Fidelity vs TIAA-CREF for new retirement account

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sasecool
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Fidelity vs TIAA-CREF for new retirement account

Post by sasecool » Mon Sep 05, 2016 11:08 am

All,
New to the boards, so I apologize if I don't ask in a manor 100% correctly :)

I'm at the beginning of my career (33), and just had a large salary bump. I am someone who will be managing my own portfolio, re balancing, etc.. I am a believer in index funds, although I will be a little aggressive in the breakdown of my portfolio (say 80% riskier (stocks, etc.), 20% bonds, mostly index funds for both).

I am working for an educational institution, and they provide a pretty awesome setup for my retirement schedule. They offer a 403b mandatory, 403b voluntary, and 457 voluntary plan. The 403b mandatory plan has a certain percentage that puts me over the 18k limit.

What's interesting is that the 403b mandatory plan supposedly doesn't have an 18k individual limit (so says the retirement people, because it is mandatory), although I believe that they finagle around that by rolling the excess funds into a 401a...not sure on the details yet.

Anyway, supposedly I should be able to have a 403b and a 457, and possibly an additional 403b, but they are going to get back to me on that one.

The company offers either fidelity or TIAA-CREF - both have similar investments, from what I can tell. Anyone have any experience on some of the advantages/disadvantages to either. I don't know how long I am going to stay with this institution (likely not for the rest of my life). I need to make a decision about which one to choose.

Here are all of the investments available through each:

Fidelity:
Target funds:
All fidelity freedom funds: All .15% net exp ratio
FID FDM IDX 2005
FID FDM IDX 2010-60
FID FDM IDX INC INV

Other funds:
AB DISC GRTH Z .68%
Fid contrafund K .61%
Fid low priced stock .69%
Fid money market trust retirement goverment money market II .42%
vanguard 500 index admiral .05%
vang devlop market index admiral .09%
vanguard equity index admiral .17%
vanguard intermediate term goverment bond admiral .1%
vanguard LT gov bond index .1%
vanguard midcap index admiral .08%
vanguard small cap index admiral .08%
vanguard short term gvt bond index admiral .1%
vanguard total bond market admiral .06%

TIAA-CREF:
TIAA-CREF lifecycle index institutional 2010 - 2060 Most .20-.28%, except 2055 fund .41%, and 2060 1.71%,
TIA-CREF lifecycle index retirement income fund .45%

other funds:
AB disc growth class Z .68%
AB discovery value fund class z .81%
american funds grwoth fund of america .33% r6
CREF money market .27%
CREF social choice account r3 .32%
CREF stock account r3 .38%
TIAA real estate account .89%
vanguard 500 index admiral.05%
vanguard developed markets indesx fund admiral .09%
vanguard developed market index institutional .07%
vanguard equity income fund admiral .17%
vanguard intermediate term gov bond index .10% fund admiral
vanguard long term goverment bond index fund admiral .10%
vanguard mid cap index fund institutional .07%
vanguard short term gov bond index fund admiral .10%
vanguard small cap index fund admiral .08%
vanguard total bond market index fund institutional .05%

You can see that the funds are very similar with similar gross/net exp ratio. Looks like TIAA has a few more that are institutional.

Anyone have any insight if I should choose fidelity vs tiaa?

Thanks a bunch,
Paul

retiredjg
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Re: Fidelity vs TIAA-CREF for new retirement account

Post by retiredjg » Mon Sep 05, 2016 11:31 am

I don't think it is going to matter much. Both are excellent plans. I'd probably use the Fidelity plan, but the T/C plan has one fund that people seem to like - the TREA (real estate fund).

dbltrbl
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Re: Fidelity vs TIAA-CREF for new retirement account

Post by dbltrbl » Mon Sep 05, 2016 12:16 pm

I would suggest Fidelity.Just better customer service, 24x7 access and index funds ERs today.

Retired1809
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Re: Fidelity vs TIAA-CREF for new retirement account

Post by Retired1809 » Mon Sep 05, 2016 12:48 pm

You have two excellent vendor options.

I was surprised that you did not list the TIAA Traditional R.A. (Guaranteed) account among the TIAA investment choices. Without it, your decision is pretty much a jump ball, but if the guaranteed account (with the 3% floor) is available in the TIAA vendor offering, I would pick TIAA.

