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TIAA-CREF CEO Speaks About Retirement Savings at Tippie College

A recent survey found that 55 percent of people say they have not adequately planned for their retirement.

Herbert M. Allison, Jr., chief executive officer, president and chairman of the board of TIAA-CREF financial services, told a crowd in Iowa City last week that he fears the other 45 percent are likely ignorant of their financial needs.

"We really need a national wake-up call," he said, which would "emphasize the importance of saving for retirement."

TIAA-CREF manages the retirement plan for 15,000 University of Iowa workers, part of 38,000 around the state. The company officially opened a new field office at 327 Second St., Suite 103 in Coralville last week to serve those participants. Mr. Allison, who was in town for the opening, spoke to about 75 people at the Tippie College of Business last week.

Mr. Allison has been chairman, president, and CEO of TIAA-CREF since 2002. Before that, he had worked at Merrill Lynch & Co. for 28 years, the last two as president and chief operating officer.

At TIAA-CREF, he oversees the largest non-governmental pension plan in the country, with 3.2 million participants from 15,000 institutions. In addition to the UI, TIAA-CREF serves employees of Iowa State University, the University of Northern Iowa, Cornell College, Grinnell College and ACT.

It also provides a whole host of financial services which are available to people working for not-for-profit institutions. It manages assets of about $365 billion nationwide.

Mr. Allison spent much of his talk discussing the state of savings in the U.S., particularly peoples' plans for retirement. He cited figures about lifespans, including the fact that one-third of those currently 65 will live to be 85, and one-quarter will live to be 95. Yet many of those people have not adequately saved for even a few years, let alone another 20 to 30.

"We are a nation of spenders; we are not a nation of savers," he said.

People whose retirement plans are managed by TIAA-CREF have more in savings, on average, than those who do not, he said. Part of that stems from the fact that the universities that employ many of those people contribute more toward such plans than private sector businesses. Employees often are allowed to contribute significantly more of their salaries under university pension plans.

Until recently, those employees were almost certain to have their pensions with TIAA-CREF. Since the 1980s, however, the company's nearly 100 percent share of the pension market for higher education and other not-for-profit companies has dipped to around 70 percent.

To address that, the company is taking several steps, including significant expense cuts, more aggressive marketing and an increase in outreach and support for participants.

The new Coralville office is part of that latter strategy. When Mr. Allison took over in 2002, about 22 percent of the company's staff had direct contact with participants. Today that total is about 30 percent, with a goal of reaching 50 percent.

"We want to get closer to participants and work with universities and encourage them to save more," he said. "That's in everybody's interest." The company had 23 field offices two years ago. It has about 40 now, including the Coralville office, with plans to have as many as 60 or more open in the next few years.

The company also has sharply reduced cost, cutting $300 million in expenses in an effort to streamline and direct resources toward other areas, Mr. Allison said.

It also has initiated a significant marketing campaign to raise awareness of its services. Surveys found that only about 1 percent of people had heard of TIAA-CREF.

"Most people think we're a confederation of labor unions or a federal agency," he said of the New York company, founded in 1918 by Andrew Carnegie.

Because of its frequent television and print ads, that awareness has tripled. That is important, because university faculty members are increasingly likely to come from the world of business, he said, and when presented with a choice of pension managers, many will choose those they are familiar with, such as Fidelity or Vanguard, rather than TIAA-CREF.

"We've got to grow the company," he said. "People are taking assets away from us."

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