to assess a general account. Very, very valuable information when you're evaluating the insurance company, whether it's TI or others. So with that, Heidi, I guess we can go to some questions with our remaining time. Happy to answer those. Sure, we're actually gonna call on Bill and have him answer some questions. We're gonna call on Bill and have him use his expertise because the questions were numerous. Yeah, Paul, Heidi deputized me to kind of consolidate some of the questions. Tons of fantastic questions from everybody. You know, it might mean going back to a slide, but there was many, many questions about kind of the mechanics of the crediting rate reset in March versus the month-to-month contributions. A lot of people were asking about that. Struggling back, I'll be happy to do that. Yeah. What was the question in particular, Bill? You know, when do things, you know, where did it go? Sort of like what's the reset mechanism and the timing? What's the reset mechanism? How are the rates determined? How good are they long? You know, how long are they good for? How are the rates determined? Things like that. Okay. I'm gonna jump in and then Bill, please, I'm happy to welcome your addition. So the mechanics are, as we talked about, we set rates as money comes into the account, we're crediting at that prevailing rate, right? And we're making investments in the general accounts, right? It's a sort of a, it'd be called an asset liability matching type of exercise. And so the money is now in the account, earning those rates, actuarially calculated so that we arrive at, with any given bucket, what we can pay on that contribution vintage. And what we're doing is we're on an ongoing basis, we're evaluating those rates. And every February 28th, we're gonna say, okay, what are our new buckets? You'll see the buckets on the left change again. And Bill, you might wanna comment on something more technical here if useful. And then March 1st, these buckets will get reconstituted. We don't see usually huge swings in these buckets, but we do see changes. And that's why I kind of, Bill, I pointed out the example of the December, it's gonna go December, January, February, and then it's gonna reset. Whereas a March annuitant would get March all the way through the following February, and then that resets. Would you add anything further? No, that's it. I think we did receive so many questions. So Paul, I think you told me to say, people can follow up with advisor services or even you directly if they want to, if that's okay. Sure. Because there's a lot of questions that are based on specific facts and circumstances of client cases. Okay. So I just wanna say that. I think another major theme, I've got the question a few times from Tamara and Glenn and Greg is basically, how does TIA or TIA traditional make money? So you spoke a lot about the profit sharing on payout and how we longer term contributors who contributed to TIA can receive a higher income based on profit sharing. And then on the crediting side, based on how the board declares the interest rates that we have, how do we make money? Is a lot of questions. So it's an interesting kind of perspective to ask the question, which is making money. We really operate without profit, so to speak. I don't wanna get into the technicalities around how we file taxes and all that sort of stuff. Putting that aside, we operate without profit. But how we make money is essentially, look, we have different businesses within TIA as an enterprise. Nuveen, for example, you may know, is a wholly owned subsidiary of TIA held in the general account. It generates a profit, right? As if it were a asset manager out in the marketplace, it generates a profit. Those profits go back into, it's one of the investments of the general account, very unique. So a company that operates without profit owns a company that generates a profit and goes back to that parent company. So I would say, and Billy can add again, happy to hear your perspective is, we don't, quote unquote, make profits. Anything that's excess on top of keeping our obligations on the crediting side, as well as the payout side, or building up our reserves, our rainy day funds, which we're required to, again, far higher reserves levels. We're very serious about that. So beyond that, when we have excess dollars, the only place that we can actually apply them or utilize them is higher crediting rates, higher initial payout rates, and increases in payout rates. Again, when practicable, when it's a prudent thing to do, we're gonna make that decision based on our charter. So that's how I would address that question. Yeah, I agree. So there were a lot of questions about, people hear about the 10-year payout. So there were a lot of questions about the 10-year payout and the basic plan versus the supplemental plan, because you had that in your presentation. And do you wanna talk about the different versions of TI traditional and why some of them have more of a delayed liquidity and some of them have like an immediate? Yeah, so we touched on that, right? Again, the base plans, it's really a question of the purpose of those dollars. Plan sponsors who have TI traditional on the menu and are putting dollars into the plan on behalf of the participants, right? Their ethic around that is, we're gonna put that money in and that's gonna be used as almost like a personal pension. So the limited liquidity is based on the fact that that's the stated intention of the account, right? Of that investment. And we're gonna credit, CIA can credit a higher amount because again, we've got longer, that money's gonna stay in the general account for a longer period of time. We can have a longer duration average, on average of the investments backing those base contracts, the GRA and RA-GRA contracts. Higher crediting, higher income based on the fact that you've got a greater level of accumulated savings in the account, but with less liquidity. For those legacy accounts, it's a 10 year, it's basically 10 payments over nine years, substantially equal payments. That's the fastest way one could gain access to those dollars but again, each year that you do that, you're sort of giving away some of that loyalty bonus over time. I would note that even if the client has started a TPA, a transfer payout annuity, at any time they can stop that, they could stop it and convert it back into lifetime income for whatever balance remains. So that is a