what to do with 8k in TIAA-CREF?

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what to do with 8k in TIAA-CREF?

Postby bundy » Fri Apr 05, 2013 6:04 pm

Hi everyone. So i was a SUNY employee, so you are forced to put away at least 3% of your paycheck in TIAA-CREF retirement account. I left suny, and now have 8k sitting there in a money market account not earning anything. From what i understand, this is a 401a plan. I put in 2k and employer put in 6k. Its pretax.

I am in my 30s, have a stable job that pays me well. I am in the 33% tax bracket. I have no debt.

My portfolio:
Roth IRA(backdoor, started this year) $10,500 vanguard retirement 2045
All others in taxable
total stock marker 10k
total international stock market 5k
Vanguard Small-Cap Index Fund Investor Shares 3k
Vanguard Intermediate-Term Tax-Exempt Fund Investor Shares 10k
Vanguard New York Long-Term Tax-Exempt Fund Investor Shares 10k
I just started contributing to 401k this year and will max it.

Any ideas? I wouldnt mind keeping it at tiaa but dont really know much about their mutual funds. i am not risk aversive.

Also, what do you think about my choices for taxable?
Thanks!
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Re: what to do with 8k in TIAA-CREF?

Postby The Wizard » Fri Apr 05, 2013 6:30 pm

Put the $8K in the TIAA Real Estate Account (TREA)...
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Re: what to do with 8k in TIAA-CREF?

Postby johnubc » Fri Apr 05, 2013 7:15 pm

You can roll it over into a traditional IRA. CREF in a lump sum, TIAA over a 10 year period.
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Re: what to do with 8k in TIAA-CREF?

Postby retiredjg » Fri Apr 05, 2013 7:38 pm

I think your best choice is to roll the old 401a into your new 401k. If the choices in your new 401k are poor, you could leave the money at TIAA CREF and use just one fund such as a bond fund.

I don't suggest rolling this to IRA unless you are willing to pay taxes on the money (high at 33%, but it's only $8k) to get the money into Roth IRA. If you roll it into tIRA, it will just get in the way of your back door contributions to Roth IRA.
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Re: what to do with 8k in TIAA-CREF?

Postby cheese_breath » Sat Apr 06, 2013 9:09 am

I don't know about their 401a plans, but when I had a TIAA-CREF 403b plan it required my former employer's permission before I could roll it over. So check this out first and make sure you can roll it over without sacrificing the employer's contribution. If you want to (or have to) stay with TIAA-CREF and want to increase your stock allocation you might look at one of their equity index funds.
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Re: what to do with 8k in TIAA-CREF?

Postby Carpe » Sat Apr 06, 2013 11:35 am

The Wizard wrote:Put the $8K in the TIAA Real Estate Account (TREA)...


+1

I toiled with this issue for some time. In general, I'm not too impressed with the expense ratios of their own funds, tenure of their staff, and their website. However:

The TIAA Real Estate (Annuity) Account does stand out, and seems to have a broad level of respect (added: some may disagree). The Expense Ratio of their Real Estate fund looks expensive, but it reflects actual property management costs - a consequence of the fund investing directly in property. It also provides a means for investing directly in property, in contrast to REIT index funds, which invest in multiple REITs; REITs in turn invest in property, but all sorts of digging is required if you want to know the level of leverage they are using, their cost efficiency (i.e. their property management costs), etc...

TIAA-CREF also has an S&P Index Fund and the International Equity Index fund, the institutional classes of which have low E/Rs (I think currently 0.7% and 0.8%, respectively). The concern about TIAA-CREF Expense Ratios are the (short-term) contractual limits being used, so keeping an occasional eye on what they are doing with expenses is important.

The ability to use TIAA or CREF for annuities also provides another retirement planning option.
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Re: what to do with 8k in TIAA-CREF?

Postby tibbitts » Sat Apr 06, 2013 11:50 am

I actually agree with putting the money in tiaa real estate, but it's way off to say it's anywhere close to having a "broad level of respect." In recent years, it's done worse than many measures of commercial real estate, and worse that REITs (which it also holds.) It would be interesting to see a critique of the fund by a CRE expert. As it is, investing in it is sort of a hold-your-nose and hope for the best situation.

