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April 3, 2014

How to become retirement-ready

The University Senate’s benefits and welfare committee heard a presentation on retirement readiness from TIAA-CREF, one of two companies providing retirement savings options at Pitt.

“One of the big buzz words in the world today is retirement readiness,” Jay Mahoney, relationship manager with TIAA-CREF’s financial services, said during his presentation on March 18. “What do we need to do to get [Pitt employees] to maximize that benefit?”

That’s the reason TIAA-CREF, the nearly 100-year-old higher education-focused financial services company, began this academic year to more actively reach out to University staff and faculty who use its retirement savings programs or could benefit from them.

“We were part of that founding group” of universities that created TIAA-CREF, noted Ron Frisch, associate vice chancellor for Human Resources, a chancellor’s liaison to the committee. “We rest in about the top 20 of all universities in the world for total assets” in TIAA-CREF. “Unfortunately, we have a lot of people who don’t do anything, either because they are uninformed or they never look at it again until they leave the University. ‘Do you realize how much money you have?’ And the response is, ‘No, I don’t.’”

“And they surely don’t know what it means in terms of monthly income when they start to retire,” added Mahoney.

The average balance in TIAA-CREF accounts of Pitt employees aged 55-60 is $141,000, he reported, whereas the average balance in a 401K nationwide is only $35,000. (Pitt employees also have the option of directing all or a portion of their contributions to Vanguard.)

Retirement usually requires income at about 80 percent of the level of your active employment income if your current lifestyle is to be maintained, Mahoney explained.

From their main local offices in Bakery Square and campus office in the benefits department of Human Resources, TIAA-CREF field advisers offer free personalized advice to Pitt employees. They help employees deal with questions about budgets, managing cash flow and saving for a child’s education, for example. TIAA-CREF also has registered investment advisers for those needing to manage larger assets, for whom the company conducts annual personal reviews for a fee. Last year, TIAA-CREF also began to partner with Ibbotson Associates to provide fee-based wealth management planning, which usually is used by people with assets of $500,000 or more.

Mahoney’s presentation showed that TIAA-CREF currently has about 8,000 active Pitt employees contributing toward their retirement and 13,870 non-contributing Pitt participants who have retired, left Pitt or are otherwise no longer contributing.

John Kozar, assistant vice chancellor for Human Resources and another chancellor’s liaison to the committee, noted that there are active employees who participate in Pitt retirement plans simultaneously through TIAA-CREF and Vanguard and some who choose one service or the other. According to Kozar, there are 5,400 employees currently contributing to Vanguard retirement savings plans and 8,000 non-contributing Pitt employees with Vanguard accounts.

Ten percent of Pitt employees have chosen Pitt’s defined benefit pension plan. Also called a noncontributory benefit plan, it accumulates Pitt-funded retirement monies based on 2.1 percent of the employee’s compensation, but does not include an employee contribution. Retirement benefits, often in the form of an annuity, are based on salary, number of years in the plan and age at retirement.

The level of TIAA-CREF services usage is encouraging, Mahoney said. Last year, there were 284,117 web logins by 8,598 individuals on myTIAA-CREF. The company advised 656 Pitt employees in 2012, when Pitt’s voluntary early retirement program was offered to staff members, and saw 547 people in 2013.

Concluded Mahoney: “Our studies have shown, people who take advice, they tend to have a higher level of retirement readiness, [and] they save more …”

Kozar and the chair of the committee, Angelina Riccelli, say they are considering scheduling a Vanguard presentation this fall.

—Marty Levine