TIAA/CREF vs Vanguard

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TIAA/CREF vs Vanguard

Postby uui11 » Thu Aug 23, 2007 3:00 pm

Hello,

What do people here think of TIAA/CREF? Are there any clients who have experience. My Dad would be moving over a SEP and potentially using them for more (DB plan, annuities).

I am looking for advice not just about their funds, but for everything that the company offers, including the quality of their advisers. They look promising, but I would like to get some opinions first.

I did some googling but could only find some opinions that hint that they are a good company.

Note: my Dad probably still qualifies for having accounts with them, if they still are restricted.

Thanks,
Will
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Postby livesoft » Thu Aug 23, 2007 3:12 pm

I have had a 403(b) at TIAA-CREF for more than 20 years. While they have an excellent reputation, they have also higher fees than Vanguard, a clunkier web site, are a little bit pickier about filling out forms correctly.

I would not put any new money with them. I have not used their advisors, but recently used phone help to figure out how to transfer funds and make sure my beneficiaries were set properly. Phone service was on par with the service I have received from Vanguard, TDAmeritrade and WellsTrade.
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Postby JRA » Thu Aug 23, 2007 3:33 pm

My wife and I have had our 403B accounts with TIAA-Cref for a couple of decades. Here is my take on them: (1) they used to be low cost, but, when they were denied non-profit status, their costs have been increasing (it seems) every year (sort of mid-level now). They basically funded their move into the retail mutual fund market on the backs of their annuity fund holders. To this day, the annuity funds cost more than their retail mutual fund counterparts. They are not unreasonably expensive, but a lot more so than Vanguard. (2) With a few exceptions, their mutual funds tend to underperform. For example, their growth fund has been a dog for about a decade, and their Equity Index Fund (Russell 3000) underperforms Vanguard's Total Stock Market due to cost and, in my opinion, a less representative index. Some of their value funds have been pretty good as well as their International fund, and the Real Estate Variable Annuity has been a pretty good fund. (3) They are not very open to their shareholders. Remember, many of their products are annuities and don't have the reporting requirements that mutual funds have. Only they and God knows what exactly is invested in their Traditional Annuity. You can ask, but they won't tell you. (4) Their transition to the mutual fund industry has been messy. Many people's statements have been incorrect, and money has not been credited to people's accounts properly. This is supposed to have been fixed, but I still check every statement and transaction. (5) Their new image of powerof.org is the largest load of nonsense I have ever seen. I hope they hire better people to manage my money than they have in their advertising division. Bottom line: I'm not a big fan. I would move my money to Vanguard in a heart beat if I could. TIAA-Cref not a bad company - a lot better than most other organizations - but it has been going down hill for about a decade. I haven't seen any signs of a turn around.
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Postby nonjim » Thu Aug 23, 2007 3:44 pm

I'm with TIAA/CREF through my employer's 403b. Not much in terms of choice in annuities: a few different (though not drastically so) large cap stocks funds, one bond fund, an one inflation bond fund. Also a Real Estate offering that people seem to either really like or not like (the latter based on recent changes in the way it's managed).

-nonjim
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Postby alec » Thu Aug 23, 2007 3:56 pm

JRA wrote:Remember, many of their products are annuities and don't have the reporting requirements that mutual funds have. Only they and God knows what exactly is invested in their Traditional Annuity. You can ask, but they won't tell you.


All their variable annuities have more or less the same reporting requirements. See:

CREF account SEC filings

TIAA Real Estate SEC filings

NAIC Consumer information Source for TIAA

You can either get a quick html financial profile, or TIAA's finanical statements [as recent as 3/31/07] for free. Note that you've got to create a free account with a working email address.

- Alec
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a) They're great. b) I bailed.

Postby nisiprius » Thu Aug 23, 2007 4:39 pm

IMHO the big things TIAA-CREF has going for it is that it is nonprofit, has been operating for a long time, and historically was set up specifically for the purpose of providing teachers pensions... that is, institutionally their core expertise is, specifically, in retirement plans, and they've done a good job at keeping lots of money safe for long periods of time. They're also humongous in size. I won't use the words "too big to fail," but perhaps there is safety in numbers.

