Welcome to the webinar. I'm Heidi Tennant, NAPFA Senior Coordinator of Membership and Continuing Ed. Thanks for joining NAPFA for this program on what you need to know about CREF variable annuity accounts with Paul Valen, a Senior Director in TIAA's Institutional Financial Services Group. Paul is based in San Diego and he builds TIAA's product and solutions proficiency programs to ensure that TIAA delivers industry-leading financial planning and solutions to participants, focusing on the areas of lifetime income, annuity solutions, and retirement readiness. Paul holds the designations of Certified Investment Management Analyst, or CIMA, and Retirement Management Advisor, or RMA. Thank you, Paul, for joining us today. Thank you, Heidi. Actually, I'm in San Francisco, or close to San Francisco as opposed to San Diego, so, you know, because I don't know if my CAN would be appropriate for San Diego, so we don't want to, you know, have people think that I'm hanging out on the beach in San Diego. But in any case, thank you for that kind introduction. Good afternoon, everybody, and thank you for joining today's session on CREF variable annuity accounts. I'm happy to be back with those of you who joined us for the session on TIAA traditional last Monday, which was a really great session. I work very closely with our Advisor Services Group, and today joining me from Advisor Services are folks from our Relationship Management Team, Dennis Rupp and Karen Crosby, to help us with answering questions and making sure that we, they hold me accountable and honest here. I know many of you work with Dennis and with Karen, and they work every day to support your success in working with TIAA and our shared clients. As Heidi mentioned, this is the third series, third in a series of five, and we really greatly appreciate the level of interest and engagement we've had thus far. Dennis did a nice job on session one for Advisor Services overview of the group, and, again, we did the TIAA traditional annuity account last week to check the Learning Center site. There's some really excellent resources there. The traditional presentation deck has a lot of great information, as always, with CREF, with traditional, with Advisor Services. Please call us. We'll give you contact information to do that. That's what we're here for, which is to assist you in your practices. So for today, we're going to spend some time on CREF, which is very significant in terms of as a portfolio holding for many of the participants who are clients that you work with. In addition to TIAA traditional, the CREF accounts have been vehicles that have enabled all of these clients to build wealth over their careers, and so it's important to understand the value of these accounts, how they work, and how they performed over time. We will do a quick overview of TIAA as an enterprise, a little bit on why CREF and the opportunity for growth and lifetime income they provide. Then I want to kind of spend some time on the lineup in terms of what it encompasses in terms of the types of accounts available within CREF. We're going to spend a little bit of time or more than a little bit of time on CREF stock, that being our flagship CREF account that you'll probably see most often based on just the raw assets that are under management in that account. We'll look at it from the perspective as a component of a retirement portfolio as well as as a component of a retirement income plan, and importantly, how it fits into a diversified lifetime income plan and maybe a framework to look at that through, and then we'll wrap up and take your questions, whatever those might be. So a bit about TIAA. So again, we've talked about this in our previous sessions, but for over 100 years, we're about a $1.2 trillion in assets under management. So pretty sizable Fortune 100 financial services business that really is founded on paying out benefits for the whole hundred, let's see, five years of this year, it's really been paying out benefits. And so if you look at us through, you know, from that inception date through today, over a half a trillion dollars has been paid out in benefits by TIAA of all forms. If you look at lifetime income in 2021 alone, almost $6.5 billion of lifetime income paid. And the cornerstone or underneath that in terms of as an organization is the fact that we really are looking at delivering value, we operate at cost, which we'll talk about a little bit today, or I should say without profit, CREF is without cost. To that point, 93% of our funds and our variable annuities have expense ratios below their respective Morningstar categories. So we are very much mindful of being stewards of our clients' investing. Secondly, we also are very much underpinned by our financial strength. And we're one of the highest rated insurance companies by the four leading ratings agencies. And that is underneath all of it, right? We lead with lifetime income. That's really our byline, certainly throughout our history, but no more than today, which is really kind of what's guiding how we're building our business as we move forward. To that point, again, $6.5 billion in lifetime income in 2021 underpinned by such a strong company. So before we jump in, Heidi, let's bring up our first polling question before we talk about Y-CREF. And the question is, when was the first variable annuity account brought to the marketplace? And which insurer introduced the concept? So your four choices are TIA in 1960, Prudential in 1952, Western and Southern in 1962, or 1952 by TIA. I'll give you guys a minute or two to, or not a minute or two, a second or two. We'll do it pretty quickly. Okay. Dennis, I think they were listening to your first session because you mentioned this in session one. That's correct. For those of you, the most of you got it, the answer was D. And in fact, RefStock was the world's first variable annuity in 1952. Now we all know that variable annuities have seen a lot of innovation since then. I might