New TIAA-CREF Index Reveals Not-for-Profit Employees on Track for Retirement

On track to replace, on average, more than 90 percent of their income
in retirement

Underscores importance of strong employer and employee contribution
rates and benefits of an income replacement approach to retirement

NEW YORK–(BUSINESS WIRE)–Research released today from TIAA-CREF’s new Retirement Income IndexSM
shows not-for-profit sector plan participants are estimated to replace
an average of more than 90 percent of their pre-retirement income in

“As people live longer in retirement, and costs continue to rise for
healthcare and basic living expenses, the stakes for retirement planning
have been raised dramatically,” said Teresa Hassara, president of
Institutional Retirement at TIAA-CREF. “In this environment, employers
who look only at their employees’ account balances can feel a false
sense of security. Ultimately, employees’ ability to replace the income
they earned while working will determine whether they can maintain their
standard of living in retirement.”

The Retirement Income Index is based on a study of 500,000 employees
actively contributing to TIAA-CREF retirement plans as of December 31,
2014. The high ratio underscores the impact of a number of factors on
individual and plan outcomes: a robust combined employer and employee
contribution rate (an average of 14 percent for TIAA-CREF participants),
access to personalized financial advice and the inclusion of guaranteed
lifetime income options, such as fixed annuities.1

TIAA-CREF retirement plan participants’ average plan account balance is
approximately $177,0002 (as of December 31, 2014), nearly
twice the industry average of $91,3003 (as of December 31,
2014). However, an important financial retirement readiness measure is
income replacement, as this is the metric that determines whether
individuals will be able to meet their essential living expenses.

The index shows participants’ income replacement ratio, which is a
person’s projected after-tax income after retirement divided by his or
her after-tax salary before retirement. The methodology used to
calculate the index assumes a retirement age of 67 and includes full
benefits from Social Security. TIAA-CREF participants’ average income
replacement ratio of more than 90 percent is in line with industry
experts’ recommendation that individuals aim to replace 70 percent to
100 percent of their pre-retirement income.

Key highlights from the index:

  • Employees generally can expect to receive more than 90 percent of
    their pre-retirement income in retirement, with 53 percent of that
    coming from guaranteed sources such as Social Security (47 percent)
    and fixed annuities (6 percent), and the balance from variable sources
    such as mutual funds and variable annuities.
  • Participants younger than age 40 have an average income replacement
    ratio of 110 percent. In this case, however, the number doesn’t tell
    the whole story. These participants are generally saving less than
    their older counterparts, and the projections show they are more
    reliant on Social Security than on their own investments for their
    guaranteed income.
  • Participants age 67 or older have an average income replacement ratio
    of 107 percent. This is driven by higher average savings rates and
    account balances, but also reflects less reliance on Social Security
    for guaranteed lifetime income.

“The findings of the Retirement Income Index are a great testament to
our clients’ use of best-practice plan design and investment solutions,
coupled with our focus on lifetime income,” continued Hassara. “There
will always be more work to be done, but the collaboration between
TIAA-CREF and our clients is clearly helping employees achieve long-term
financial well-being.”

The data is derived from TIAA-CREF’s Plan
Outcome Assessment
(POA), a consultative service that enables plan
sponsors to analyze and evaluate their plan’s goals, design and
investment choices, as well as employee demographics and behaviors. POA
gives plan sponsors a foundation to determine whether their retirement
plan is meeting its objectives, allowing them to make changes to help
strengthen employees’ retirement readiness.

“The Retirement Income Index uses the same basic methodology as our Plan
Outcome Assessment, which we use to measure each institution’s
retirement program,” noted Hassara. “The assessment provides employers
with vital information they need to help ensure their employees are on
track to meet their retirement expenses in their later years by
measuring retirement income from various sources, such as annuities,
Social Security and mutual funds. It also indicates what percentage of
participants’ income comes from guaranteed sources, which is critical in
determining whether individuals will have a steady, reliable stream of
income to cover their essential living expenses in retirement.”

For more information, read the Retirement
Income Index Guide
For more information about Plan Outcome Assessment and other resources
TIAA-CREF offers to plan sponsors to promote active employee engagement
in retirement planning, visit


is a national financial services organization with $869 billion in
assets under management (as of 6/30/2015) and is the leading provider of
retirement services in the academic, research, medical and cultural

Please note: An individual’s income replacement ratio will vary from the
study’s estimated rate based on a number of unique individual factors.
Study results are not intended to project an individual’s actual ratio.
TIAA-CREF Retirement Income Index data are as of 12/31/2014, based on
501,639 actively contributing participants from 303 TIAA-CREF
record-kept plans. Using the participant’s current salary, age,
contribution rates (employer/employee), asset allocation and an assumed
retirement age of 67, TIAA-CREF leverages the advice engine from
Ibbotson Associates, Inc., an independent expert retained by TIAA-CREF,
to calculate the projected retirement income stream (including estimated
Social Security benefits) in current dollars as a percentage of current
salaries using Monte Carlo analysis (500 total simulations). The results
indicate the participant’s 70 percent probability of achieving the
retirement goal. A lower probability of success is associated with
better (and less likely) estimated income; a higher probability is
associated with lower estimated income. Please note the median income
replacement ratio based on the analysis above is approximately 88

The Ibbotson tool’s advice is based on statistical projections of the
likelihood that an individual will achieve their retirement goals. The
projections rely on financial and economic assumptions of historical
rates of return of various asset classes that may not reoccur in the
future, volatility measures and other facts, as well as information the
individual provides.

IMPORTANT: Projections, and other information generated through the
Retirement Income Index and the Ibbotson tool regarding the likelihood
of various investment outcomes, are hypothetical, do not reflect actual
investment results, and are not a guarantee of future results. Results
may vary with each use and over time.

Past performance does not guarantee future results. TIAA-CREF Individual
& Institutional Services, LLC, Teachers Personal Investors Services,
Inc., and Nuveen Securities, LLC, members FINRA and SIPC, distribute
securities products.

©2015 Teachers Insurance and Annuity Association of America–College
Retirement Equities Fund (TIAA-CREF), 730 Third Avenue, New York, NY

Consider investment objectives, risks, charges and expenses carefully
before investing. Go to for product and fund prospectuses
that contain this and other information. Read carefully before
investing. TIAA-CREF funds are subject to market and other risk factors.


1 Guaranteed lifetime income is subject to TIAA’s claims
paying ability.
2 Average across 500,000 employees in
the Retirement Income Index actively contributing to TIAA-CREF
retirement plans as of December 31, 2014.
3 Source:
CNNMoney January 2015.


Chad Peterson, 888 200-4062
Leslie Sepuka,
888 200-4062
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