which TIAA-CREF account is best, independent of AA ?

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which TIAA-CREF account is best, independent of AA ?

Postby RustyShackleford » Tue Oct 13, 2009 4:06 pm

I solicit opinions as to which of the retirement accounts offered at
TIAA-CREF (TIAA Trad, TIAA Real Estate, CREF variable annuities)
is "the best" ? Yes, of course it's a silly question in a way, because
it depends on what I need in my AA. But the fact is, only 10-15% of
my egg is at TIAA-CREF (and I *NEED* to leave it there, for certain
fringe benefits). So whatever the answer to my original question is,
I can easily make it work with the rest of my egg to satisfy my AA.
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Re: which TIAA-CREF account is best, independent of AA ?

Postby danwalk » Tue Oct 13, 2009 4:23 pm

RustyShackleford wrote:I solicit opinions as to which of the retirement accounts offered at
TIAA-CREF (TIAA Trad, TIAA Real Estate, CREF variable annuities)
is "the best" ? Yes, of course it's a silly question in a way, because
it depends on what I need in my AA. But the fact is, only 10-15% of
my egg is at TIAA-CREF (and I *NEED* to leave it there, for certain
fringe benefits). So whatever the answer to my original question is,
I can easily make it work with the rest of my egg to satisfy my AA.


I'm not sure if I know which is "the best" but the two most unique instruments would have to be TIAA Traditional and TIAA Real Estate (TREA).

Certainly, if you were to choose TREA it may be better to wait until the price plunge stops before going in. There are a number of threads on "timing" TREA here and many more over on the M* TIAA-CREF forum if you are interested.

Dan
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Postby DavidA » Tue Oct 13, 2009 4:47 pm

Like Dan, I have no idea what is "best." I do have money in the TIAA Traditional Annuity and appreciate the steady return during turbulent markets. However, the fact that the money has to come out via a TPA over a 10-year period locks it up for a considerable period of time (this does not apply if you are holding the funds in an IRA or SRA), has moved me in the direction of using the CREF Inflation Linked Bond fund in my TIAA-CREF accounts. The expense ratio is 0.50%. It works for my overall AA and puts TIPS in my tax deferred holdings, creating more "space" for equities in my taxable accounts.

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Transferring Traditional Account investment out without TPA

Postby raywax » Tue Oct 13, 2009 6:33 pm

DavidA wrote:Like Dan, I have no idea what is "best." I do have money in the TIAA Traditional Annuity and appreciate the steady return during turbulent markets. However, the fact that the money has to come out via a TPA over a 10-year period locks it up for a considerable period of time (this does not apply if you are holding the funds in an IRA or SRA), has moved me in the direction of using the CREF Inflation Linked Bond fund in my TIAA-CREF accounts. The expense ratio is 0.50%. It works for my overall AA and puts TIPS in my tax deferred holdings, creating more "space" for equities in my taxable accounts.

David


David forgot to mention the GSRA which also does not require a TPA to move Traditional Funds out of an RA. Also more recent contracts have GRA accounts and they DO allow transfer of Traditional Funds out of it though IIRC one has to have been retired and it has to be done within a short time (two months?) after retirement. I am vague on this as I did not and do not have a GRA. Phone T-C and ask if you have one and you are interested in transferring Tradtional Funds out.

Ray
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Postby retiredjg » Tue Oct 13, 2009 6:44 pm

Of course, there is no "best" fund, but I kind of like CREF Stock which is an all world stock including almost everything including emerging markets and international small caps.

Of course "best" is determined by what else you have. Why not just use CREF Equity which, as best as I can tell, is a total stock market fund? Everybody needs some of that.
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Postby Levett » Tue Oct 13, 2009 6:45 pm

Yes, it does depend on what you need in your AA, and 10-15% of your money ain't chicken feed IMHO.