argue myself personally that not all of that innovation has been in the best interest of consumers. But RefStock was originally developed to be the growth and inflation hedging component that would be part of a diversified retirement plan portfolio when it was combined with the TIA traditional guaranteed annuity, which was introduced right back in 1918. So those are two pivotal dates for us. 1918, the company's founded traditional becomes the guaranteed fixed annuity for college professors who were retiring with very, very little. And then as the years, as the decades span forward, we saw the need to, again, have a growth and an inflation hedging component, and that's where RefStock was born. So today, RefStock is about a $100 billion account, and it's managed by the very best equity investors we have within Nuveen, which we acquired a number of years ago and is now TIA's asset management business. And importantly, we continue to believe in the importance of the role that variable annuities can play in a diversified lifetime income plan. Again, more about that later. So CREF, Opportunity for Growth and a Hedging Against Inflation, along with Lifelong Income. I would point to three key points here that underpin CREF. One is market growth, the second is built-in lifetime income, and the third is helping participants grow and protect that lifetime income. As it relates to market growth, I would largely focus on, and we will today, on the equity-based accounts which provide that opportunity for growth and hedging against inflation. And with that growth, greater lifetime income that enables our participants and our shared clients to achieve financial security and really be confident in their retirement. And we're going to talk again more about the diversification within income plans that we think is so important. Second is the built-in lifetime income, but let's focus on the fees and the costs associated with that. CREF accounts, and we call it, are offered at cost. That means no profit is generated to TIA. We are operating them at what it costs us essentially to operate the accounts. So that means no added fees. We don't have any riders that are available for this variability. Again, there's been a lot of innovation in the industry, but that's around guaranteed minimum and withdrawal benefits and lifetime income benefits that require riders that are on top of expenses that make us at cost a very attractive option as it relates to variable annuities. And we'll talk more about that. And I would also say as participants are contributing, for each dollar that goes in, more of that dollar goes to work for the client, again, back to our delivering value to the participant. And lastly, helping participants grow and protect lifetime income. So like traditional or guaranteed fixed annuity, the same risk pooling and mortality credits that enable us to pay a greater initial income apply with CREF. And if you look at historically, we provided about 65% more lifetime income in retirement than the simple, say, 4% rule of thumb withdrawal. So that's a key advantage. We've been, again, doing this since 1952, starting with the CREF stock account, over 4 million participants utilize the CREF accounts. We've got a track record of paying out 100% of the income that's been promised through the CREF accounts, which is obviously very important. The clients are looking to TIA to do that. And the last five years, about 1.6 billion in retirement income benefits out of the CREF account outside of December of this past year. Now, I know we just mentioned low cost, but I do want to reemphasize that we are, if you look at variable annuities in their totality, we are the lowest expense selection or suite of variable annuities in the industry. Not only that, but we're also lower when you compare our annuities to the average mutual fund expense ratio. I don't think it's very easy to find annuities and comparing those to an average mutual fund expense ratio and coming out below that average. So it's really quite unique to have annuities that can be compared to funds. Usually annuities are far more expensive when you look at total expenses associated with them. On the payout side, we would also want to make sure that everybody's aware that there's tremendous flexibility. Once a client decides they want to convert a CREF balance into lifetime income, there are no penalties or fees for doing so. You can switch amongst the CREF accounts, and we'll talk about those in a moment in terms of the lineup that's available, the real estate account, as well as the traditional guaranteed annuity. And again, we do this by operating at cost and without profit to TIA. That last point's important, though, because that's something that not only are you managing the assets while clients are contributing, but also managing on an active basis the income streams that are coming from the annuitized portion that the client decides or you help the client decide to convert. OK, so let's take a deep breath here. This is the lineup that's available in the CREF account suite. We started out, again, with the CREF stock account in 1952, but as you can see, we've expanded over the last 30-plus years to include eight different accounts that span different asset classes, all of which are professionally managed portfolios with distinct investment objectives, as we can see by the varied benchmarks. So you start from the top to the bottom here, global equities, down to money market is generally on a relative risk basis. The first two accounts are global, that is global equities and the stock account. The difference being there that global equities has in its benchmark a higher proportion to international versus the stock accounts, which, as we'll talk about when we go into a little bit more of a deep dive on that vehicle, is a little bit higher on the U.S. allocation. As you move down, the next two accounts, again, four total in the equities, if you will, category, are CREF growth and