I trust them as much as I trust anyone.

But.

I like them a little less since they lost their tax-exempt status in 1998, or whatever it was, and started to sell mutual funds to the general public. They seem a little less like the pension fund founded by the Carnegie Foundation, http://www.tiaa-cref.org/about/press/about_us/history.html , and a little more like just another mutual fund company.

I'm about to retire next year. I had three major globs of money, one at TIAA-CREF, one at Vanguard, one at Fidelity. I decided I wanted to sweep them together, or at least reduce the number of accounts I have, to make it easier to manage them as a whole, to get the size of the accounts up to the level where companies waive fees and treat you nice, and to have less to keep track of mentally.

Two things I didn't like about TIAA-CREF. First, they had some kind of problem with their IT and data processing operations a while ago:

http://www.eweek.com/article2/0,1895,2034753,00.asp

http://www.eweek.com/article2/0,1895,1949675,00.asp

I have not experienced any problems whatsoever myself. But I don't like those stories.

Second, the range of investment options available, although it's really broad enough for any sane person--especially since they added the ability to invest in CREF mutual funds for retirement-fund participants--is still, well, like the range available in a good 401(k). I've gotten spoiled by places like Vanguard and Fidelity which have associated brokerage services.

So I did a rollover of all my CREF accounts into one of my brokerage accounts.

Part of my assets at TIAA-CREF are "TIAA Traditional," which cannot be rolled over as a lump sum. I'm planning to buy single-premium immediate annuities, and after brooding over various options, I decided to take the line of least resistance which is to keep that account at TIAA and invoke the "lifetime income with graded payout" option. I'm not crazy about the way their payouts work, but I think TIAA is about as honest and safe as they come.
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Postby SpaceMonkey » Thu Aug 23, 2007 4:44 pm

I would avoid TIAA-CREF unless I had no better alternative. I wholeheartedly second JRA's comments about their transition being "messy." My online account access has showed a "N/A" balance for the last two months, and I still can't get any of the phone representatives to tell me what the problem is. When I signed up for my 403(b) through my employer, I initially logged on to find that they had completely ignored by stated AA preference (everything was in a MM fund), so I changed my AA online, to an allocation that ended up being different from my initial preferences. Literally 10 months later I got a confirmation by mail that my account had been created, at which point I logged on to find that they had switched my AA to the original allocation I had submitted when creating the account.
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Postby JRA » Thu Aug 23, 2007 4:47 pm

Alec,
Thanks for pointing that out. I am aware of their reporting requirements to the SEC, etc., but they don't report this directly to the consumer and refuse to do so even when asked. In my opinion, their current management has created a public relations fiasco and has alienated a lot of shareholders in their retirement annuity accounts. With all of their recent errors and mistakes, it would seem that more rather than less transparency would be in order. Do they have to tell me? No, but they will loose my money just as soon as I ever see a window of opportunity. I am also lobbying my school to drop TIAA-Cref and/or add Vanguard. I would even prefer Fidelity to Cref - they have some very low cost index funds. 403B and non profit retirement annuities have been TIAA's bread and butter for decades, and the company is doing them a disservice. Unless they change their ways, I doubt if U. of Minn. will be the last or only institution to dump them. Some BS advertising is not going to cut it.
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Postby extra » Fri Aug 24, 2007 9:23 am

Second, the range of investment options available, although it's really broad enough for any sane person--especially since they added the ability to invest in CREF mutual funds for retirement-fund participants--is still, well, like the range available in a good 401(k). I've gotten spoiled by places like Vanguard and Fidelity which have associated brokerage services.

So I did a rollover of all my CREF accounts into one of my brokerage accounts.

