Getting money out of TIAA Traditional: the nine-year clock, explained.

Nine years and a day. That's how long it takes to move a TIAA Traditional balance out of a classic Cornell retirement contract, It surprises nearly everyone who asks me about it. Last month I made the case that the bulk of a Cornell 403(b) belongs at Fidelity. The follow-up question, every time, was some version of "so how do I get it there?" This is that answer.

Why TIAA Traditional only opens one way

TIAA Traditional is a guaranteed account. Your balance never falls, and TIAA credits interest at a rate it declares each year, with a floor written into your contract. To make that promise, TIAA invests your money in long-dated bonds, mortgages, and private loans it can't sell on a Tuesday. So it asks you not to leave on a Tuesday either. The price of the guarantee is liquidity, and in the Retirement Annuity (RA) and Group Retirement Annuity (GRA) contracts, that price is written plainly: no lump sums, installments only.

That's a fair trade. The older RA contracts carry a 3% guaranteed floor for life, and TIAA has historically paid the illiquid contracts more than the liquid ones. You're being paid for patience. You should know you signed up for it.

How the transfer payout annuity works, step by step

The exit is called a transfer payout annuity, or TPA. Despite the name, nothing about it is a lifetime annuity. It's a schedule.

1. You tell TIAA where the money should go: the Fidelity side of the Cornell plan, other funds inside TIAA, or an IRA elsewhere. Sent to another retirement account, each installment moves without tax.
2. TIAA pays out one-tenth of the balance right away.
3. Each year after, on the anniversary, it pays out an equal share of whatever is left: one-ninth, then one-eighth, and so on, until the tenth payment empties the account. Ten payments, nine years apart end to end, plus a day.
4. The balance still waiting in line keeps earning interest. Under the RA and GRA contracts the payout floor is 2.5%, plus whatever extra TIAA declares, so the later installments are a bit larger than the first.

You can start a TPA while you're still employed. That detail is the whole strategy.

A worked example: Ruth, $400,000, and a five-year head start

Say Ruth is a 62-year-old Cornell professor with $400,000 in TIAA Traditional inside a legacy RA contract. She plans to retire at 67 and wants the money in low-cost index funds at Fidelity by then.

If she waits until her retirement party to ask, the first dollar leaves at 67 and the last dollar leaves at 76. She spends most of a decade of retirement waiting on a balance she can't touch on her own schedule.

If she starts the TPA this year, the first installment of about $40,000 moves to Fidelity now. By 67, five payments have gone across and roughly half the balance is already invested the way she wants. The rest keeps arriving each year while the remaining balance keeps earning its guaranteed rate. By the tenth check, the installments add up to more than her original $400,000, because the money kept compounding in line.

Nothing about Ruth's plan is clever. She read her contract letters and started the clock early.

RA, GRA, RC, SRA: which TIAA contract you have decides how fast it moves

The letters on your TIAA statement tell you the rules. There are two families: the classic annuity contracts and the newer Retirement Choice contracts, and Cornell employees hold both depending on when the money went in.

• RA (Retirement Annuity): no lump sums from Traditional, ever. Ten annual installments over nine years and a day. Floor of 3%.
• GRA (Group Retirement Annuity): same ten-installment schedule, with one exception. Within 120 days of leaving Cornell you can take the whole balance at once, and TIAA keeps 2.5% for the privilege. On $400,000 that's $10,000.
• RC (Retirement Choice): 84 monthly installments, so seven years instead of nine. Same 120-day lump-sum window with the same 2.5% charge. Floor floats between 1% and 3%.
• SRA, GSRA, and RCP (the supplemental contracts): fully liquid. Move it whenever you like, no schedule, no charge. TIAA generally pays these a lower rate, which is the flip side of the same coin.

The short version: the installment rule applies to the RA and GRA money. The supplemental money was never locked up.

What you give up when you leave TIAA Traditional

Moving Traditional isn't free even when there's no fee. Three things come off the table:

• The guaranteed rate. A 3% floor is worth little while money market funds pay more than that. It was worth a great deal in 2020 and would be again if rates fell hard. Old RA money with a 3% floor deserves a slower hand.
• The TIAA loyalty bonus. If you later convert Traditional to lifetime income, TIAA tends to pay a higher monthly check on money that has sat in the account for a long time. Start a TPA and you forfeit that on the money that leaves.
• A payout rate that may differ from your accumulating rate. Once the TPA starts, the waiting balance earns the payout-annuity rate, which TIAA sets separately. Ask for the current number before you sign.

In exchange you get liquidity, funds with a printed expense ratio, and a portfolio that follows your plan instead of TIAA's calendar.

When to leave TIAA Traditional alone

If you already know you'll convert the balance into a lifetime paycheck at retirement, don't touch it. The illiquidity was never going to bite you, and the loyalty bonus rewards you for staying. The same goes for a modest Traditional balance you're happy to treat as the bond slice of a bigger portfolio.

For everyone else: if you're going to want the money at Fidelity in retirement, the clock should already be running.

The wider picture of the plan (both record-keepers, contribution limits, phased retirement) lives in our guide to the Cornell 403(b) and TIAA. And if the retirement date itself is coming into view, the guide to retirement planning in Ithaca covers the healthcare bridge, New York taxes, and the house.

Common questions

How do I get money out of TIAA Traditional? It depends on the contract. In the classic RA and GRA contracts, transfers and withdrawals are paid through a transfer payout annuity: ten annual installments over nine years and a day. Retirement Choice (RC) contracts pay out in 84 monthly installments over seven years. Supplemental contracts (SRA, GSRA, RCP) are fully liquid and can move in one transfer.

Can I take a lump sum from TIAA Traditional? Not from an RA contract. GRA and RC contracts allow a one-time lump sum only within 120 days of leaving your employer, with a 2.5% surrender charge. After that window closes, the installment schedule is the only exit short of converting the balance to lifetime income.

Does my money keep earning interest during a transfer payout annuity? Yes. The balance still waiting to be paid earns a guaranteed rate plus whatever additional interest TIAA declares, though the payout rate can differ from what your accumulating contract was earning. Each installment moves without tax if it goes to another retirement account.