Also, it's a little misleading to say that property management expenses are included. Some people who own CRE think of mowing the grass and cleaning the toilets as property management expenses, and I'm not seeing those in the .9% unless I'm misunderstanding. It's true that there's a level of expenses happening in REITs that might be covered by part of that .9%, and isn't as visible in a REIT fund, but it's also true that part of the tiaa fund in invested in REITs, so you're paying those REIT expenses on top of the .9%.

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Re: what to do with 8k in TIAA-CREF?

Postby Carpe » Sat Apr 06, 2013 2:48 pm

tibbitts wrote:I actually agree with putting the money in tiaa real estate, but it's way off to say it's anywhere close to having a "broad level of respect." In recent years, it's done worse than many measures of commercial real estate, and worse that REITs (which it also holds.) It would be interesting to see a critique of the fund by a CRE expert. As it is, investing in it is sort of a hold-your-nose and hope for the best situation.

Indeed, it was over presumptuous to claim a broad level of respect. I have removed the "broad" in the original posting.
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Re: what to do with 8k in TIAA-CREF?

Postby fpkng » Sat Apr 06, 2013 3:11 pm

If you have your money in TIAA-CREF in a money market fund, my suggestion is that you move it within TIAA-CREF to another available 401(a) account. Money market fund interest rates are terribly low these days. You don't need them for personal financial liquidity when the funds are in a pension plan.

For the long term, you might want to consider moving to one of the CREF equity funds. They perform quite well against the conventional benchmarks. My TIAA-CREF pension is mostly in the CREF Equity Index Fund. It has performed well over the long term and brings in a variable income (but quite steady, as a matter of fact) that incorporates a very good yield.

You said you were "forced" to put 3% of salary into the pension plan, but your employer also put in money on your behalf, more than matching it, and that is a good thing, a good deal, as it were. And that is typical of many defined contribution plans: The employer contributes a good deal more than an employee if the employee contributes some too. And at age 90, for example, as I am, you will be likely to feel good about the accumulating funds over the years. I would aim at least at a six-figure income during retirement. So . . . build up those funds.

TIAA's expense ratios are pretty good--i.e., low, in the neighborhood of Vanguard's, for example. Many funds have much higher expense ratios, and those figures are important too over the long run.

You are wise to raise these questions. Financial planning for retirement is one of the most important things you can do.
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Re: what to do with 8k in TIAA-CREF?

Postby Garco » Sat Apr 06, 2013 3:19 pm

The Wizard wrote:Put the $8K in the TIAA Real Estate Account (TREA)...

Here's another vote in support of this move. Over time your investment/retirement accumulation will dwarf the amount in your old 401K but TIAA Real Estate (TREA) has some unique features that make it a very decent place to park/invest $8K. While it's not immune to serious downdrafts in the commercial real estate market (as we saw in 2008-9), it's not nearly as volatile as REITs and its total return can be expected to outpace most bond funds for the foreseeable future.
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Re: what to do with 8k in TIAA-CREF?

Postby MN Finance » Sat Apr 06, 2013 4:07 pm

Just move it to the same location as the rest of your money.
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Re: what to do with 8k in TIAA-CREF?

Postby bundy » Sat Apr 06, 2013 4:56 pm

Tiaa real estate account has an expense ratio if 0.95. Is this really the best option? Maybe I'm just spoiled with vanguards ERs. :)
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Re: what to do with 8k in TIAA-CREF?

Postby livesoft » Sat Apr 06, 2013 5:02 pm

We don't know your options, so please tell us. TIAA-CREF has many plans with all kinds of different options. What are YOUR options?
It's all about short-term opportunistic rebalancing due to a short-term change in one's asset allocation, uh, I mean opportunistic rebalancing, uh I mean rebalancing, uh I mean market timing.
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Re: what to do with 8k in TIAA-CREF?

Postby ourbrooks » Sat Apr 06, 2013 5:10 pm

Do you have access to the TIAA Traditional investment? There's nothing you can get at Vanguard that's quite like it. It provides long term returns like an intermediate bond fund but with no volatility whatsoever; it's like a stable value fund.

The biggest mistake I made in my investments was taking money out of the TIAA Traditional fund to put it in some other hot investment; over the long haul, the TIAA Traditional did better than the other investments. If you have this fund available, just leave the $8k in it and forget about it until retirement time; in fact, ask whether you could more after tax money in.