Probably, you want a "pure play" of some kind that matches well with your AA--i.e., all domestic equity (there's no pure international among the VAs), pure TIPS, pure nominal bonds, pure RE, or TIAA Traditional if there's a place for a stable value fund. Bob U.
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Re: Transferring Traditional Account investment out without

Postby grabiner » Tue Oct 13, 2009 10:29 pm

raywax wrote:
DavidA wrote:Like Dan, I have no idea what is "best." I do have money in the TIAA Traditional Annuity and appreciate the steady return during turbulent markets. However, the fact that the money has to come out via a TPA over a 10-year period locks it up for a considerable period of time (this does not apply if you are holding the funds in an IRA or SRA), has moved me in the direction of using the CREF Inflation Linked Bond fund in my TIAA-CREF accounts. The expense ratio is 0.50%. It works for my overall AA and puts TIPS in my tax deferred holdings, creating more "space" for equities in my taxable accounts.

David


David forgot to mention the GSRA which also does not require a TPA to move Traditional Funds out of an RA.


However, the return is lower (historically usually 0.75% less), as compensation for this additional liquidity.
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Postby RustyShackleford » Tue Oct 13, 2009 10:55 pm

bob u. wrote:Yes, it does depend on what you need in your AA, and 10-15% of your money ain't chicken feed IMHO.


Like I said, I can make anything work with my AA.

Probably, you want a "pure play" of some kind that matches well with your AA--i.e., all domestic equity (there's no pure international among the VAs), pure TIPS, pure nominal bonds, pure RE, or TIAA Traditional if there's a place for a stable value fund. Bob U.


Well, about 1/3 of it is in TIAA Trad, in a 10-year payout contract;
if I knew what I knew now (about interest rates) I probably never
would have done the TPA. Otherwise, I agree, a pure play sounds
good. I don't think it makes sense to use any of the equity accounts,
since it's tax-sheltered, and I have too little room for tax-inefficient stuff
as it is. I guess I should just wait 'til TIAA Real Estate seems poised
for a turnaround, because this almost exactly meets the 10% RE in
my target AA.
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Postby Levett » Wed Oct 14, 2009 6:28 am

Hi Rusty,

Be very wary of TIAA Real Estate because there appear to be policy changes afoot as a result of its assets being chopped in half.

The ER is also 1.01 and, by policy, could climb to 2.50.

There have got to be better choices for real estate. Bob U.
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Postby Valuethinker » Wed Oct 14, 2009 8:00 am

bob u. wrote:Hi Rusty,

Be very wary of TIAA Real Estate because there appear to be policy changes afoot as a result of its assets being chopped in half.

The ER is also 1.01 and, by policy, could climb to 2.50.

There have got to be better choices for real estate. Bob U.


Really your best alternative would be a fund like VG REIT index.

Given the different properties of the 2 funds (marked to market, leverage etc.) I would suggest that as a rough rule of thumb, 2 units of a REIT index is worth 3 units of a fund like TIAA. (it could be as much as 2 for 1)

So 10% in TIAA would be something like 6.5% in a REIT index. You are taking on more risk and volatility due to financial leverage HOWEVER the REIT fund will have the market's most current up to date view of RE prospects ie the most efficiently priced.

On the way down, this hurt you. Going forward from here, it probably helps. TIAA will pretty much always lag a REIT index.

The other allocation I would suggest to the poster is a fixed income fund eg TIPS where the tax exemption is valuable.

Might as well make this money as secure as you can: either ST bonds or a TIPS fund.
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Postby RustyShackleford » Wed Oct 14, 2009 3:36 pm

Valuethinker wrote:
bob u. wrote:Hi Rusty,

There have got to be better choices for real estate. Bob U.


Given the different properties of the 2 funds (marked to market, leverage etc.) I would suggest that as a rough rule of thumb, 2 units of a REIT index is worth 3 units of a fund like TIAA. (it could be as much as 2 for 1)

So 10% in TIAA would be something like 6.5% in a REIT index. You are taking on more risk and volatility due to financial leverage HOWEVER the REIT fund will have the market's most current up to date view of RE prospects ie the most efficiently priced.

