TIAA Traditional Instead of Bonds?

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jbk
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TIAA Traditional Instead of Bonds?

Post by jbk » Wed Nov 13, 2013 9:36 pm

I'm in the accumulation stage with probably 15-20 years to go before retirement. Nearly all of my fixed income is CREF Bond Market, but I was thinking of selling that and buying TIAA Traditional instead. The 30-day SEC yield of Bond Market is 1.66%. Traditional is guaranteeing 3%. The account is in a GSRA so I don't have the 10-year transfer restriction and could therefore transfer back to Bond Market if the outlook changed. Is this move a no-brainer? The only 'downside' I see is the standard caveat that Traditional is guaranteed to the extent that TIAA stays in business. It's a pretty large operation, though, and they've been here 100 years or so. The risk there seems minimal. I posted this question on the M* TIAA-CREF forum a while back and the replies were largely in agreement that this would be a good move. I just wanted to run it by the Boglehead universe before pulling the trigger. Thanks.

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House Blend
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Re: TIAA Traditional Instead of Bonds?

Post by House Blend » Wed Nov 13, 2013 9:53 pm

I'd say so. If/when the yields on bonds are beating the yield on Traditional in your GSRA, you might want to reconsider.

Casper
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Re: TIAA Traditional Instead of Bonds?

Post by Casper » Wed Nov 13, 2013 9:54 pm

I am in a similar situation and did just that. If you are in a GSRA then the rate is lower, but it is still guaranteed at 3% and there are fewer restrictions on trading. I am far from an expert, but I really don't see a downside. The only difference for me is that I didn't sell bonds to go into Traditional; we are just making new contributions to Traditional in order to increase our fixed income allocation.

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Dutch
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Re: TIAA Traditional Instead of Bonds?

Post by Dutch » Wed Nov 13, 2013 9:57 pm

Yes, that's what I did. My fixed allocation is TIAA Traditional and series I/EE savings bonds

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cheese_breath
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Re: TIAA Traditional Instead of Bonds?

Post by cheese_breath » Wed Nov 13, 2013 10:11 pm

I currently have no real bonds. All my 'bonds' are TIAA Traditional, and until bond yields improve I guess they'll stay that way.
The surest way to know the future is when it becomes the past.

columbia
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Re: TIAA Traditional Instead of Bonds?

Post by columbia » Wed Nov 13, 2013 10:18 pm

From the TIAA-CREF site:

Code: Select all

Interest Rates for the TIAA Traditional Annuity
Accumulating Stage Interest Rates From 03/01/13 to 02/28/14
For Premiums Applied	RC
09/01/13 - 11/30/13	4.10%
08/01/13 - 08/31/13	3.95%
07/01/13 - 07/31/13	3.75%
03/01/13 - 06/30/13	3.35%
01/01/13 - 02/28/13	3.30%
01/01/12 - 12/31/12	3.35%
10/01/11 - 12/31/11	3.85%
03/01/11 - 09/30/11	4.35%
09/01/10 - 02/28/11	3.85%
06/01/10 - 08/31/10	4.10%
01/01/10 - 05/31/10	4.35%
01/01/09 - 12/31/09	4.85%
01/01/08 - 12/31/08	5.35%
08/01/05 - 12/31/07	4.60%

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Dutch
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Re: TIAA Traditional Instead of Bonds?

Post by Dutch » Wed Nov 13, 2013 11:27 pm

columbia wrote:From the TIAA-CREF site:

Code: Select all

Interest Rates for the TIAA Traditional Annuity
Accumulating Stage Interest Rates From 03/01/13 to 02/28/14
For Premiums Applied	RC
09/01/13 - 11/30/13	4.10%
08/01/13 - 08/31/13	3.95%
07/01/13 - 07/31/13	3.75%
03/01/13 - 06/30/13	3.35%
01/01/13 - 02/28/13	3.30%
01/01/12 - 12/31/12	3.35%
10/01/11 - 12/31/11	3.85%
03/01/11 - 09/30/11	4.35%
09/01/10 - 02/28/11	3.85%
06/01/10 - 08/31/10	4.10%
01/01/10 - 05/31/10	4.35%
01/01/09 - 12/31/09	4.85%
01/01/08 - 12/31/08	5.35%
08/01/05 - 12/31/07	4.60%
Yes, these rates are for accounts that come with certain withdrawal restrictions.

The OP is referencing a different account with no/less restrictions. The trade-off is lower (but still reasonable) rates.

jasg
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Re: TIAA Traditional Instead of Bonds?

Post by jasg » Thu Nov 14, 2013 7:11 pm

In my GSRA (no liquidity restrictions), I am using Traditional instead of bond funds, money market and CDs. If interest rates change, I will reallocate. I also put a hunk of former fixed income into TREA, riskier but still not the same as equity risk.

I consider both of these too unique to ignore.

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