Either way, congratulations; you're in a great plan.

ralph124cf
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Re: Fidelity vs TIAA-CREF for new retirement account

Post by ralph124cf » Mon Sep 05, 2016 12:53 pm

retiredjg wrote:I don't think it is going to matter much. Both are excellent plans. I'd probably use the Fidelity plan, but the T/C plan has one fund that people seem to like - the TREA (real estate fund).
I second the recommendation for the TREA fund. It appears unique in the investment world. It is not a REIT, and it operates the real property directly.

Ralph

sasecool
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Re: Fidelity vs TIAA-CREF for new retirement account

Post by sasecool » Mon Sep 05, 2016 1:07 pm

HikerNC wrote:You have two excellent vendor options.

I was surprised that you did not list the TIAA Traditional R.A. (Guaranteed) account among the TIAA investment choices. Without it, your decision is pretty much a jump ball, but if the guaranteed account (with the 3% floor) is available in the TIAA vendor offering, I would pick TIAA.

Either way, congratulations; you're in a great plan.
I thought I had mentioned that it gives you the option of this plan, but now that I am thinking about it, I probably just implied it.

Would that drastically change the recommendation?

sasecool
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Re: Fidelity vs TIAA-CREF for new retirement account

Post by sasecool » Mon Sep 05, 2016 1:10 pm

I should also mention that I can have both Fidelity and TIAA-CREF (i.e. put the mandatory funds into Fidelity, and the others into TIAA).

retiredjg
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Re: Fidelity vs TIAA-CREF for new retirement account

Post by retiredjg » Mon Sep 05, 2016 1:39 pm

When people talk about TIAA-CREF, the two things they mention are Traditional and TREA (real estate). Everything else is just like funds available other places, often at a lower cost than T/C.

There are several different Traditional offerings and you have to see which one is offered in YOUR plan, what it is currently paying, and what the guaranteed minimum rate is. Some have a 10 year withdrawal requirement (actually 9 years and 1 day I think) and these pay the most. I understand that some do not have that requirement and they pay something less.

In a time of low interest rates, TIAA Traditional has been paying people very nicely.

There might be some benefit to using both plans if you don't have to pay plan fees twice.

I don't see how you could go wrong with either plan.

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House Blend
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Re: Fidelity vs TIAA-CREF for new retirement account

Post by House Blend » Mon Sep 05, 2016 2:14 pm

This sounds very similar to my employer: contributions go into four accounts (two 403(b), 401(a), and 457(b)). Some of it is mandatory and doesn't count towards the $18K elective deferral limit. Also, the 457(b) has a separate $18K limit. (But do not make assumptions--read up on the details of your plan.)

Similarly, my employer offers TIAA-CREF and Fidelity as record-keepers. You can send all contributions to one, or split and use both. In addition, both the T-C and Fidelity sides offer about a dozen Vanguard institutional funds.

As a result, the choice for me is very easy. All the money goes to T-C, where I can get the cheap index funds I need from Vanguard, and the two funds that you can't get anywhere else: TIAA Traditional and TIAA Real Estate.

If I were lusting after, say, the Fidelity Contrafund, I might use Fidelity. Or if I wanted to use a single target date fund for everything, I'd do a closer comparison of the TIAA and Fidelity versions before making a decision.
sasecool wrote:The company offers either fidelity or TIAA-CREF - both have similar investments, from what I can tell. Anyone have any experience on some of the advantages/disadvantages to either. I don't know how long I am going to stay with this institution (likely not for the rest of my life). I need to make a decision about which one to choose.
This, on other hand, suggests that you should be very careful before putting a dime into TIAA Traditional. The version of Traditional in your 401(a) and one of your 403(b)s is likely to be "non-liquid", and cannot be transferred out except in 10 annual payments (or some similar variation). On the other hand, Traditional in your 457(b) is likely to have no such restriction and pay less.

If you think you might leave academia entirely after a few years, you'll likely be frustated down the road with a piddling amount in this non-liquid Traditional account that you cannot add to, and cannot exit without a paperwork fight and a multiyear wait.