On the way down, this hurt you. Going forward from here, it probably helps. TIAA will pretty much always lag a REIT index.


Wow, interesting analysis. Comments ?

The other allocation I would suggest to the poster is a fixed income fund eg TIPS where the tax exemption is valuable.

Might as well make this money as secure as you can: either ST bonds or a TIPS fund.


Got tons of good individual TIPS (that I bought in last year's fire sale)
in regular IRA, so TIPS fund at TIAA-CREF is a no-go.

What do folks think of their regular bond fund (CREF Bond Market) ?
That really DOES seem to be the best choice - if we really think the
Real Estate account is a pariah going forward - given it doesn't make
sense for me to have equities in this retirement account, and I have
TIPS covered in IRA.
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Postby DickBenson » Wed Oct 14, 2009 8:37 pm

RustyShackleford wrote:Well, about 1/3 of it is in TIAA Trad, in a 10-year payout contract; if I knew what I knew now (about interest rates) I probably never would have done the TPA.


If you really regret the TPA, then you could consider putting funds into Trad rather than the CREF Bond Fund.

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Postby RustyShackleford » Thu Oct 15, 2009 1:54 am

DickBenson wrote:
RustyShackleford wrote:Well, about 1/3 of it is in TIAA Trad, in a 10-year payout contract; if I knew what I knew now (about interest rates) I probably never would have done the TPA.


If you really regret the TPA, then you could consider putting funds into Trad rather than the CREF Bond Fund.

Dick


If I understand TIAA Trad correctly - which I may very well not - money
put into it today will not enjoy the same interest rates as that I put in
decades ago (and am now TPA'ing out).
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Postby Valuethinker » Thu Oct 15, 2009 2:34 am

RustyShackleford wrote:
Valuethinker wrote:
bob u. wrote:Hi Rusty,

There have got to be better choices for real estate. Bob U.


Given the different properties of the 2 funds (marked to market, leverage etc.) I would suggest that as a rough rule of thumb, 2 units of a REIT index is worth 3 units of a fund like TIAA. (it could be as much as 2 for 1)

So 10% in TIAA would be something like 6.5% in a REIT index. You are taking on more risk and volatility due to financial leverage HOWEVER the REIT fund will have the market's most current up to date view of RE prospects ie the most efficiently priced.

On the way down, this hurt you. Going forward from here, it probably helps. TIAA will pretty much always lag a REIT index.


Wow, interesting analysis. Comments ?

The other allocation I would suggest to the poster is a fixed income fund eg TIPS where the tax exemption is valuable.

Might as well make this money as secure as you can: either ST bonds or a TIPS fund.


Got tons of good individual TIPS (that I bought in last year's fire sale)
in regular IRA, so TIPS fund at TIAA-CREF is a no-go.

What do folks think of their regular bond fund (CREF Bond Market) ?
That really DOES seem to be the best choice - if we really think the
Real Estate account is a pariah going forward - given it doesn't make
sense for me to have equities in this retirement account, and I have
TIPS covered in IRA.


We don't know your whole portfolio.

The main thing here is tax efficiency.

Therefore REITs or fixed income.

I would argue TIPS are relatively good value compared to anything but a ST bond fund right now. So I would increase my exposure to TIPS.

Failing that, then a bond fund is probably better than no bond fund. There are exceptions, but I doubt CREF is one of them (ie they are probably not engaging in too many rash strategies-- but I don't know).
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Postby DickBenson » Thu Oct 15, 2009 2:43 am

RustyShackleford wrote:money put into it today will not enjoy the same interest rates as that I put in decades ago (and am now TPA'ing out).


Money put in today will have an interest rate of 3.65%. In comparing this rate with a bond investment, you should consider that, although this rate may change in the future, it will never go below 3%,... and that you will never lose any of your principal.

Of course you would need a TPA to retrieve the funds. You need to consider how much of a negative this would be for you.