CREF equity index. The CREF growth account is the Russell 1000 growth as a benchmark, and the equity index is a more broad and varied Russell 3000 index. The social choice account, I want to stop there and talk about that for a minute. It's very, very interesting in that it provides clients with a 60-40 balanced portfolio, stocks and bonds, that are invested in via environmental, social, and governance, or in various impact criteria. So this is a socially responsible investing vehicle, and if you think about TIA's participant base, we have professors and people that work in higher education and other not-for-profits in the hospital space that have preferences and belief systems around investing in a socially responsible way. So this account, which was initiated in 1990, has become a unique annuity account offering that, again, I think you'll see in client portfolios that you work with over time. And then we'll finish up with the last of these eight accounts with a couple of fixed income, one's an inflation-linked bond account that's designed to track or keep up with inflation, a core bond that's sort of a Barclays-Ag type of investment-grade account, and the money market account. So those are the eight. And what I would also just point out, again, is, again, you always have control in terms of managing the balances across CREF accounts. All of them can be converted to lifetime income. As I mentioned, no penalties or fees to transfer amongst the accounts or between CREF, NTI traditional, or the real estate account as well. And that's whether the client is still saving or in retirement. Now just as an example, what that enables you to do in terms of managing a retirement income strategy might be, for example, you decide there's a run-up, you see there's a run-up in the equities market, and you maybe move a portion of the client's annuity units that they're holding in the payout side from the, say, CREF stock or a CREF growth account into TI traditional. And you're able to then lock in those income gains, right, because at that point, the client might be very happy with that income level for some portion or, I mean, some growth as an example. So that's kind of how you can think about these post-settlement options that are, again, no costs, no fees to do so. And you're actively managing, if you will, the income sleep. So that's the lineup, again, eight accounts available to select from, serving various purposes and attributable to various different benchmarks. Here's my, our friends with the disclosures for the benchmarks. You'll be able to see those, again, when they're up in the Learning Center if you wanted to see what those benchmarks are based on, but I think everybody's got some familiarity there. Okay. So that's sort of a high level on CREF. Let's spend a little bit of time now on focusing on CREF stock. Again, that's our leading CREF account, and we're going to delve a bit into the investment attributes of the account, how the account is managed, and its performance, which over the long term, as we'll see, has been pretty solid. The account, as stated here, is intended to serve as a core equity holding and it aims to achieve growth during the accumulation phase and provide a strong foundation for lifelong income and retirement. So that's its real, that's our intention or that has been our intention throughout the history of the account. As of 1231 of last year, this past December, the account AUM was about $104 billion. And again, its long-term success has been driven by a globally diversified core equity portfolio, which takes on what we would call a moderate relative level of risk. Now, what's unique about the CREF stock account in its totality is that while we maintain a moderate risk profile overall, the various investment styles within CREF stock do have the latitude in their investing. So for example, those that are investing on it using fundamental approaches, they can make a sector bet, they can decide to overweight on a specific equity name, right, they have that latitude. Yet, the account's overall diversification across the fundamental management, the quantitative management and the research analyst investment approaches dampens, what those different styles do is they dampen the risk that we're taking on in the account. And as market conditions change, the account dynamically reallocates through our investment process, which is again, to design and maintain this moderate risk return profile. When you look to the right in terms of the pie chart, what we see here is a 65-35 split between U.S. and foreign investments. The foreign is 25 developed and 10% emerging. That's our sort of core benchmark. And that's based on our asset management team's assessment of the incremental risk adjusted returns that international equity exposure can add to the portfolio. In other words, what they're saying is with a 35% allocation to international stocks, the portfolio is in a sense optimal or optimized. And so we are focused on achieving this balance of between U.S. and international within the craft stock account. So again, we begin with this strategic allocation of 65-35, and then the account is actively allocated across various disciplines and various approaches. Central to the investment process is a risk management framework that diversifies geographically, right, by market capitalization and by investment style. And then what we uniquely do is employ three styles of investment management underneath those geographic market cap and investment styles, which are fundamental investment managers and investing based on fundamental research. Then we have specific research-based specialists, and they build high conviction sleeves within the portfolio, for example, could be emerging markets and having a specific sleeve within emerging markets, as an example. And then we have investment professionals who build quantitative models. So with all of these tools in the toolbox, as market conditions change and evolve over