Tuesday, November 07, 2017

The TDA Fixed Rate Fund Is A Winner!

In New York City, teachers are known as"the smartest", due to their educational requirements that require a masters degree to achieve tenure and passing a content specialty test.  Of course I question that designation based upon teachers voting, time and again, for the same old disconnected union leadership who negotiate inadequate contracts, provide massive "givebacks" and fail to include member concerns when negotiating with the DOE.  A case in point the requirement of four to six observations when the rest of the State only needs to have two observations and the use of the punitive Danielson rubric.  However, there is one item that makes us teachers "the smartest", that is contributing to our Teachers Deferred Annuity (TDA) Fixed Income option.

Why do I say the teachers are "the smartest"?  Easy, the TDA Fixed Income option give the educator a fixed rate of 7% for UFT members and 8.25% for non-UFT educators.   With inflation running a little over 2% and money market funds giving a measly 1%, the no-fee Fixed Income Fund is a godsend and a windfall for educators who contribute to it.

According to the conservative and anti-union Citizens Budget Commission (CBC) the TDA's Fixed Income Option is attracting more and more educator money and in the last report in 2015, the percentage of TDA funds in the Fixed Income Option has risen to 65% of the total TDA contribution.  Compare that to 38% in 2006 and 25% at the creation of th Fixed Income option. Moreover, as of 2016, the average TDA balance was $325,000 and at 7% interest the UFT member can supplement their pension by taking out $22,750 annually.

While I sometimes question the designation as "the smartest", there is no doubt that educators who contribute to the TDA's Fixed Income option are "the smartest".


Anonymous said...

Who is this available to? All New York teachers?

Anonymous said...

Ran for Mayor in the event the DOE wants to fire me - I will claim retaliation because I ran for office against the person in charge of the DOE. I am always thinking one step ahead. Hope people voted for me.

Anonymous said...

Now that we don’t have to worry about the Con-Con for 20 years, I have a question.

I’ve been thinking of moving a chunk of my TDA to fixed. Currently I have 50% of my TDA money in Formally Know As A. I spent years putting money into that ONLY and then after getting slaughtered in the downturn, I started putting most into fixed (@ 80%). I put in MAX (after years of not being able to put in much money) and I’m going to keep that ratio, but I feel like while the Market is high I should move a chunk out of Formally Know As A into fixed (maybe 50% of the money in there) because I feel like the stock market and everything else is going to fall apart soon. (And, when it does, the 20% will buy more credits so I will keep buying.) I think the TRS people say it only takes a month to switch.

I’m not 50 years old, yet, but soon. Please note I’m terrible at this. Everyone around me who I trust is terrible at this. And, I’m not lucky about money.

I’m sure Chaz and everyone else have opinions and I would like to read peoples’ thoughts.


Anonymous said...

Can you explain the supplemental part? At what age can you use TDA to supplement your income?

Anonymous said...

Chaz, that $22,750 you take annually from TDA will be taxed as earned income. Therefore you only get to keep about $16,000.
I prefer to invest after-tax (Roth) through the NYC Deferred Compensation Plan. When I take withdrawals is retirement, they will be tax free and my beneficiaries will never be taxed on this money.

Prehistoric pedagogue said...

1:12 AM while it is true that you can move your money in a month you also have to give them at least a months notice so, in effect, it takes at least 2 months. Probably a good move to fixed once u hit your 50s. Leave about 20 percent In FKA variable a as a hedge

Chaz said...

Anon 7:31

Only for NYC Public school teachers working for the DOE. Charter schools are not included.

Anon 1:12

I agree with Prehistoric pedagogue, since the equities act as an inflation

Anon 7:05

You can start taking the TDA at age 55. The supplement is the ASAP which the DOE gives you $400 every year after you reach 8b on the salary scale. Read my posts, they explain it in more detail.



Anon 12:07

The ROTH is a great option for younger educators but the TDA has no ROTH option and the city plans give you between 1-2% on their stable funds.

Anonymous said...

Does the Roth NYC Deferred Compensation Plan have a choice for fixed rate?

kenny said...

I know you said there are no fees associated with that fixed portion of this but are there any bees if you invest in the other options

Anonymous said...

NYC Deferred Compensation gives you a large number of investment choices including Target Funds. I’m in the Equity Fund, up 23% in the last year!!!

Anonymous said...

The NYC Deferred Compensation does not have a 7% fixed rate, that can't be found anywhere else in America. The NYC taxpayers are getting ripped off by supplementing this investment.

Chaz said...

Anon 5:53

Yes, but it only pays between 1 and 2% at this time.


The fees are extremely low 0.15 cents per 1,000.

Anon 7:24

The Equity Fund is not risk adverse. It's up 23% today but could be negative next year like in the 2009-11 time period.

Anonymous said...

After departing the DOE this year for Long Island after years of misery in the ATR and in a failing school it was tough to lose this by transferring the pension back to the state. Other then this though life is good east of Queens!

Anonymous said...

why would you put your money in a fixed rate of 7% verses the diversified equity fund which seems to do pretty well over 20 yrs

kenny said...

If you look at the history of the stock market the past 20 years you were averaging around 7% also. If you can find a place that will guarantee you 7% that is incredible