Not familiar with the mechanisms of a TPA, but if the funds remaining in your account during a TPA receive the same rate as the accumulation rates of a RA, then all pre-2000 contributions are now receiving a rate of 3.75%... almost identical to the rate of new contributions.

(Note: a call to TIAA will get you your present overall average interest rate for your Traditional account)

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Postby RustyShackleford » Thu Oct 15, 2009 11:28 pm

Valuethinker wrote:I would argue TIPS are relatively good value compared to anything but a ST bond fund right now. So I would increase my exposure to TIPS.

Failing that, then a bond fund is probably better than no bond fund. There are exceptions, but I doubt CREF is one of them (ie they are probably not engaging in too many rash strategies-- but I don't know).


I already have 50% of bond allocation in TIPS - individual ones.

There are only TWO TIAA-CREF bond offerings in the retirement
annuities. The TIPS and and CREF Bond Market. I wouldn't quite
call the latter ST - average maturity is 5.6 years.
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Postby RustyShackleford » Thu Oct 15, 2009 11:42 pm

I APPRECIATE all the thoughtful comments thus far. If people are not
already tired of my question, perhaps it would be helpful if I re-posed
it in a more focused way:

I have 10-15% of my egg in TIAA-CREF retirement funds, and it needs
to stay there - if I roll it to an IRA, it loses state-tax free status and I
may lose my health insurance - enough said.
I'm wondering where to put it, given that I can make anything work
with my remaining AA. In other words, given that this money is
STAYING at TIAA-CREF, what are the best quality investments there ?

I'd tend to rule out equity funds, because I'm already pretty short on
space in tax-sheltered accounts for tax-inefficient investments. I don't
want to use CREF Inflation-Linked Bond, because I already have my
50%-of-bonds allocation to TIPS (individuals in my IRA). That pretty
much leaves 3 choices: CREF Bond Market, TIAA Real Estate, and TIAA
Traditional. We all know the issues with Real Estate; there's a lot of
sentiment that TIAA RE is a bad choice going forward. I can't figure
out how good/bad CREF Bond Market is - IS that a good place for a
goodly chunk of the non-TIPS portion of my bond allocation ? Or is
perhaps TIAA Trad better ?
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CREF Bond Market or TIAA Traditional

Postby raywax » Fri Oct 16, 2009 1:59 am

RustyShackleford wrote: I can't figure
out how good/bad CREF Bond Market is - IS that a good place for a
goodly chunk of the non-TIPS portion of my bond allocation ? Or is
perhaps TIAA Trad better ?


I cannot keep all the intricacies of your situation in mind but assuming the funds in question are in an RA, from which Traditional Account money can only be moved out via a TPA over a period of nine years and one day - then the Traditional Account is out and you are only left with the CREF Bond Market variable annuity. IF my assumption is incorrect, and these funds are held in an IRA, SRA or GSRA, from which Traditional Funds can be moved out at will, then I would put the funds in the Traditional Account.

Ray
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Postby DickBenson » Fri Oct 16, 2009 2:38 am

Agree with Ray that the Traditional would be the better choice if it was an SRA. But what is confusing is that Rusty said:

if I knew what I knew now (about interest rates) I probably never would have done the TPA.


So it appears to me that, even though it is a RA, selecting the Traditional still would be a better choice than the Bond Fund. He would be getting 3.65% rather than the 3% of a SRA.

If he wished that he could cancel the TPA that he started, there should be no problem in staring up a new Traditional in his RA.

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Postby Valuethinker » Fri Oct 16, 2009 5:43 am

RustyShackleford wrote:
Valuethinker wrote:I would argue TIPS are relatively good value compared to anything but a ST bond fund right now. So I would increase my exposure to TIPS.

Failing that, then a bond fund is probably better than no bond fund. There are exceptions, but I doubt CREF is one of them (ie they are probably not engaging in too many rash strategies-- but I don't know).


I already have 50% of bond allocation in TIPS - individual ones.

There are only TWO TIAA-CREF bond offerings in the retirement
annuities. The TIPS and and CREF Bond Market. I wouldn't quite
call the latter ST - average maturity is 5.6 years.