On the other hand, if you forsee spending the next 3 decades at institutions that offer TIAA plans, the lack of liquidity is much less of an issue, as long as you have other fixed income options you can use to rebalance out of.
Last edited by House Blend on Mon Sep 05, 2016 2:38 pm, edited 1 time in total.

student
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Re: Fidelity vs TIAA-CREF for new retirement account

Post by student » Mon Sep 05, 2016 2:34 pm

This is similar to my university. We have access to both TIAA-CREF and Fidelity. We can contribute $18,000 to each of 403b and 457b, it is in addition to contributions by the university. As usual, those 50 or above can do catch-up contributions. I do not like to have all my money with one vendor so I have about half in each. Our choices in TIAA-CREF include very cheap index funds. I think TIAA Traditional is a good substitute for bond funds. As others have pointed out, there are liquid and illiquid versions. My guess is your employer's contributions will be in either a RA (Retirement Annuity) or GRA (Group Retirement Annuity), which will be illiquid. Your own contributions may be in a separate account such as SRA or SGRA, where S stands for Supplemental, and it will be liquid. You do not have to worry about the word "annuity." It is not the "bad" kind that you have heard about.

sasecool
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Re: Fidelity vs TIAA-CREF for new retirement account

Post by sasecool » Mon Sep 05, 2016 3:20 pm

House Blend wrote: If you think you might leave academia entirely after a few years, you'll likely be frustated down the road with a piddling amount in this non-liquid Traditional account that you cannot add to, and cannot exit without a paperwork fight and a multiyear wait.

On the other hand, if you forsee spending the next 3 decades at institutions that offer TIAA plans, the lack of liquidity is much less of an issue, as long as you have other fixed income options you can use to rebalance out of.
I don't plan on leaving academia, just possibly the particular University I am currently in.

This brings up interesting food for thought, because the traditional has made me start to think I should place a conservative amount in that account, as it seems attractive to balance out my more risky investments with the annuity type. I don't quite grasp how portable however, the specific plan is. So, if I spend 5 years at this University, and then goto another (who has TIAA), and do the annuity plan again, does it get lumped together?

JerseyBoy
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Re: Fidelity vs TIAA-CREF for new retirement account

Post by JerseyBoy » Mon Sep 05, 2016 3:32 pm

One more pro for TIAA --- their website (at least for my wife's 403b SRA account) has a tool you can use at anytime to rebalance your portfolio automatically.

Regarding the Traditional Account, she splits her fixed income allocation (bonds) 50-50 between Traditional and Total U.S. Bond Market.

Good Luck with you investments and career!

retiredjg
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Re: Fidelity vs TIAA-CREF for new retirement account

Post by retiredjg » Mon Sep 05, 2016 4:03 pm

sasecool wrote:This brings up interesting food for thought, because the traditional has made me start to think I should place a conservative amount in that account, as it seems attractive to balance out my more risky investments with the annuity type. I don't quite grasp how portable however, the specific plan is. So, if I spend 5 years at this University, and then goto another (who has TIAA), and do the annuity plan again, does it get lumped together?
I don't know if you can lump it or move it. But I do know it may be possible to just leave it there until you are ready to use it. I have a friend who has left his Traditional sitting for 30 or 40 years.

ralph124cf
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Re: Fidelity vs TIAA-CREF for new retirement account

Post by ralph124cf » Mon Sep 05, 2016 5:04 pm

sasecool wrote:
House Blend wrote: If you think you might leave academia entirely after a few years, you'll likely be frustated down the road with a piddling amount in this non-liquid Traditional account that you cannot add to, and cannot exit without a paperwork fight and a multiyear wait.

On the other hand, if you forsee spending the next 3 decades at institutions that offer TIAA plans, the lack of liquidity is much less of an issue, as long as you have other fixed income options you can use to rebalance out of.
I don't plan on leaving academia, just possibly the particular University I am currently in.

This brings up interesting food for thought, because the traditional has made me start to think I should place a conservative amount in that account, as it seems attractive to balance out my more risky investments with the annuity type. I don't quite grasp how portable however, the specific plan is. So, if I spend 5 years at this University, and then goto another (who has TIAA), and do the annuity plan again, does it get lumped together?
The different institutions contributions cannot be lumped together, you will forever have two different account numbers (TIAA and CREF) for each institution that you work for. You can handle the accounts as if they are lumped together, but when it comes time to take withdrawals, you will need to fill out two separate sets of paperwork for each institution that you have worked for.