Part of my assets at TIAA-CREF are "TIAA Traditional," which cannot be rolled over as a lump sum. I'm planning to buy single-premium immediate annuities, and after brooding over various options, I decided to take the line of least resistance which is to keep that account at TIAA and invoke the "lifetime income with graded payout" option. I'm not crazy about the way their payouts work, but I think TIAA is about as honest and safe as they come.


Just to bring you up to date; TIAA-CREF now has Mutual Funds Retirement Class which include a large number of additional index funds and managed funds, making it easy to slice and dice. They also have a Brokerage option that allows purchase of anything from anywhere. One other fund (technically called an annuity) is the Real Estate account which is exclusive to the company.

If you're retiring, it's probable that you can get a Wealth Management Advisor assigned to you.

Good luck,
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Postby uui11 » Fri Aug 24, 2007 1:46 pm

There are some very good points here - thanks everyone for the replies.

It seems it is *almost* an easy decision to go with Vanguard instead, but TIAA/CREF has some definite merits.
For the sake of completion - Extra, you mention the option of a Wealth Management Advisor. Do you have experience with this? Can anyone else provide some insight.
I myself have done a fair bit of DIY study, feel fairly competent and will keep improving. Given that, hand holding is not necessarily a bad idea. Can an adviser add significant value?
To complicate matters, my Dad is dual citizen and will be retiring in Canada. I will call them up and see if anyone there has cross-border experience.

Will
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Postby extra » Fri Aug 24, 2007 2:12 pm

Extra, you mention the option of a Wealth Management Advisor. Do you have experience with this?.


Yes, I do have experience with this. I find it very helpful. My WMA is sincere and honestly tries to provide the best advice and assistance that she's capable of.

You might benefit by contacting them and asking for a WMA to assist you in your decisions. In my opinion, you will probably get better advice in that pursuit than asking Bogleheads. Although some of them are very knowledgeable, most know little to nothing of TIAA-CREF, and I detect a negative bias toward them on this board.
Not that there's anything wrong with going 100% with Vanguard as far as I know, but it's like asking a born-again Christian whether you should choose Hinduism or the Moslem faith.

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Postby nisiprius » Fri Aug 24, 2007 4:50 pm

extra wrote:
They also have a Brokerage option that allows purchase of anything from anywhere.


You're right, it's a relatively recent option and I'd sort of forgotten about it. (When they announced it I tried to take a look at it but could only get into a sort of useless "demo website" which wouldn't even show me whether specific funds I hold were available in their brokerage and whether they would incur transaction fees).

One other fund (technically called an annuity) is the Real Estate account which is exclusive to the company.


I bought into it shortly after they started it--the first quarterly report listed about half-a-dozen office buildings! Six months ago I about 4% or 5% of my total assets in it. It's pretty nice, and I dithered on whether or not to keep it.

If you're retiring, it's probable that you can get a Wealth Management Advisor assigned to you.


They told me that you are supposed to have three-quarters of a million with them in order to rate a Wealth Management Advisor, which I don't, but they seem to have assigned me one anyway.

I detect a negative bias toward them on this board.
Not that there's anything wrong with going 100% with Vanguard as far as I know, but it's like asking a born-again Christian whether you should choose Hinduism or the Moslem faith


I have accounts at TIAA-CREF, Fidelity, and Vanguard... Vanguard as a result of having bought VFINX when it was still called the "Vanguard Index Trust," circa 1986, TIAA-CREF by virtue of a 403(b), and Fidelity by virtue of a 401(k). I don't think the differences are really of any practical consequence. Christian/Hindu/Islam? No, I think the differences a less important than that... more like Ford/GM/Chrysler... please don't ask me which analogizes to which.
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Re: a) They're great. b) I bailed.

Postby RetiredInNH » Sat Sep 08, 2007 2:05 pm

nisiprius wrote:Two things I didn't like about TIAA-CREF. First, they had some kind of problem with their IT and data processing operations a while ago:

http://www.eweek.com/article2/0,1895,2034753,00.asp

http://www.eweek.com/article2/0,1895,1949675,00.asp

I have not experienced any problems whatsoever myself. But I don't like those stories.
I, alas, have experienced them :(

Fortunately I moved almost all of my assets out of TIAA-CREF (to Vanguard) a couple of years ago. But they screwed up a tiny payout (too small a sum to genuinely matter), and took ten months to fix it.