The long run expected return of a bond fund is the average yield to maturity of the bonds in it (that is the best predictor-- John Bogle had apaper on that I believe).

So if you are prepared to run the bet that is what you will get in the long run.

Then you need to compare that to the 'breakeven inflation' rate of a TIPS bond of the same maturity (or TIPS portfolio).

If inflation is above that rate, you were better off in TIPS, if below, you were better off in the conventional bond fund.

For my money, there is nothing 'magic' about 50/50 TIPS and Bonds split-- it's just a rule of thumb. I would rather have more of an inflation-protected asset, assuming average real yield above 2%. There may be better times to buy of course.

I would, in your shoes, stick it in TIPS fund and quit thinking about it. Or half TIPS and half the bond fund.

RE fund is a good long term bet BUT I am worried about the short term (NAV keeps falling, liquidation of units takes place, fund has liquidity problems, downward spiral on valuations).
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Postby Valuethinker » Fri Oct 16, 2009 5:46 am

RustyShackleford wrote:
Valuethinker wrote:I would argue TIPS are relatively good value compared to anything but a ST bond fund right now. So I would increase my exposure to TIPS.

Failing that, then a bond fund is probably better than no bond fund. There are exceptions, but I doubt CREF is one of them (ie they are probably not engaging in too many rash strategies-- but I don't know).


I already have 50% of bond allocation in TIPS - individual ones.

There are only TWO TIAA-CREF bond offerings in the retirement
annuities. The TIPS and and CREF Bond Market. I wouldn't quite
call the latter ST - average maturity is 5.6 years.
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Postby RustyShackleford » Sat Oct 17, 2009 3:58 pm

DickBenson wrote:Agree with Ray that the Traditional would be the better choice if it was an SRA. But what is confusing is that Rusty said:

if I knew what I knew now (about interest rates) I probably never would have done the TPA.


So it appears to me that, even though it is a RA, selecting the Traditional still would be a better choice than the Bond Fund. He would be getting 3.65% rather than the 3% of a SRA.

If he wished that he could cancel the TPA that he started, there should be no problem in staring up a new Traditional in his RA.

Dick


Correct-mundo. It is an RA. Sounds like just u-turning that TPA into
Trad may be the ticket.
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Postby RustyShackleford » Mon Nov 16, 2009 11:07 pm

RustyShackleford wrote:
DickBenson wrote:So it appears to me that, even though it is a RA, selecting the Traditional still would be a better choice than the Bond Fund. He would be getting 3.65% rather than the 3% of a SRA.

If he wished that he could cancel the TPA that he started, there should be no problem in staring up a new Traditional in his RA.

Dick


Correct-mundo. It is an RA. Sounds like just u-turning that TPA into
Trad may be the ticket.


Yep, I don't even need to "start up a new Traditional". I can just
transfer the money and it's done.

What I'm wondering is, not having fully grok'ed all the ins and outs
of vintages, is there any particular time it'd be advantageous to move
this TPA'd money (that's now sitting in CREF Money Market) back into
Traditional ? Like after the new year, before it, etc ? Or is just the
same old market-timing question, there's really no way to know ?
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Postby DickBenson » Tue Nov 17, 2009 12:15 am

RustyShackleford wrote: is there any particular time it'd be advantageous to move this TPA'd money back into Traditional ?


The vintage rate given for all new money can change at the beginning of each month,... but once deposited it will receive that month's rate until the following March 1.

At that time all vintage rates (and even their intervals) are subject to change. Then these new vintage rates will remain fixed for one year,... until the following March adjustments.

Thus, if you invest this month you will get 3.65% until March, if you invest next month it could be at a different rate, and when March comes along, all your funds could have new vintage rates, ... which would remain in effect for the following year.

One observation would be that the SRA vintage for new funds is now at the minimum 3%, and the RA vintage has always been at least 50 basis points above the SRA. So I would be surprised if the vintage rate for the RA ever went lower than 3.5%.

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