Ralph

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House Blend
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Re: Fidelity vs TIAA-CREF for new retirement account

Post by House Blend » Mon Sep 05, 2016 5:06 pm

sasecool wrote:
House Blend wrote: If you think you might leave academia entirely after a few years, you'll likely be frustated down the road with a piddling amount in this non-liquid Traditional account that you cannot add to, and cannot exit without a paperwork fight and a multiyear wait.

On the other hand, if you forsee spending the next 3 decades at institutions that offer TIAA plans, the lack of liquidity is much less of an issue, as long as you have other fixed income options you can use to rebalance out of.
I don't plan on leaving academia, just possibly the particular University I am currently in.

This brings up interesting food for thought, because the traditional has made me start to think I should place a conservative amount in that account, as it seems attractive to balance out my more risky investments with the annuity type. I don't quite grasp how portable however, the specific plan is. So, if I spend 5 years at this University, and then goto another (who has TIAA), and do the annuity plan again, does it get lumped together?
No, your accumulations of non-liquid Traditional from different employers cannot be lumped together, except by doing one of the multi-year transfers[*]. The difference I was trying to highlight between a string of jobs with access to TIAA vs. leaving TIAA/academia entirely is that you can continue to build a position in it, and ultimately use it (for example) to purchase a significant income stream in retirement. (Even if the position is spread across multiple accounts.)

You could also do this within one of your existing accounts. For example, you spend 5 years at this employer, and at the time of departure, your 401(a) account is 80:20 equity:non-liquid Traditional. Transfers *into* Traditional are unrestricted, so even after you leave, you could increase your Tradtional holding by transferring some of the existing equity allocation in the 401(a) into Traditional.

[*] And because of the vintage system used for crediting earnings in TIAA Traditional, it is generally suboptimal to transfer one non-liquid Traditional account into another.

sasecool
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Re: Fidelity vs TIAA-CREF for new retirement account

Post by sasecool » Tue Sep 06, 2016 10:47 am

hmm Based on what I have heard thus far, it makes some sense to have the TIAA stuff. I spoke with my retirement folks, and after getting some clarification on their end, it sounds like I can max out my 457, and will only have access to the mandatory 403b, which will not conform to the typical 403b limits (sort of). It sounds like when you've maxed out the 18k, they turn over to a 401a.

The more and more I am looking at the TIAA annuity, the more and more I like it.

Assuming an 80/20 (20% conservative), with no prior investments (well, not true, but not signficant)

Does it make sense if I distribute as follows:

457 - 100% into TIAA annuity
403b (Employee/Employer match plan) Fidelity for my higher risk assets. This breakdown puts roughly 20% of my savings into the 457, and 80% into my 403b. I do plan on doing other investing outside of these plans, FYI.

I liked the reviews that have been on this forum about Fidelity and customer service etc. etc. It seems like the TIAA product is a little more slow moving, and that might irritate me a little (or maybe that is actually for the better!)

The only reason I thought that might be good, is because the 403b account will wind up being very complicated (it will be a 403b, and then a 401a, and have a vested portion from the University), and it is my understanding that the TIAA annunity can penalize those who rebalance/shift money in/out with regards to the return. When the university shifts funds around (when I am vested), that could possibly create an issue (maybe).

Any thoughts?

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Re: Fidelity vs TIAA-CREF for new retirement account

Post by DartThrower » Tue Nov 28, 2017 4:29 pm

sasecool wrote:
Tue Sep 06, 2016 10:47 am
hmm Based on what I have heard thus far, it makes some sense to have the TIAA stuff. I spoke with my retirement folks, and after getting some clarification on their end, it sounds like I can max out my 457, and will only have access to the mandatory 403b, which will not conform to the typical 403b limits (sort of). It sounds like when you've maxed out the 18k, they turn over to a 401a.

The more and more I am looking at the TIAA annuity, the more and more I like it.
I have been considering the TIAA annuity and the real estate fund recently.

