Investing in your future
From your date of hire until you leave Stanford, there are savings and retirement income plans designed to help provide financial security in later years. It is important that you understand eligibility and participation rules in order to maximize your income after retirement. This article briefly reviews available plans and the two most common ways employees fail to realize maximum benefit from participation.
Immediately upon hire, all regular and continuing employees are eligible to participate in the Tax-Deferred Annuity (TDA) retirement Plan. The TDA offers you the opportunity to invest a percentage of your salary on a tax-deferred basis for income at retirement. Investments are made in funds at three investment companies: Fidelity Investments, TIAA-CREF or The Vanguard Group. Contributions and investment earnings grow on a tax-deferred basis until distribution is made after age 59-1/2.
After one year of service, every regular employee becomes an automatic participant in one of the remaining two retirement income plans sponsored by Stanford. These plans are:
- The Stanford Staff Retirement
Annuity Plan (SRAP) a defined benefit plan for eligible
bargaining unit employees. SRAP guarantees a benefit based on
length of service and salary to vested participants (vesting
requires five years of service). Stanford provides the total
funding for the plan and takes all the investment risks required to
provide the defined benefit. SRAP cannot accept employee
- The Stanford Contributory Retirement Plan (SCRP) a defined contribution plan available to eligible faculty and non-union staff. This plan does not guarantee a benefit; rather, the benefit grows from specified University contributions, voluntary personal contributions and investment earnings. Contributions are invested in funds available from one of the three investment companies: Fidelity Investments, TIAA-CREF and The Vanguard Group.
How SRAP Participants Can Maximize Retirement Income
Since SRAP participation is fully funded by Stanford and employees do not contribute, even small contributions to the TDA can provide important additional income at retirement. The following example shows the difference TDA participation can make after ten or 20 years of participation. The example is based on an annual salary of $35,000.