time, these allocations can then be shifted to adjust to those changing market conditions. If we look at strategic allocation, and I'll really quickly again, 65-35 geography, you can see as a 12-31 where we were in terms of market cap and investment style in the domestic, the U.S. piece is what we stay within the range of about 60% core and then split evenly 20% growth, 20% value in terms of the U.S. piece of the account. But what I think is really interesting when you look at investment approaches is where are we taking on active risk, right? On the right, you see the target allocation is plus or minus about 60% fundamental, 35% in the research analyst sleeves, and about 5% quantitative. As of 12-31 this past year, right, you can see where our current portfolio weights were in terms of fundamental research and quantitative. And if you look at the tracking error, the contribution to potential excess risk adjusted returns in the right, those translate into where we're taking current active risks. Today, right, 3% overweight on the fundamental, about, let's see, 4% underweight on the research sleeves, and about 1% over on the quantitative. The index obviously doesn't, indexes doesn't have any tracking error, there's no really active risk, it's really just tracking the index. So today that's where we're positioned relative to the target, but we're adjusting exactly that, those allocations to basically adjust to market conditions. And as of today, that's where, or as I say, as of 12-31, that's where we're weighted from a active risk allocation standpoint. So that's sort of a, hopefully not too deep of a dive, but just give you some look under the hood about the CREF stock account and how it's managed. Now I want to just shift to competitive performance. And this is for the, what we call the R3 share class. We have four share classes, R1, R2, R3, and R4, R4 being most recently introduced and the least expensive charge to the, the least expense charge or lowest expense charge, R3 being second, and then we've got some with higher expense charges, and those are really based on the plan size. So it's really a scale issue in terms of what shared class goes into which plan that you might see. But in this case, we're using R3. And for CREF stock, the expense charge is 23 basis points. You can see that over to the right. And again, for a globally diversified equities portfolio, which manages equity risk during accumulation, as well as while you're generating lifetime income. We like, and our investment team likes the account, not only in accumulation, but in decumulation, because really you're, you want to have diversification in the income stream that you're getting from the equities, from annuities, excuse me, an equities based annuity. And so that global diversification is what we're trying to manage in terms of risk and income, both in accumulation and in distribution. So let me point out a few things on performance. No hiding behind the year to date and one year. Those are difficult. It was a challenging environment for any equity investor. But as we look at the peer group ratings, whether it's three, five, 10 years, we're three and four stars. If you look at the five, 10 and overall, we're a four star rated account versus our peers. Second thing I would point out is since inception, about 9.62% through the December of last year. And over the last 10 rolling 30 year periods, the CREF stock account outperformed its Morningstar peer group 100% of the time, which is the 85% plus equity allocation. So we're very, very pleased with the long-term performance and the value that's been delivered through the CREF stock account on behalf of clients. And it's, as I mentioned earlier, we really put our best investors against this account from the Nuveen side, and they've continued to produce quite well long-term returns for our clients on a risk adjusted basis. So that's an overview of the investment attributes and the performance of CREF stock. What I wanna do now is shift to the income potential of CREF stock for a few minutes. But before we do that, Heidi, can you please, our second polling question, thank you. So here's our question. Since CREF stock was introduced in 1952, if a participant converted a CREF stock balance of $100,000 to lifetime income and selected a 20 year guarantee period, so they were gonna get 20 years of payments regardless, or we can talk about that too, what was the maximum payback they got over those 20 years? You can see the numbers and see what you think. We'll give like 10 seconds, Heidi, and then we'll see what people voted for. This is a very smart audience today. That is correct, $541,000. And let's take a look at the numbers here that I wanted to point out with regard to what the accounts been able to pay out. So maybe people have seen this before, but that was, I could have seen, other than the really high one, $900,000 one, that's unreasonable. I could have seen any of the other answers being viable. So what we wanna show you is that if a client were to annuitize, and this is $100,000 choosing a single life annuity with a 20 year guarantee period, and again, $100,000, and each of these bars is gonna represent a 20 year period. So for example, the 1972 bar, all the way to the left is the craft inception of 1952 to 72, and then 53 to 73, and so on all the way up to 2002 to 2022, all the way to the right. So these are 20 year periods. And as we said, 20 years guaranteed means that if that annuitant passed away within the first 20 years, a named beneficiary would receive payments through 20 full years. So that's the worst case scenario, dies within 20 years, payments last only 20 years. Of course, payments could go much longer than this, but we're just looking at 20 years of payments. As we said, the question, the maximum was 2000, let's see, 1991 to 2000, let's see, 1981 to 2001. That was the historical maximum payout based on market performance over that period of time. North of a half a million