Celebrity endorsements aren't worth anything in investing, but, for your amusement, one of the other holders of the TIAA Traditional is a professor on leave from Princeton university who has some kind of job with some kind of federal banking agency. :D
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Re: what to do with 8k in TIAA-CREF?

Postby Carpe » Sat Apr 06, 2013 5:54 pm

bundy wrote:Tiaa real estate account has an expense ratio if 0.95. Is this really the best option? Maybe I'm just spoiled with vanguards ERs. :)


Thank you for supporting a point I was trying to make in a separte thread :beer

http://www.bogleheads.org/forum/viewtopic.php?f=1&t=114071

FYI, it's the bit about spurning funds, just because they present an E/R that is high relative to Vanguard.

The point is, the TIAA Real Estate fund invest directly in real-estate, and their E/R is a consequence of direct property management - if you think 0.95% is unreasonable for this, have a look around and see what else you can find for funds that invest directly in property.

Vangaurds REITs index fund E/R is the expense incurred by Vangaurd for tracking an index of REIT companies. An entirely different problem set and cost profile.
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Re: what to do with 8k in TIAA-CREF?

Postby Valuethinker » Sun Apr 07, 2013 4:22 am

bundy wrote:Tiaa real estate account has an expense ratio if 0.95. Is this really the best option? Maybe I'm just spoiled with vanguards ERs. :)


Bundy.

0.95% is probably not like for like. In a quoted REIT fund you have no control over what the individual REITs charge shareholders for managing assets. The 0.2% say VG charges is only the top level fee (for managing the stocks in the portfolio).

You'd have to read David Swensen's book on personal investing, he's on the board of the TIAA RE fund. It's unique in the universe of what individual investors can buy, he takes you through that (the alternatives are private label RE limited partnerships, and if you google 'REIT wrecks' or read the book, he has some spectacular stories -- every so often someone comes up here, with a holding in one, what can be done to help them is often very limited).

So TIAA RE is unique, and in the long run it's a unique asset. It won't have the volatility of the quoted REIT fund. It's a fairly blue chip portfolio. It will track long term Commercial RE in the USA, thus performing better than bonds, worse than stocks (but with lower volatility) AND having a higher degree of correlation with inflation than either.

Try to explain why:

- commercial leases are like bonds-- fixed payouts for c. 5 years. Companies need premises in which to operate, so you are like a very highly rated bond if the company gets into trouble (but it makes them more equity like) as even in Chapter 11, they need to do a deal with landlords
- however commercial leases also increase with inflation at renewal, generally- so you get inflation protection
- buildings depreciate-- commercial buildings typically need a major revamp every 15 years, and replacement every 30. However land tends to rise in value
- the industry is hugely cyclical (the cycle is typically about 15 years long). Overbuilding leads to collapse, bankruptcy, then as the economy and demand recovers supply lags demand and you get strong rent rises, building values go up, then the banks start lending too much on speculative development, overbuilding, the economy turns down and the cycle begins again. You have to be a long term investor and not overleveraged (TIAA RE is very conservative on leverage).

This is why pension funds and professional asset allocators like RE-- long term asset with linkage of returns to inflation and economic growth-- just like the liablitiies of a a final salary pension scheme.

Morningstar has a TIAA Forum with many absolute enthusiasts for the fund. Suffice it to say I think it's reasonable to have 10% of your assets in this fund, not more (5-10% is the ideal range). Given it is one fund, in one asset class, with one manager. Given that you won't be contributing to this fund any further, you can start with a higher weighting.

1. So from a portfolio point of view, tossing it in there and forgetting about it for 30 years (making sure there are no radical changes in charges/ governance of the fund) would make a lot of sense. Over 30 years it won't be your best investment decision, but nor will it be your worse.

2. Alternative is to try to consolidate into your existing funds with other managers-- less mess and paperwork (we are dealing with my father's estate, he died without warning, and I can tell you simplicity is a virtue for your wife and heirs).

3. Third alternative is to put it in an appropriate stock fund with TIAA and, again, forget about it. Not sure that is a big advantage over 2.

Wizard, Carpe, Tibbitts et al. -- they know what they are on about with this fund. Consider it a useful building block to retirement wealth, most of which your employer paid for.
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Re: what to do with 8k in TIAA-CREF?