flexibility you have. On the supplemental side, it's fully liquid. It's designed with a little bit of a different, you still wanna get credit as high a possible rate as possible, but the average duration of the investments in the general account backing those balances is gonna be a little bit lower. Therefore, again, we also have to plan for some liquidity, some people accessing those dollars and systematic withdrawals or lump sum withdrawals. So those would be the two flavors. Again, Bill, any other things to add? I'm open to hearing yours as well. Yeah, no, and the different versions of TI traditional, if you go to the tia.org website, you can see the different, on the performance page, you can see the different versions of TI traditional listed and there's product fact sheets for each different version of TI traditional. They're all under the umbrella of TI traditional, but it's kind of like saying TI traditional, I don't know, there's different flavors of TI traditionalism, there's a fact sheet for each. And Bill, just if I can add, just in order for just to be from a brevity standpoint, we didn't cover the RC and RCP contracts. Those are retirement choice contracts that are newer. They're institutionally controlled as opposed to individual contracts between TI directly with a participant. Again, that's more nuanced there. The 10 year is instead of an 84 month payout. And actually, interestingly, even though the guarantees aren't the 3%, we are paying out higher on the RC, RCP on average, but that's another conversation for another day. And to bring that in, we already covered enough for today. So, but to Bill's point, you can find out more on the RC, RCP on the ti.org site or call us. By the way, Heidi told me to turn my camera on, Paul, I know you didn't want to see it. Love to see it, love to see it. Can you, there was a few questions, like Paige had a question. There's a few questions about, cause you talked about the crediting rate and March 1 was a significant date. And then you talked about annuitization. Can you like separate the two, you know, a little bit in black and white terms, like the crediting rates March 1 versus annuitization throughout the year? Does that make sense? Okay. So yeah, so in other words, that reset date, I think Bill is what you're pointing at. The reset date on the crediting side, again, is that February 28th for March 1st reset. Each year on January 1, and we actually sent this out to all, I believe advisor services sent out to everybody a notice. Bill, what was our increase across all annuitants in 2023? What was it? So all annuitants, well, so again, there's a difference. So just to be black and white about the differences, when you're working and saving and contributing to TI Traditional, you get a monthly crediting rate and the money that you've already contributed in prior years can reset on March 1, but the money that's coming in month by month, you know, can change every month, like the current year, if you will. But when you annuitize your money, March 1 has nothing to do with that. You can annuitize in any month. It doesn't matter. You know, we have different payout rates. You know, there's like a different schedule. Like when somebody annuitizes, there's a different schedule than when someone's accumulating. And you didn't, and Paul, you didn't have the benefit of reading the question. So that was more what the question was about. And I probably didn't explain it that well. No, it's okay. But no, thanks for clarifying, Bill. And what I was asking you was, so every January 1st, right? We reset our payout and there may be a potential increase. So I was asking in 2023, I'm just off the top of my head, what was our increase? It was- So one of the things we used to say is that once you annuitize TI traditional as a fixed annuity isn't exactly fixed, you can receive increases over time. The increase, all of our annuitants who were actively receiving income in 2023 had a 3% increase in their annuity payments. Yeah, the 3%- And the year before that was 5%. Right, it was 5% the year prior to it, and these are substantially outstanding, but still anybody who was receiving actively, receiving in 2022 got a 3% increase as of this past January 1st. That's what I was pointing to. Okay, we've got a couple more minutes. I know Heidi wants to wrap us up too, so. Yeah, I'd like to ask you for your final comments then, Paul. Okay, great. So look, my final thoughts, thank you, Bill, for your help there and Heidi for coordinating. The bottom line from my perspective is understand what your clients own in traditional contracts. Right, we're looking to, and you are providing them the guidance that they can take full advantage of the value that they've built over their career of savings, right? That's our responsibility from the producer perspective, your responsibility as well. I would say, look at the traditional through a lens of the informed investor. What are the unique advantages CI can deliver through our profit sharing approach, right? The product is designed with the best interests of our clients in mind, notwithstanding some of the nuances that Bill and I, I covered and Bill and I were addressing, which there are there, but understanding those and delivering as much value as you can and understanding the profit sharing approach. And lastly, I just say, thank you. We really value our partnership with you and our advisor services team is always available to help, whether it's a client case that's specific around that or running an income illustration, assisting you with an operational issue. We wanna partner with you as advisors out there in the marketplace. Engage us so we can help participants that we share realize their retirement goals together. Those would be the three things I would highlight, Heidi. Great, thank you. And if we did not get to your question or you have another one, please fill it in. The last question on the survey is open answer. You can also request the FAQs that Paul referred to. Just put FAQs in there and we'll share your email with him. We hope to see you all next Monday for the program on PREV variable annuity accounts. And please do complete the survey. Thanks again and have a great afternoon, everybody. Bye now. Thanks, everybody. Thanks, Paul. Thanks, Heidi.

Paul Balin

TIAA Traditional

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retirement plans

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