dollars for that $100,000 that was annuitized. On the flip side, on the other, the minimum payback in 2019 was $107,000. So again, it's not a guarantee. In some cases, for a 20 year period, less favorable, but on average, about a quarter million dollars was paid out to a client who annuitized and did a single life with a 20 year guarantee. And all along, what's been happening here? The client's been benefiting from a handful of things. First, the initial income is boosted by the mortality credits that I mentioned earlier. Like traditional, CREF annuities do pool risk and provide significantly higher starting lifetime income, which has an effect over the longterm over the 20 year payout period. Also, payments automatically adjust to the annual and cyclical variability of the global equity markets. So we're adjusting, but we're always maintaining the units, the annuity units throughout retirement. So the recovery, we're not selling, say in the case of an ETF or a mutual, we're not selling the shares in order to generate income. We're kind of rolling with the ongoing performance of the global equities market. And because we have these constant units able to recover as things go forward, which is another contributor. And the last thing I would just say is that confidence is another component of the lifetime income plan that both on the fixed side and on the variable side, there are components that will never run out. Variability, absolutely, but also guaranteed lifetime income. The other aspect I wanted to talk about on the payout side is the mechanics and how we've determined initial payouts historically and how we do calculate initial payouts. And it's all based on, or rotates around a 4% assumed investment return, AIR. An initial payout is determined by a rate. In this case, we use 4%. Which options you choose, whether it's singular joint life and or a guarantee period. And third, the age of the annuitant, right? This is from mortality perspective. And if it's a joint annuity, the age of the spouse. And so that's how we determine an initial payout. And again, in the case of CRAF, it's a steady 4% that does not change. If we look below, what we see is historical initial payouts for CRAF at 65, 70, and 80 years old. Doing a single life annuity with a 10 year guarantee. And you'll see that, you can see the payouts in that middle column are quite solid when you talk about building an income plan and combining it with guaranteed payments, say from traditional, from social security. But the payouts that one can achieve as an initial payout relative to a 4% withdrawal at 65, it is one quite a nice payout advantage. And by the way, what we did was here, just to be fair and balanced is at 70 and at 80, because of the reduced mortality, the life expectancy at those ages, we upped the advantage comparison to 5% withdrawal at 70 and 6% at 80. So we weren't comparing the payouts to 4% at 70 and 80 because that would be a little bit skewed in terms of what we were showing, but still payout advantages are 50% and above relative to the systematic withdrawal at the 4% level. The other thing to note here is for future payouts, we use 4% as sort of a bogey. And depending on what the rate of return is from the underlying account, we're going to compare that with 4%. And based on that comparison, the income will either stay level if it's exactly 4%. If it's below 4%, right, then the account, the payout will go down. And if it's above 4%, it'll go up. So for example, just to make it clear, if CREF stock were to return 10%, and this is approximate, it's very close. There's also an actuarial component here, but very close. 10 left 4 would be a 6% increase if the CREF stock account returned 10%, say in year two. If alternatively, the count was flat, let's assume that it was a 0%. It was just a flat year for the markets. Payouts would go down by 4%. That's four, right down to zero is 4%. It's below 4% by four. So it would be a negative 4% effect on the ongoing income. So that's what I wanted to make sure is that we understood, again, that 4% AAR in terms of how the payment's calculated and on an ongoing basis, how it's adjusted based on the underlying performance. As noted here, there's also a timing of the market throughout the year, right? We make payment adjustments every April 1st to the CREF payouts. So, see here, what do I wanna go to here? The next thing I wanted to basically talk about is transition into lifetime income planning and diversification within a lifetime income plan. What we're trying to do is hedge risks, right? And achieve certain objectives on behalf of the client. So we know we've got longevity risk. We have market risk, otherwise may be known as sequence of return risk. There's cognitive risk in terms of the ability for the client to make decisions. Again, these are all things that you as the advisor are counseling and providing guidance to the client. And lastly, there's inflation risk. We all know very well, we're very well aware of that today. The other thing we wanna do is we must maintain liquidity post-retirement. Post-retirement, so we've gotta have liquidity that's adequate for the client and appropriate. Emergency funding, as well as just general liquidity. And the client might have legacy or estate planning goals, correct? So those are clearly things, risks that we wanna hedge against and objectives that we wanna maintain for the client. And as we can see, the four solutions at the top are going to effectively address these different risks and different objectives. The one column I might add here, which we don't have and maybe it goes to the fixed annuity side, but it's really not, is social security, right? That is excellent for longevity. It's certainly inflation adjusted, so it helps there. And obviously, from a market risk standpoint, it does all those things. But from a longevity standpoint, we see that fixed and variable annuities are really the only investment vehicles that can hedge against longevity