Postby Carpe » Sun Apr 07, 2013 10:56 am

Valuethinker wrote:
bundy wrote:Tiaa real estate account has an expense ratio if 0.95. Is this really the best option? Maybe I'm just spoiled with vanguards ERs. :)


Bundy.

0.95% is probably not like for like. In a quoted REIT fund you have no control over what the individual REITs charge shareholders for managing assets. The 0.2% say VG charges is only the top level fee (for managing the stocks in the portfolio).

You'd have to read David Swensen's book on personal investing, he's on the board of the TIAA RE fund. It's unique in the universe of what individual investors can buy, he takes you through that (the alternatives are private label RE limited partnerships, and if you google 'REIT wrecks' or read the book, he has some spectacular stories -- every so often someone comes up here, with a holding in one, what can be done to help them is often very limited).

So TIAA RE is unique, and in the long run it's a unique asset. It won't have the volatility of the quoted REIT fund. It's a fairly blue chip portfolio. It will track long term Commercial RE in the USA, thus performing better than bonds, worse than stocks (but with lower volatility) AND having a higher degree of correlation with inflation than either.

Try to explain why:

- commercial leases are like bonds-- fixed payouts for c. 5 years. Companies need premises in which to operate, so you are like a very highly rated bond if the company gets into trouble (but it makes them more equity like) as even in Chapter 11, they need to do a deal with landlords
- however commercial leases also increase with inflation at renewal, generally- so you get inflation protection
- buildings depreciate-- commercial buildings typically need a major revamp every 15 years, and replacement every 30. However land tends to rise in value
- the industry is hugely cyclical (the cycle is typically about 15 years long). Overbuilding leads to collapse, bankruptcy, then as the economy and demand recovers supply lags demand and you get strong rent rises, building values go up, then the banks start lending too much on speculative development, overbuilding, the economy turns down and the cycle begins again. You have to be a long term investor and not overleveraged (TIAA RE is very conservative on leverage).

This is why pension funds and professional asset allocators like RE-- long term asset with linkage of returns to inflation and economic growth-- just like the liablitiies of a a final salary pension scheme.

Morningstar has a TIAA Forum with many absolute enthusiasts for the fund. Suffice it to say I think it's reasonable to have 10% of your assets in this fund, not more (5-10% is the ideal range). Given it is one fund, in one asset class, with one manager. Given that you won't be contributing to this fund any further, you can start with a higher weighting.

1. So from a portfolio point of view, tossing it in there and forgetting about it for 30 years (making sure there are no radical changes in charges/ governance of the fund) would make a lot of sense. Over 30 years it won't be your best investment decision, but nor will it be your worse.

2. Alternative is to try to consolidate into your existing funds with other managers-- less mess and paperwork (we are dealing with my father's estate, he died without warning, and I can tell you simplicity is a virtue for your wife and heirs).

3. Third alternative is to put it in an appropriate stock fund with TIAA and, again, forget about it. Not sure that is a big advantage over 2.

Wizard, Carpe, Tibbitts et al. -- they know what they are on about with this fund. Consider it a useful building block to retirement wealth, most of which your employer paid for.


Indeed, and thank you for your input - very helpful.

David Swensen's "Conventional Success" was my own entry point to appreciating what TIAA's Real Estate Account, so I guess I should be thanking abuss, as the book was purchased on that recommendation (Thank you abuss!). The option of owning property directly instead of owning an index of companies that use leverage to own property is preferred when available, and closer to our personal values. As a result, I have started rotating some of our US REIT index assets ( with Vanguard) into TIAA's Real Estate Account.

An issue that remains for me is the positioning of a “real” real estate asset. Our REIT based assets are taken from the % of assets available to equities. However, from your comments, there may be some argument to having actual real estate ownership taken from the bond holding. I am conscious that as we grow older the bond allocation will increase along its predetermined glide-path, making any real estate positioning more critical as a function of age. So, basically, should a direct real-estate asset-class / holding increase with age or decrease withn an investment portfolio? My instinct is to keep the direct real-estate ownership as an equity sector until it is clear that it should be otherwise.

Also, if direct real estate and REIT assets are arguably different classes, does it automatically follow that there should be space for both in an asset allocation?

Thanks again.
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Re: what to do with 8k in TIAA-CREF?

