The only way to pass a TIAA-CREF account beyond the current generation requires that you elect not to annuitize. You must instead elect the Minimum Distribution Option, because that avoids the conversion of the account into a premium. The first benefit, assuming that this comports with your values and resources, is that you will have responsibility for your own financial destiny. To underline the point, you have rejected the safety net of a lifetime annuity and have chosen instead to take distributions at your own pace, subject to the governmentally prescribed minimum. (more…)

The final task in the area of investments is to establish a monitoring system to evaluate investment performance and to determine whether the fund’s investment objectives have been met. This topic is the subject of a separate monograph published by the Financial Analysts Research Foundation, and it will not be covered at any length here. However, a few comments are pertinent. (more…)

Although practices may differ with respect to the involvement of the corporate sponsor in objective setting and asset allocation retirement, selection of investment managers is rarely delegated. In terms of dollars of assets, most funds are managed by investment managers outside of the corporation, inasmuch as few companies have the internal expert staff needed to perform this function. Moreover, corporate management may prefer to delegate the fiduciary responsibility for investment, and some companies believe that having outside managers reduces some of the problems with respect to pensions in labor negotiations. (more…)

This is usually referred to as the actuarial accrued liability. It is that portion of the actuarial present value of all future benefits (PVFB) that is assigned by the actuarial method to the period prior to the valuation date. present value of all future benefits is the present value of all benefits accrued and unaccrued, past and future. It is a measure of the total obligations of the plan, past and future. That portion assigned to the past is called the actuarial accrued liability. This concept will be discussed again later in the section on actuarial methods. Due to the wide variety of actuarial methods in use, the same plan and assumptions can generate Significantly different actuarial accrued liabilities. In fact, one commonly used method (Aggregate Actuarial Cost) produces a zero actuarial accrued liability by definition. It funds costs over future payrolls only. (more…)

With respect to investments, the first task of the corporate sponsor is to set return objectives and broad definitions of characteristics for the investment portfolio that receives the corporate contribution. Setting investment objectives by the corporation for the investment manager or managers was not always considered an important function of the corporate sponsor; objective setting frequently was left to the discretion of the investment manager. However, as funds have grown in size, setting investment objectives has assumed increased importance; written objectives are prepared and then reviewed at regular intervals. Unfortunately, objectives often are stated in very vague terms, such as obtaining the maximum return consistent with prudence. Nevertheless, this problem is getting increased attention, and more specific directions may be expected in the future. (more…)

Sense of financial security in retirement will elude anyone who worries about what will happen to them when someone else dies. Whether the risk is loss of investment expertise, the absolute loss of income (e.g., because a pension benefit has no survivor benefit), the loss of assets to probate and estate taxes, or other circumstance of financial loss, providing for survivors is an element of financial security in retirement. (more…)

Now that you have quantified your retirement objectives, identified the asset classes you should choose, and considered how this retirement account will work with existing assets, you can move to select the specific product(s) for your portfolio retirement.

If you are an experienced investor with the time, temperament, training, and money to select individual stocks and bonds, you can certainly include them in your portfolio. (more…)

Many investors incline to take more risks in their investment for the hope of higher returns. Even though in some point this decision put risk into their retirement investments and their retirement planning as general. Moreover, risk aversion by investors seeking safe investment only, making the prospect of increased efficiency gains. Common investor also needs knowledge of the various types of investments he or she can choose from. (more…)

Once you identify your personal financial retirement profile, you can move to the next level on the financial planning for retirement. Many people accumulate different types of property for pension that can be used for retirement. The type of property one owns and its tax characteristics can be important in creating an overall retirement strategy that fits well into Level III of the financial pyramid. Let’s take a look at how to create efficiency and diversification in an integrated program. (more…)

The “ideal product,” then, may be a diversified asset allocation program. By selecting a proportion of assets from each category, you can tailor an overall portfolio retirement to suit your risk tolerance, time frame, and goals. Although there is no guarantee of performance, selecting asset classes based on your personal retirement profile may help insulate you from the worst effects of inflation, market, and interest rate risks, while positioning you for potential account growth. (more…)