[Editor’s note: This is part of continuing series of profiles of civic and philanthropic heroes.]
By Claire Gaudiani
Carnegie launched retirement fund for faculty, nonprofit professionals.
Philanthropy created the pensions that now support college faculty and nonprofit professionals.
The first private pension plan in the U.S. was offered by American Express in 1875. The government offered pensions to soldiers and their widows and children. And in 1894, the first statutory retirement program for teachers was adopted in New York City.
But college professors’ retirement remained bleak, and salaries were low.
For steel magnate Andrew Carnegie, the idea of a pension for faculty members was a brainstorm solution to a serious problem.
The problem? Parents of brilliant children would be likely to discourage their progeny from studying to become college professors since they were paid so little and had no chance to put funds away for their elder years.
Carnegie believed the country would need a powerful and consistent improvement in the quality of education, something that could not happen without ever better teachers and a stronger curriculum.
In 1918, Carnegie put $1 million into an invested account to enable it to build assets to meet the needs of teachers as they retired. He soon realized the initial investment would have to grow to meet the needs it generated.
He invited all academic institutions wanting their faculty participate to contribute annually, and then asked each future beneficiary to make a small contribution to their accounts.
In its first 20 years, Teachers Insurance and Annuity Association received office space and had all its expenses paid by the Carnegie Corporation of New York.
By 1937, TIAA had grown so fast that Carnegie created a new nonprofit to hold the shares of TIAA and then, through a special New York law, incorporated a new company and gave it ownership of TIAA.
The company kept growing. Teachers and employees of nonprofits contributed along with their employers.
Carnegie’s gift created power and opportunity in the lives of millions of Americans who enjoyed longer and more comfortable retirement years with their benefits from what is now TIAA-CREF.
TIAA-CREF, which in 2004 held well over $300 billion in assets under management, now offers a full range of financial services.
The U.S. economy would be very different without that single act of philanthropy by Andrew Carnegie.
Perhaps more importantly, the retirement fund he created has made an academic or nonprofit career more attractive.
Claire Gaudiani is a professor at The George H. Heyman Jr. Center Center for Philanthropy and Fundraising at New York University and the author of The Greater Good: How Philanthropy Drives the American Economy and Can Save Capitalism.
Other columns by Claire Gaudiani:
Helping hands [9.20.04]
Change agent [10.11.04]
Retailing generosity [10.25.04]
Prescription for change [11.22.04]
Whitewashing history [12.06.04]
Breakthrough philanthropy [12.20.04]
Critical thinking [01.03.05]
Tsunami lessons [01.17.05]
Making money [02.01.05]