Postby MN Finance » Sun Apr 07, 2013 11:32 am

ourbrooks wrote:Do you have access to the TIAA Traditional investment? There's nothing you can get at Vanguard that's quite like it. It provides long term returns like an intermediate bond fund but with no volatility whatsoever; it's like a stable value fund.

The biggest mistake I made in my investments was taking money out of the TIAA Traditional fund to put it in some other hot investment; over the long haul, the TIAA Traditional did better than the other investments. If you have this fund available, just leave the $8k in it and forget about it until retirement time; in fact, ask whether you could more after tax money in.

Celebrity endorsements aren't worth anything in investing, but, for your amusement, one of the other holders of the TIAA Traditional is a professor on leave from Princeton university who has some kind of job with some kind of federal banking agency. :D


The account in question has access to TIAA, as they all do, but it will be locked in for 10 years, so it doesn't make much sense.

Again, just consolidate it with your other accounts. If you want real estate, as everyone is talking about, you can go buy that investment some other time.
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Re: what to do with 8k in TIAA-CREF?

Postby livesoft » Sun Apr 07, 2013 11:39 am

For all the love of TIAA Real Estate in this thread, I have to write that I own it, bought it starting in June 2007, and now almost 6 years later have positive total return of about 1% or under 0.2% average annual return. Before 2007, TREA was certainly a darling.
It's all about short-term opportunistic rebalancing due to a short-term change in one's asset allocation, uh, I mean opportunistic rebalancing, uh I mean rebalancing, uh I mean market timing.
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Re: what to do with 8k in TIAA-CREF?

Postby ResearchMed » Sun Apr 07, 2013 12:22 pm

MN Finance wrote:
ourbrooks wrote:Do you have access to the TIAA Traditional investment? There's nothing you can get at Vanguard that's quite like it. It provides long term returns like an intermediate bond fund but with no volatility whatsoever; it's like a stable value fund.

The biggest mistake I made in my investments was taking money out of the TIAA Traditional fund to put it in some other hot investment; over the long haul, the TIAA Traditional did better than the other investments. If you have this fund available, just leave the $8k in it and forget about it until retirement time; in fact, ask whether you could more after tax money in.

Celebrity endorsements aren't worth anything in investing, but, for your amusement, one of the other holders of the TIAA Traditional is a professor on leave from Princeton university who has some kind of job with some kind of federal banking agency. :D


The account in question has access to TIAA, as they all do, but it will be locked in for 10 years, so it doesn't make much sense.

Again, just consolidate it with your other accounts. If you want real estate, as everyone is talking about, you can go buy that investment some other time.


To clarify, the TIAA Traditional Annuity (if not yet "annuitized") is not fully locked in for 10 years. One can take all or part and spin it out in a TPA (Transfer Payout Annuity), over 9 years: On each anniversary date of the first payout, another portion is paid.
TIAA calculates what they estimate will be the value, and approximately 1/10th of that is paid each time. To the extent that the actual interest rate varies (which depends upon the "extra" if there is any above the guaranteed amount), the annual payments can differ slightly.

Also, the TIAA Traditional Annuity now pays very different "guaranteed" returns depending upon when one invested the money, and if it is part of a 403b plan. I think the current guarantee for personal investing is 1%; for certain group policies it is still 3%. There are several different categories.

At the time we began our TPA (we are half-way through), the "guaranteed" return dropped to 2.5%. It was extraordinarily difficult to find this out, with answers varying among "it stays at 3%" to "it will be 1/2 %" to "it MIGHT be 1/2 % less than current" to "zero" (meaning, we'd get NO interest on a substantial amount for an average of 4.5 years). When we pressed for an answer, the "nicest" response was "It doesn't matter, because you can't do anything about it; it's whatever it is". Well... we DID have the choice NOT to take ZERO percent on a large sum for several years, and just leave the money "in", and then annuitize. By then, we were eager NOT to rely upon TIAA-CREF "for the rest of our lives". Our Employer (with the ERISA mandated Fiduciary Responsibility) actually ended up hiring an attorney/accountant to help us get the answers, because they couldn't get a clear answer either. The CPA/attorney couldn't understand many of the nonsense/contradictory answers.
However, it got to a point that we felt reasonably comfortable that it was EITHER 3% or 2.5% minimum, and we started the TPA.