It seems to me that the annuity product generates an apparently high yield by using the interest from GIC contracts and from mortality credits. I don't understand how to calculate the expense ratio on the annuity as one would see for a mutual fund. Whatever the expenses are, are offset by the two sources of yield, but not knowing what the expenses are gives me pause. They are hidden in the complexity of the product. For me, that fact and the recent articles in the NYT (see viewtopic.php?f=10&t=230313 ) are enough to cause me to bypass this option.

The real estate account sports an expense ratio of .85% over the current period based on the 2017 prospectus (August update). That's a little high for my taste. As an adherent to Bogle's Cost Matters Hypothesis I feel that I will most likely be better off 10-20 years from now by investing everything in a globally diversified stock and bond portfolio with prudent re-balancing at a cost of around .10%. I don't know if TIAA has become a different kind of entity due to the changes of the past 20 years or not, but by staying away from TIAA I feel I can avoid that risk and be no worse off.

I would love to hear someone give a good argument as to why these TIAA options will benefit investors like me through increased diversification and/or higher returns and/or mitigation of longevity risk.
A Boglehead can stay the course longer than the market can stay irrational.

jalbert
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Re: Fidelity vs TIAA-CREF for new retirement account

Post by jalbert » Tue Nov 28, 2017 5:19 pm

In this case, the TIAA ERs are lower, and what I would use, but both plans are very good.

Be advised that that the Vanguard Small-cap Index Fund, Mid-Cap Index Fund, and S&P500 fund all overlap (the "small-cap" fund includes considerable mid-caps, and the "mid-cap" fund includes considerable large caps). Perhaps best is to just skip the midcap fund and accept a small gap of about 180 stocks (7% of the market by cap weight) between the S&P500 and CRSP "Small-Cap" index.

Apparently fund advisors just look at the names of the funds when designing the plans. Ideally they would just use the S&P500 + Extended Market Completion Index Fund (S&P market completion pairs) or Large Cap Index Fund and Small-cap Index Fund (CRSP market completion pairs).
Risk is not a guarantor of return.

stlrick
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Re: Fidelity vs TIAA-CREF for new retirement account

Post by stlrick » Wed Nov 29, 2017 8:50 am

DartThrower wrote:
Tue Nov 28, 2017 4:29 pm
sasecool wrote:
Tue Sep 06, 2016 10:47 am
hmm Based on what I have heard thus far, it makes some sense to have the TIAA stuff. I spoke with my retirement folks, and after getting some clarification on their end, it sounds like I can max out my 457, and will only have access to the mandatory 403b, which will not conform to the typical 403b limits (sort of). It sounds like when you've maxed out the 18k, they turn over to a 401a.

The more and more I am looking at the TIAA annuity, the more and more I like it.
I have been considering the TIAA annuity and the real estate fund recently.

It seems to me that the annuity product generates an apparently high yield by using the interest from GIC contracts and from mortality credits. I don't understand how to calculate the expense ratio on the annuity as one would see for a mutual fund. Whatever the expenses are, are offset by the two sources of yield, but not knowing what the expenses are gives me pause. They are hidden in the complexity of the product. For me, that fact and the recent articles in the NYT (see viewtopic.php?f=10&t=230313 ) are enough to cause me to bypass this option.

The real estate account sports an expense ratio of .85% over the current period based on the 2017 prospectus (August update). That's a little high for my taste. As an adherent to Bogle's Cost Matters Hypothesis I feel that I will most likely be better off 10-20 years from now by investing everything in a globally diversified stock and bond portfolio with prudent re-balancing at a cost of around .10%. I don't know if TIAA has become a different kind of entity due to the changes of the past 20 years or not, but by staying away from TIAA I feel I can avoid that risk and be no worse off.

I would love to hear someone give a good argument as to why these TIAA options will benefit investors like me through increased diversification and/or higher returns and/or mitigation of longevity risk.
There is some seriously incorrect terminology being used here. Where you are using "TIAA annuity" you are referring to the TIAA Traditional Account - usually abbreviated TRAD. The real estate account is TREA. The access to these two accounts is what has made me a happy TIAA participant for 40 years.

