TIAA Enhances Retirement Income Profile Tool

Available to all customers, the tool analyzes an individual’s real-time account information, along with their responses to a handful of simple lifestyle and financial questions, allowing for projections and interactive analysis of retirement income strategies. 

TIAA announced enhancements to its Retirement Profile tool, a feature of the company’s Preparing for Retirement experience.

Available to all customers, the tool analyzes an individual’s real-time account information, along with their responses to a handful of simple lifestyle and financial questions, to give them a view of what their income in retirement might look like.

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According to Executive Vice President and CEO of TIAA Financial Solutions Lori Dickerson Fouché, the tool is designed to make retirement planning easier for customers and help them build confidence in their decisions.

“The enhanced Retirement Profile tool shows TIAA annuity customers how the combination of lifetime income—such as fixed and variable annuities, Social Security or pensions—and systematic withdrawals have the potential to yield a steady and guaranteed retirement paycheck,” she adds.

According to TIAA, the expanded retirement income profile tool offers individuals estimates whether an their portfolio is “on track” to generate the monthly income they will need in retirement using real-time account data; suggests strategies to help an individual work toward their goals by adjusting factors like the age at which they start collecting Social Security and how they will draw income from their annuities; and provides an interactive “play area” that shows individuals how adjustments to their inputs, such as retirement age, can change their monthly retirement income and likelihood of meeting their annual retirement income needs.

Proposed strategies are outlined alongside an individual’s current strategy, illustrating how adding income from annuities may be able to help an individual secure a stream of income in retirement for as long as they live. The tool also generates a “probability of success” indicator to further illustrate whether a particular approach will put an individual on track to achieve their annual retirement income needs.

Advisers Can Help Start-Up Retirement Plans Evolve

PLANSPONSOR’s 2018 Defined Contribution Survey found many start-up plans have not yet adopted plan design best practices and many are unsure about fees, but fortunately, nearly two-thirds employ the services of a retirement plan adviser or institutional investment consultant.

It takes time to perfect a project, and results from PLANSPONSOR’s 2018 Defined Contribution Survey suggest this is true for start-up defined contribution (DC) plans.

While start-up plans (defined as those with less than $1 million in assets and less than three years of tenure with their provider) do offer beneficial provisions for retirement plan participants, the survey finds not all of them are yet using plan designs and governance practices that are recommended in the industry. It is likely this will change as start-up plans get larger and spend more time being educated by plan advisers and providers.

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According to the survey, the majority (73.9%) of start-up plans are safe harbor plans, which do not have to worry about nondiscrimination testing. This compares to 54.4% of DC plans overall in the survey. In addition, three-fourths (75.7%) of start-up plans offer participants the ability to save after-tax contributions in a Roth account. Forty-five percent of start-up plans that match participant deferrals say match amounts are immediately 100% invested, compared to 36% for DC plans overall. Start-up plans offer a similar variety of investment classes to participants for investing plan assets as DC plans overall.

One-third of start-up plans report their approximate average asset-weighted expense ratio of all investment options in their plan less than 25 bps, and 74.4% reported it is less than 75 bps. Also, more often than other plans, start-up plans do not pass fees to participants. For example, 66.1% said recordkeeping fees are paid by the company, versus 33.9% for DC plans overall. More than three-fourths (78.8%) of start-up companies report that expenses associated with employee communications and education are paid by the firm, compared to 52.1% for all DC plans.

However, only 19.5% of start-up plans use automatic enrollment, compared to 46.3% of DC plans overall. Those that do use automatic enrollment tend to stick more to smaller default contribution rates than DC plans overall. Two-thirds (66.7%) use a default deferral rate of 3% or less. In addition, only 14.7% of start-up plans use automatic deferral escalation, versus 37.8% of DC plans overall.

While average participation and deferral rates are similar between start-up plans and DC plans overall, start-up plans tend to make employee wait longer to be eligible to participate in their DC plans. Only 17.9% are eligible immediately upon hire (vs. 36.8% for DC plans overall), and 33.3% must wait until they are employed for one year (vs. 21%).

What is interesting is the information about which start-up plans are unsure. Nearly two-thirds (64%) are unsure or don’t know whether their plan includes mutual funds that pay 12b-1 and/or sub-TA fees to recordkeepers or third-party administrators (TPAs). Half are unsure whether their plan uses an “ERISA account” or “plan expense reimbursement account” to track revenue sharing credits.

In addition, no start-up plans have a policy to address fee equalization.

Fortunately, nearly two-thirds (64.5%) of start-up plans employ the services of a retirement plan adviser or institutional investment consultant. Continued interaction with retirement plan advisers, investment consultants and recordkeepers most of the time results in improved education for plan sponsors and participants and improved plan design.

For information regarding the purchase of the PLANSPONSOR 2018 Defined Contribution Survey results or industry reports, contact Brian O’Keefe at brian.okeefe@strategic-i.com.

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