Meanwhile, we have a substantial amount in the TIAA Real Estate Fund - the only place we envision "staying" with TIAA-CREF long term. There doesn't seem to be any other fund like it.
It took a hit in 2008/2009, and is chugging back now, but has not returned to it's 2008 peak.

I watch our balances frequently (yes, I know, I know...) and as long as we'd been holding it, it had only chugged away steadily (and not so slowly) that we called it "The Little Fund That Could".
So as things started looking/sounding bad in 2008/2009 I slowly sold, but sold all of the TIAA Real Estate fund as one of the earliest moves, since that type of volatility was VERY unusual. (Another Forum at the time had a discussion of why this was happening and would likely get worse. I wish I could remember where that was!!)
In late 2010, our 403b choices changed at TIAA-CREF, and one of those changes was that any money remaining in the TIAA Real Estate Fund could remain, but no more could ever be added. By then, the fund had started chugging upward again, after a really bad downturn. Knowing we could remove the money but never add back, we moved a substantial amount back in near the deadline.
(I know, I know... if only ALL such decisions were so positive...)

I understand that TIAA now has a cap on the total amount that any one investor can put into the TIAA Real Estate Fund. It's been chugging along at ~8%/year (vs. the 12-14% before the crash), and we DO consider it to be our "bond fund", at least for now. (We still have about half of the Traditional Annuity as a guaranteed bond-type buffer, and even that has *currently* been doing a lot better than the TIAA-CREF bond funds.)
Decisions will be trickier in the future, because IF we remove any of that, we won't be able to put more than the new maximum, ever (unless they change the rules again, of course), if we remove much. (Well, Spouse still could put up to the new max into the fund. But Spouse doesn't have the significant retirement funds to do so, unfortunately.)

One other caveat: One can remove money from the TIAA Real Estate Fund ONLY ONCE PER QUARTER. So IF you decide to invest there, and want to remove any of the money, make sure that the timing is near the end of a quarter OR be sure that you feel comfortable knowing you can NOT remove any more until the start of the next quarter.

We keep fluctuating in our analyses/emotions: Do we have too much in the TIAA Real Estate Fund, or not enough? We figure as long as we are truly waffling AND as long as it keeps chugging AND given the current bond situation, we are probably holding about the right position for our purposes.

RM
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Re: what to do with 8k in TIAA-CREF?

Postby grabiner » Sun Apr 07, 2013 12:27 pm

bundy wrote:Hi everyone. So i was a SUNY employee, so you are forced to put away at least 3% of your paycheck in TIAA-CREF retirement account. I left suny, and now have 8k sitting there in a money market account not earning anything. From what i understand, this is a 401a plan. I put in 2k and employer put in 6k. Its pretax.


I have the same problem as you. I left the University of Michigan, and Michigan allowed me to roll over my own contributions to an IRA (which I did, because I wanted to convert to a Roth), but I can't withdraw the Michigan matching contributions until I turn 55.

Check the options in your plan. In the Michigan plan, I used TIAA-CREF Large-Cap Value Index for a while, as this is a low-cost fund which matched where I would have put the money if I rolled it into my IRA. However, the Michigan plan allows some Vanguard funds as well, and I now use insitutional shares of Vanguard REIT Index.
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Re: what to do with 8k in TIAA-CREF?

Postby Garco » Sun Apr 07, 2013 1:57 pm

livesoft wrote:For all the love of TIAA Real Estate in this thread, I have to write that I own it, bought it starting in June 2007, and now almost 6 years later have positive total return of about 1% or under 0.2% average annual return. Before 2007, TREA was certainly a darling.

This is hardly unique to TREA. Many people who held other investment classes in 2007 are barely ahead of where they were then, either in nominal or inflation-adjusted terms. That said, TREA did take a real dive, with the rest of the commercial real estate market, in 2008-2009. Since it hit bottom in about March 2010, however, its average annual increase has been 13.5%, though currently about 8%. I should have mentioned in my earlier post that I've been a long-term investor in TREA -- except for 2008-2009! ValueThinker's post (above) gives a very good sense of what this fund tries to do and why it's distinctive.
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Re: what to do with 8k in TIAA-CREF?

Postby livesoft » Sun Apr 07, 2013 2:05 pm

ResearchMed wrote:..., and we DO consider it to be our "bond fund", at least for now.