The first thing to understand is that the TRAD account is not an annuity, as you think of it. The annual guaranteed interest and excess interest paid (right now, I am receiving 4% on new contributions) on the TRAD account does not include any mortality credits. TRAD is a version of a stable value fund. TIAA uses the word "annuity" for many of its investment options that are effectively identical to what elsewhere are called mutual funds. They make it more complicated by offering mutual funds also. In any case, when working with TIAA, there is a fundamental distinction between an "annuity" and "annuitizing." Mortality credits come into play if you decide (it is entirely optional) to annuitize part of your accumulation at retirement.

TIAA provides their funds under several different types of what can be understood as umbrella contracts that they sign with your institution. These go by designations such as GRA, RA, SRA. The guaranteed interest in the TRAD account can vary with the contract type, as can the restrictions on withdrawing funds from the TRAD account.

TREA is not a reit, which TIAA offers also. TREA is direct ownership of properties. The net asset value is based on rents received and quarterly assessments of the property values. The ER appears high, but it is a unique form of real estate asset. Moreover, as discussed regularly on the TIAA board at Morningtstar, it is, as far as most of us know, unique in the investment world in being remarkably predictable. Because of the way ERs are determined, NAV changes in an very regular and predictable way.

TIAA has some irritating features. TRAD in particular is complicated, and in general TIAA as an organization usually makes the paperwork associated with doing anything more complicated than Fidelity. However, it is worth it to many participants. Also, should you have plans for an SPIA in retirement, annuitization of TRAD with TIAA generally has a very favorable payout rate compared with SPIAs on the open market, including those offered through Vanguard.

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Re: Fidelity vs TIAA-CREF for new retirement account

Post by fourwheelcycle » Wed Nov 29, 2017 9:38 am

I would go with Fidelity and I would go straight to the Vanguard 500 Index and Total Bond Market funds.

My wife and I have worked our whole careers for not for profit organizations that offer similar retirement options. I would advise you to NEVER get involved with TIAA's guaranteed interest traditional/annuity contracts. They are NOT a mutual fund; apparently they are a true contract and you cannot get out of them except through a ten year roll out - that may not be true for you, but it was true for us.

Also, if you mentioned the current management fees charged by TIAA and Fidelity I missed it. I am retired now, but my wife's employer recently renegotiated their custodial agreements with TIAA and Fidelity. Previously, neither company charged any management fees to employee accounts, but their best mutual fund expense ratios were about 56 basis points at Fidelity and 26 basis points at TIAA. Needless to say, we had most of our retirement funds at TIAA. Now, both companies offer access to the low ER Vanguard funds, but they also charge annual management fees to each employee's account.

For some reason, probably because TIAA and Fidelity negotiated for different arrangements, Fidelity charges a set annual fee to each employee account, regardless of the account balance. I forget the actual number, but it is small, like $75 per year. TIAA, on the other hand, charges a basis point fee (in the range of .004% ?) that comes out about the same as Fidelity's set fee for her employer's average size employee account. However, since my wife has a professional level salary and she is at the end of her career, TIAA's fee for her account would have been many $K per year rather than just $75. Needless to say, she assigned all of her current year deposits to Fidelity and I worked with her employer to immediately transfer all of her TIAA mutual funds to Fidelity. She still has the last two years of her ten year annuity contract roll out at TIAA, so she could not transfer that amount to Fidelity. However, I was able to set up her account at TIAA so that the annual annuity roll out amounts will transfer directly to her Fidelity account rather than to a TIAA mutual fund.
Last edited by fourwheelcycle on Fri Dec 08, 2017 8:24 am, edited 1 time in total.

stlrick
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Re: Fidelity vs TIAA-CREF for new retirement account

Post by stlrick » Wed Nov 29, 2017 9:56 am

fourwheelcycle wrote:
Wed Nov 29, 2017 9:38 am
I would go with Fidelity and I would go straight to the Vanguard 500 Index and Total Bond Market funds.