I realize that the IT transition is a one-time event. But they stopped paying me for ten months!!!. Had I needed that money for my living expenses ...
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Who cares which company you keep?

Postby extra » Sat Sep 08, 2007 3:48 pm

Well, a Boglehead is a moderated Vanguard Diehard as your description states.

Personally I like TIAA-CREF and get a good deal from my retirement investments with them. True, they recently have had (and still have an IT problem that they are struggling with), but they're working their way out of it.

I experienced an IT problem with them, but they resolved it. Otherwise, I'm quite happy with the company. I have invested in a number of other Mutual Funds in the past (including Vanguard), and have used Brokerages to buy individual stocks and ETFs.

Good luck to you all, wherever and however you invest. The point is to have a happy retirement.

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Postby Levett » Sat Sep 08, 2007 5:17 pm

I've been with TIAA since 1968 and when Vanguard was added as a SRP (I believe they are now also a BRP) in the early 80s I hopped aboard. I also ran UGMA accounts for my three kids through Vanguard.

It is the case that T/C has been beset with problems beginning with its loss of tax-exempt status. A number of those problems persist--something we've experienced directly in our family.

Nevertheless, they have some fine annuity products (TIAA Traditional and TIAA RE, for two), and as has been previously observed the Institutional Mutual Funds are inexpensive and offer a variety of indexing opportunities.

I do not own any of the mutual funds, but I suspect over time they will be competitive.

I regard myself as a TC/VG diehard. Good luck with your decision. Bob U.
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Re: a) They're great. b) I bailed.

Postby no_name » Tue May 31, 2011 7:39 pm

nisiprius wrote:IMHO the big things TIAA-CREF has going for it is that it is nonprofit, has been operating for a long time, and historically was set up specifically for the purpose of providing teachers pensions... that is, institutionally their core expertise is, specifically, in retirement plans, and they've done a good job at keeping lots of money safe for long periods of time. They're also humongous in size. I won't use the words "too big to fail," but perhaps there is safety in numbers.

I trust them as much as I trust anyone.

But.

I like them a little less since they lost their tax-exempt status in 1998, or whatever it was, and started to sell mutual funds to the general public. They seem a little less like the pension fund founded by the Carnegie Foundation, http://www.tiaa-cref.org/about/press/about_us/history.html , and a little more like just another mutual fund company.

I'm about to retire next year. I had three major globs of money, one at TIAA-CREF, one at Vanguard, one at Fidelity. I decided I wanted to sweep them together, or at least reduce the number of accounts I have, to make it easier to manage them as a whole, to get the size of the accounts up to the level where companies waive fees and treat you nice, and to have less to keep track of mentally.

Two things I didn't like about TIAA-CREF. First, they had some kind of problem with their IT and data processing operations a while ago:

http://www.eweek.com/article2/0,1895,2034753,00.asp

http://www.eweek.com/article2/0,1895,1949675,00.asp

I have not experienced any problems whatsoever myself. But I don't like those stories.

Second, the range of investment options available, although it's really broad enough for any sane person--especially since they added the ability to invest in CREF mutual funds for retirement-fund participants--is still, well, like the range available in a good 401(k). I've gotten spoiled by places like Vanguard and Fidelity which have associated brokerage services.

So I did a rollover of all my CREF accounts into one of my brokerage accounts.

Part of my assets at TIAA-CREF are "TIAA Traditional," which cannot be rolled over as a lump sum. I'm planning to buy single-premium immediate annuities, and after brooding over various options, I decided to take the line of least resistance which is to keep that account at TIAA and invoke the "lifetime income with graded payout" option. I'm not crazy about the way their payouts work, but I think TIAA is about as honest and safe as they come.


If Vanguard was no more; I would go with them in a heart beat. :)

Fidelity 2nd.
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