by pooling risk. The fixed annuity is free from market risk. Also, as I said, social security. Cognitive risk, whether it's fixed annuities, variable annuities, or social security, also, we're gonna deal with that because those are decisions that are made and remain. The check arrives every month, regardless of one's capacity to make decisions as one gets older. And finally, inflation. I would also add social security here with the COLA adjustment. The systematic withdrawal portfolio that you might be managing for the client, as well as a variable annuity that has the opportunity, like the systematic withdrawals, to grow and hedge against inflation, particularly for with the CREF annuities or variable annuities where there's equity exposure. Those are qualities that those two vehicles might bring, and the third being social security. You must have liquidity, so a portfolio that's generating systematic withdrawals is doing that, as well as providing money that can be directed to an estate for leaving a legacy. But what we're talking about here is when we combine those components, we diversify these sources and we create a diversified income strategy that provides all of these things in one plan. And that is really what we're champions for, and clients who have the traditional annuity we talked about last week, some of the distinct advantages that traditional provides, and we would also talk about variable annuities as well. So to wrap us up and get to Q&A, what we're really talking about here is combining both guaranteed sources of income and non-guaranteed sources. It's the same principles of diversification in an investment portfolio as you invest in stocks and bonds and cash and real estate. The same thing applies to guaranteed and non-guaranteed sources. And of course, what we're doing here is, back to the last slide, is diversifying those sources. I would just point to the fact, we talk about access to professional management in the variable lifetime, and the lifetime in the lump sum, patrol and coordinating, and being tax efficient. That's one of many of your practices, your primary role. But it's also access to professional income planning advice that spans all of this to create a diversified income plan for the client's lifetime. And here's where, again, what we can offer you. Whoever has an email in, we can provide you with a paper that focuses on a particular point of view we have around building lifetime income portfolios. If you want to send your email when we get to the last slide to our, if you haven't, if you didn't submit your response to sign up for the webinar, we'll be happy to send you that as well if you provide us your email. So as Heidi talked about what's coming up next, we've got Chris Burke, who's the portfolio manager for the real estate account, that's going to talk about the unique investment opportunity provided by the real estate account to do investing in direct real estate. And lastly, on the 21st, we're going to talk about how we can work with you to help assess the underlying values of TIA contracts using our Retirement Income Illustrator. We'll look forward to that session as well. As I mentioned, we can always, please, call us at Advisor Services. You can reach out to us at this email. Again, send us your email if you want to receive a white paper on our point of view on lifetime income planning. And at this point, Dennis, see what kind of questions we have from the audience. Great, we've got some good ones, Paul, from the audience. So there was a couple that, the first one talked about how does the fund expenses compare to ETF fees? So I think that can maybe be a multiple thing. Maybe talk a little bit about where craft variable annuity funds are available, where you get them, but plus the comparison of fees, maybe. Yeah, so ETFs, on the whole, I don't have data in front of me in terms of ETFs versus mutual funds. But on the whole, exchange traded funds are going to be a lower cost vehicle versus mutual funds. We compare to mutual funds because within 403B plans where we play, that's really the vehicle that's available within those plans. And so it's kind of like that's where we make the comparison. Dennis, I don't know that I have data that talks about how our expenses across the suite would compare to ETFs. I don't know if you have anything to add there in terms of comparative data. No, I mean, I think you're right, Paul. I think the big point here is they kind of mentioned that a lot of times now they're just using ETFs and not mutual funds at all. And the key point might be just that with those 403B accounts, there's really not a lot of ETF options. It's really investment options. So it's not really a direct comparison, but it's a great question. Yeah, it is. Yeah. Agreed. The next question is a little similar, Paul. It says, not including the management fee of the underlying fund, what fees are charged for being in the variable annuity at TIAA? So I was thinking that relates more to the mortality expense charges within the CREF products. Yeah. Yeah. So I think I would agree, Dennis. Essentially, it's investment expenses, sort of administrative costs, and then the M&E that Dennis was talking about, the mortality expense. Our mortality expense is de minimis. I think that the statistic is it's 200 times lower than the average M&E that you'll see in the market based on the variable annuity products that are out there. And that's based on, again, we operate at cost. And our scale, we've got, I don't know what the hundreds of billions within the overall CREF speed. Again, it's about $100 billion, a little over $100 billion for just CREF stock. But because of our scale and our at-cost, our insurance expense that's underneath, that's a component of the overall expense, is very, very small. I don't know if you have the number, Dennis, on the top of your head. But it's 0.07. It's one half of 1%. Yeah. Yeah. Right. But yeah, so those are the components. It's investment