Those are important quotation marks since clearly TREA is not a bond fund and can drop quite a bit in times of trouble.
It's all about short-term opportunistic rebalancing due to a short-term change in one's asset allocation, uh, I mean opportunistic rebalancing, uh I mean rebalancing, uh I mean market timing.
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Re: what to do with 8k in TIAA-CREF?

Postby House Blend » Sun Apr 07, 2013 2:06 pm

MN Finance wrote:The account in question has access to TIAA, as they all do, but it will be locked in for 10 years, so it doesn't make much sense.

Not necessarily. There are umpteen flavors of TIAA Traditional, and not all of them have a 9 year lock in.

I do agree that if it is the non-liquid form of Traditional, locking up $8K in a dormant account would not be sensible.

I would caution the OP to stay out of Traditional unless he has a firm understanding of the restrictions covering the particular flavor being offered.

Again, just consolidate it with your other accounts.


This is (still) terrible advice: Edit: No, I misread his post; OP does have a 401k, so rolling the money there is still a good option.

1. The OP is using a backdoor Roth.

2. From the first post, it appears that he has no access to a defined contribution plan from his current employer. Hence, no place to roll the T-C accumulation except an IRA.
Last edited by House Blend on Sun Apr 07, 2013 3:33 pm, edited 1 time in total.
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Re: what to do with 8k in TIAA-CREF?

Postby livesoft » Sun Apr 07, 2013 2:18 pm

House Blend wrote:I do agree that if it is the non-liquid form of Traditional, locking up $8K in a dormant account would not be sensible.

I would say locking something up in a dormant account would be very sensible. It would be a true "set-and-forget" account. One could come back to it in 30 years and be pleasantly surprised.
It's all about short-term opportunistic rebalancing due to a short-term change in one's asset allocation, uh, I mean opportunistic rebalancing, uh I mean rebalancing, uh I mean market timing.
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Re: what to do with 8k in TIAA-CREF?

Postby MN Finance » Sun Apr 07, 2013 2:33 pm

I'm well aware of the TIAA Traditional TPA, and my point is that there's no point to locking it in just for 3% with limited liquidity.

Second, for clarification on Real Estate, there's no limit to how much you can own. The only limit is that if your aggregate balance is greater than $150k then you can't complete an internal fund exchange into the fund. You can add money via payroll deduction and most importantly via rollover from an outside retirement account of an unlimited amount, thereby not really having any limit at all.

House Blend: I'm sorry for giving such terrible advice. If it's an issue of doing a backdoor Roth, then he/she can just add it to the new 401k. The terrible advice stands. It doesn't make sense to go through life letting orphaned accounts scatter for many reasons.

FWIW, you can find suny fund options here http://www.tiaa-cref.org/suny.
Last edited by MN Finance on Tue May 14, 2013 12:12 pm, edited 1 time in total.
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Re: what to do with 8k in TIAA-CREF?

Postby MN Finance » Sun Apr 07, 2013 2:35 pm

House Blend wrote:
MN Finance wrote:The account in question has access to TIAA, as they all do, but it will be locked in for 10 years, so it doesn't make much sense.

Not necessarily. There are umpteen flavors of TIAA Traditional, and not all of them have a 9 year lock in.


Yes necessarily. The SUNY matching plan is an RA contract with no liquidity.
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Re: what to do with 8k in TIAA-CREF?

Postby House Blend » Sun Apr 07, 2013 2:56 pm

ResearchMed wrote:Also, the TIAA Traditional Annuity now pays very different "guaranteed" returns depending upon when one invested the money, and if it is part of a 403b plan. I think the current guarantee for personal investing is 1%; for certain group policies it is still 3%. There are several different categories.


AFAIK, TIAA has started creating several new categories of Traditional contracts, but they haven't changed any of the guarantees on the existing ones.