expense, administrative, and M&E. And again, back to the mutual fund question, Dennis. I'd also just say, look, when you talk about annuity account expenses being below the average mutual fund expense, usually those are in different universes as it relates to costs for annuities. Only because, let's be candid, look out there on the variable annuity universe. And all in, many of those products can be 150, 200 basis points or more. So where we sit in an at-cost basis for our suite is incredibly low. Yeah. And Paul, I think I misspoke. It's not one half of 1%. It's one half of one basis point. I'm sorry. For the M&E. OK. Yeah. Both are independent. Big difference between the 50 basis points versus half of 1%, or half of one basis point. So yeah, big difference. Yeah. Good. Yeah, true. Yep. There were questions around the post-settlement transfer concept, Paul. And under what conditions can accumulation in TIA traditional be transferred to crafts? Yeah, so great question. There are guardrails there where you can do basically 20% of the account over five years, up to that amount, to go from traditional into the craft accounts. And craft, I think we can do one, for each account, one transfer per quarter. Dennis, hold me honest there. Make sure that I'm stating that accurately. But I believe that is the, those are the guardrails for the rules. Yeah. So that was the tie-in was with the next question was, how often can a post-settlement transfer be made? And Paul, the other thing, just to talk about a little bit, is there's a big difference between units and shares when it comes to variable annuities. And it plays a big part in kind of how it works. You want to touch on that? Sure. That's a great one, Dennis. Because we've talked about that quite a bit, too, with advisors. So when you hold, in an annuity account, you hold units, as opposed to, quote, unquote, shares in a mutual fund or ETF. When you decide to convert to lifetime income, those accumulation units are now, what is created are payout units. And those units do not change throughout the life of the participant, period. Now, what's important about that is, as the markets go back, go through their cycles, if a client were to need to generate income from a mutual fund in a down market, it may be that, depending on what income they really needed from their necessity, that they might need to sell shares. And if so, as we would all imagine, the recovery of the value as the market recovered would be, I would say, unrecoverable, because those shares were sold. Because the annuity, by its construct, has these units that never change, as the market then comes back, the annuitant is able to take advantage of all those upswings. One of the reasons, again, why you saw the numbers over 20 years, there was never a single unit sold, because, again, you can't sell the units. You can change them between accounts, as we talked about. But those units remain constant, as opposed to shares, which may or may not remain constant. And Dennis, if you had anything to add to that, that's kind of how I would construct that. Yeah, just think about it. So when the market goes down, and you're taking income, you're not actually selling off a share. Those same number of accumulation units is there. So if the market recovers, you've got that same number of units there to help you during that, when the market does recover. So you didn't sell out of the shares. It's just kind of a unique difference between funds and the systematic withdrawal versus annuitization within that. Really good questions here, Paul. And you may need to go back into your slides. But they're asking, can we go over annuity income payment example when the IAR is zero? And then also, what is the payment percentage for an eight-year-old? OK, we should go back to that slide. I'm happy to do that. So Dennis, just to make sure that I'm being clear here. So let's look at, it's really a relative to 4% question, roughly. It's very close to that, because again, there are actuarial pieces of the income adjustments. Let's assume that, again, the underlying account is up 10%. 10 minus 4 is 6. You're going to be up 6. But think about 4% being the line that you have to go above or below. Once you go below 4%, so 3, 2, 1, 0, and further down, you're now going to be down for that year in terms of a payout. So that's why I said at zero, you're 4% below that 4% BOGE rate. You're going to be minus 4 at that point. That was the question. And the other question was the eight. And Dennis, why don't we stop there? Am I being clear? Because I want to make sure people are. Yeah. Yeah, so specifically, Paul, and maybe if you could try to put some type of number around it. So you talked about the 4% return. If it did 10%, that after that, there'd be a 6% increase from the point where somebody was adding in their payment. If it was 0% return, then basically, you'd look at the same thing. You're 4% below the thing, so you'd have a 4% decrease. If you had a 0% return from the point your payment was at, your payment would go down by 4%. That's correct. I'm not going to say anything more because you just said it perfectly. Yeah, and then the second part was just the payout percentage for an 80-year-old person, which I think is on the screen, Paul. Yeah, so that's, again, if you look historically for a single life or a 10-year, that payout is 10%. Of whatever the client would annuitize, they would get a 10% payout. Single life was a 10-year guarantee. Thanks, Paul. The next question, and this maybe heads into session 5 a little bit, Paul. The question is, how can we see what is in the underlying fund in order to get a high-level view of our client's overall portfolio, including accounts not held at TIAA? Dennis, could you take that one? I think that might be a better one for you to answer. Yeah, so I think as far as seeing the underlying funds, you could probably just go on TI.org to Underinvesting, and you could look at the fund and then click on that. And if you