At the time we began our TPA (we are half-way through), the "guaranteed" return dropped to 2.5%. It was extraordinarily difficult to find this out, with answers varying among "it stays at 3%" to "it will be 1/2 %" to "it MIGHT be 1/2 % less than current" to "zero" (meaning, we'd get NO interest on a substantial amount for an average of 4.5 years). When we pressed for an answer, the "nicest" response was "It doesn't matter, because you can't do anything about it; it's whatever it is". Well... we DID have the choice NOT to take ZERO percent on a large sum for several years, and just leave the money "in", and then annuitize. By then, we were eager NOT to rely upon TIAA-CREF "for the rest of our lives". Our Employer (with the ERISA mandated Fiduciary Responsibility) actually ended up hiring an attorney/accountant to help us get the answers, because they couldn't get a clear answer either. The CPA/attorney couldn't understand many of the nonsense/contradictory answers.

However, it got to a point that we felt reasonably comfortable that it was EITHER 3% or 2.5% minimum, and we started the TPA.


All of the contracts I am aware of that guarantee 3% minimum for accumulation mode also switch to a 2.5% minimum guarantee for payout mode. That's what it
says, for example, on p. 11 of my RA contract (issued in the 1980's). What does yours say?

In another RA contract, I am in year three of a TPA of a mostly 90's vintage holding of Traditional. The TPA contract --issued in 2010--spells out a guaranteed rate of 2.5% in black and white on p. 3. What does your contract say?

The three payments I have received so far have varied by less than 1%. This year the 2.5% + "additional amounts" come to 4.09% (plus a slice of principal).
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Re: what to do with 8k in TIAA-CREF?

Postby tibbitts » Sun Apr 07, 2013 3:16 pm

Garco wrote:
The Wizard wrote:Put the $8K in the TIAA Real Estate Account (TREA)...

Here's another vote in support of this move. Over time your investment/retirement accumulation will dwarf the amount in your old 401K but TIAA Real Estate (TREA) has some unique features that make it a very decent place to park/invest $8K. While it's not immune to serious downdrafts in the commercial real estate market (as we saw in 2008-9), it's not nearly as volatile as REITs and its total return can be expected to outpace most bond funds for the foreseeable future.

Nobody objects to TIAA falling along with the rest of the CRE market; the issue is whether it's kept pace with the CRE market since the drop. TIAA has made some adjustments to its valuation mechanism that should make it lag the market (time-delay-wise) less than in the past, yet the expected degree of recovery hasn't seemed to follow. The fund is definitely subject to management risks - it's a like a concentrated active fund. The fund doesn't buy 10,000 properties (maybe it should; I don't know.) It makes big bets and can win/lose as a result.

I'm not sure you can conclude it's not as volatile as REITs. Besides its 10% REIT component, it may not have the day-to-day volatility, but it came close to dropping as much as a REIT in 2008/9 (albeit with the time-delay effect, which should be less the next time around.) Since then, REITs are pretty close to back to previous valuations. TIAA, not even close.

There were posts discussing TIAA RE as an "fixed account that yields twice as much" before the crash. It turned out not to be that, and it's also definitely not a bond fund.

Paul
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Re: what to do with 8k in TIAA-CREF?

Postby House Blend » Sun Apr 07, 2013 3:17 pm

MN Finance wrote:House Blend: I'm sorry for giving such terrible advice. If it's an issue of doing a backdoor Roth, then he/she can just add it to the new 401k. The terrible advice stands. It doesn't make sense to go through life letting orphaned accounts scatter for many reasons.


What new 401k? It appears that the OP doesn't have one.

Edit: Er wait. I just reread the OP, and discovered that I missed this line:
"just started contributing to 401k this year and will max it."

So I take back my criticism of your advice, and now agree with you: I would recommend that the OP roll the money into his 401k. (If they'll take it, and the funds available are half-way decent, and the plan rules of his old employer will allow it.)
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Re: what to do with 8k in TIAA-CREF?

Postby MN Finance » Sun Apr 07, 2013 3:28 pm

House Blend wrote:
MN Finance wrote:House Blend: I'm sorry for giving such terrible advice. If it's an issue of doing a backdoor Roth, then he/she can just add it to the new 401k. The terrible advice stands. It doesn't make sense to go through life letting orphaned accounts scatter for many reasons.


What new 401k? It appears that the OP doesn't have one.

Edit: Er wait. I just reread the OP, and discovered that I missed this line:
"just started contributing to 401k this year and will max it."

So I take back my criticism of your advice, and now agree with you: I would recommend that the OP roll the money into his 401k. (If they'll take it, and the funds available are half-way decent, and the plan rules of his old employer will allow it.)


My computer is terrible, so I could be misreading the original post
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