click, it's going to give you that additional information. There'll be a prospectus. There'll be the supplemental prospectus as well. That would have a full list of what are the investments made up inside of that investment option itself. Yeah, yeah. Yeah, there's fact sheets. I think the fact sheet was a little bit poor, because it goes through the top 10 holdings and where it's allocated currently, US versus international, for example. All the common things you'd see in a fact sheet, too. Yeah. This one is going to be tougher for me, Paul. So hopefully, you may have to. We may have to do some research on this next one. OK. How are the holdings chosen for the socially responsible funds? Yeah, so we have, Dennis, for that, if that person did not submit their email when they registered for the event, please do so. We have a brochure on the social choice account. The ESG criteria that TI uses is a proprietary approach. And so I don't know that we would sort of say, this is exactly how we do it. But we do look at, again, environmental, social, and governance factors. We've been in that space for, I think, as long as pretty much anybody in the industry has, again, based on who our client base is, and their values, and kind of their approach to investing. So Dennis, I would say we can provide more information. I don't know how satisfied that person would be in terms of what we provide, because I don't know that we, there's a lot of stuff. If you go to TI.org and you look under responsible investing, there is a lot of information. We have an annual responsible investing report that we publish. So there's a lot out there. Hopefully, you'll be able to, that advisor will be able to glean what they're looking for. And if not, call us. We'll give you what we can. Great. And then the last question, Paul, it may be a takeaway. But someone's wondering if we could add slides to the presentation that illustrate the effects of stock market performance on payouts that clients receive. Fine with using Kreft's equity account as a proxy for the market. Do we have anything like that that we, if the person put their email in, we could send them that was more of a illustration and actually market performance? So in other words, to restate that, just the beginning of it, Dennis, because I just want to make sure I heard it right. Yeah. All right. Can you add slides to the presentation that illustrate the effect of stock market performance on payouts that clients receive? Fine with using Kreft's equity account as a proxy for the market return. OK, so maybe what they're saying is the Kreft equity index as a proxy for the overall, like for the market. If that person could, I don't know exactly what they're looking for, but looking for sort of a year over year, right, like what that's been. We use, we purposefully use, Dennis, like the 20 year for Kreft stock, which is global, right? It's a global account, not a US specific account. But we use those 20 years to sort of show the history. But yes, within those 20 years, income is going up and down depending on the starting year, depending on any particular participant that annuitized on a particular year. So if that person could email us, again, we're happy to provide whatever we can to provide clarity. I'm just, I'm not sure what the question is asking. I'm not, I just want to make sure we get them what they're asking for. All right, so there's a couple of ones. I'm not 100% sure what's being asked, but I'm just going to kind of phrase these questions, Paul. So are there any options for clients who don't want such a large international exposure? And so I think that's the first question. So if you look at the menu, we have Kreft stock. If you want globally, if you want to globally diversify, Kreft stock is going to be the 6535 is going to be what is available. We don't have currently, because they want to minimize that, minimize it. The other two are, again, the Kreft growth, which is the Russell 1,000 growth, and the Kreft equity index, which is the Russell 3,000 broad indexes. So yeah, if you want less equity exposure than that within the accounts, I suppose one could utilize Kreft stock and then combine it with some greater level of the equity index for the Kreft growth. You could do that and then have a net effect of having lower international exposure. Other than that, I'm not sure how you could do it. I think there's just a couple of minutes, so we should turn it back to Heidi. Thank you. Any final thoughts for us, Paul? No, Alyssa, thank you again for attending today. We just really wanted to provide some insight into Kreft because you will see, if you already work with many TI participants, you're going to see Kreft in there. This has been sort of a wealth-building vehicle for TI participants over a long period of time. So it's important, as we stated, that you understand the accounts and hopefully have taken away the professional management and long-term performance, as well as the low-cost vehicles that the Kreft communities are and that are able to provide lifelong income for participants as part of a diversified income plan. And again, we really would love for Dennis and Karen and team to have the conversations around income planning because that's really where we feel we can make the greatest difference and deliver the greatest value to the client. Thank you, Paul, Dennis, and everybody for a great program. Please do complete the survey that pops up. You can ask any additional questions there. And specify how you'd like to be contacted. Again, the next program is on Monday, 3 p.m. Eastern. That's on real estate accounts. The final session on partnering and understanding your client's current contracts is on Tuesday, February 21. Thanks, everybody, and have a great afternoon. Bye now. Thanks, everyone. Thank you.

webinar

CREF variable annuity accounts

investment attributes

performance

income potential

CREF stock account

diversification

variable annuities

financial objectives