My wife and have worked our whole careers for not for profit organizations that offer similar retirement options. I would advise you to NEVER get involved with TIAA's guaranteed interest traditional/annuity contracts. They are NOT a mutual fund; apparently they are a true contract and you cannot get out of them except through a ten year roll out - that may not be true for you, but it was true for us.
For several kinds of TIAA contracts, the restrictions on withdrawals from TRAD are as you describe. But what didn't work for you may be fine for someone else. For me, it has been a case of "you get what you pay for." The restrictions on withdrawals makes TRAD safer than other stable value funds; there are severe limitations on the possibility of a run on the bank. It also allows TRAD to invest differently for the long-term and thereby offer a higher interest rate than most other stable value funds. For me, this is retirement money. I am not concerned with withdrawal restrictions prior to retirement. If need be, they are only a portion of my retirement investments (basically, the bond portion). Moreover, I am planning to live more than 10 years in retirement and want my retirement accumulation to last more than 10 years, so being limited to this withdrawal restriction is no restriction at all.

fourwheelcycle
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Re: Fidelity vs TIAA-CREF for new retirement account

Post by fourwheelcycle » Wed Nov 29, 2017 11:03 am

stlrick wrote:
Wed Nov 29, 2017 9:56 am
I am not concerned with withdrawal restrictions prior to retirement. If need be, they are only a portion of my retirement investments (basically, the bond portion). Moreover, I am planning to live more than 10 years in retirement and want my retirement accumulation to last more than 10 years, so being limited to this withdrawal restriction is no restriction at all.
I don't disagree. My wife and I put the "bond" portion of our TIAA retirement savings in TIAA's traditional/annuity contracts throughout our whole careers. However, all we recognized was that we were getting a better current interest rate return, with no risk of loss to principal, than we could get from bond mutual funds offered by TIAA or Fidelity. We enjoyed the benefits of TIAA's guaranteed return contracts throughout our careers, but we always knew we wanted to transfer our retirement accounts to Vanguard when we retired, and we did not appreciate the transfer constraint entailed by TIAA's traditional/annuity contracts.

When I retired we went in to our local TIAA rep for a review of our accounts. I asked about the steps required to transfer my account to Vanguard and learned for the first time that my wife and I could not transfer our traditional/annuity balances on short notice. Rather, we would have to sign requests to begin a ten year process under which TIAA would transfer 10% of our remaining traditional/annuity contract balances each year to a target mutual fund that we could designate. We immediately signed such requests and now we are down to our last year or two of the ten year transfer process.

I agree the ten year roll out requirement is not a big problem if you stay at the same employer for your whole career and you plan carefully, with a ten year planning horizon, as you approach retirement. In my case, I did not appreciate the ten year roll out requirement until I actually retired. I transferred the fifty percent or so of my TIAA account that was not tied up in traditional/annuity contracts to Vanguard early in my retirement and I have subsequently transferred all but the remaining one or two years of my TIAA traditional/annuity contracts to Vanguard.

Until recently, neither TIAA or Fidelity charged annual management fees to our accounts, and Fidelity had higher mutual fund ERs than TIAA, so my wife did not consider transferring her TIAA funds to Fidelity. Fortunately, she began her ten year TIAA traditional/annuity contract transfer process at the same time as me, so last year when TIAA was about to charge a very high management fee to her account she was able to transfer almost all of it to Fidelity.

Unlike my wife and me, our two adult sons have each already changed employers one or two times early in their careers. Each time they have transferred their retirement balances to Vanguard, partly for better ERs, but mostly to manage their retirement accounts as simply as possible and avoid having separate accounts at each of their past employers. For them, having a ten year roll out tail on their accounts at each employer would have presented a problem early in their careers. I suppose stlrick might say "So what, if they were getting a favorable interest rate on their savings". However, I think they still would have seen the transfer constraint as a problem. That is why I suggested that the OP should not get involved with TIAA's traditional/annuity contracts, even if the account management fees and fund ERs were similar at TIAA and Fidelity.

stlrick
Posts: 416
Joined: Mon Apr 14, 2008 4:37 pm

Re: Fidelity vs TIAA-CREF for new retirement account

Post by stlrick » Wed Nov 29, 2017 11:36 am

fourwheelcycle wrote:
Wed Nov 29, 2017 11:03 am
...When I retired we went in to our local TIAA rep for a review of our accounts. I asked about the steps required to transfer my account to Vanguard and learned for the first time that my wife and I could not transfer our traditional/annuity balances on short notice...

I agree the ten year roll out requirement is not a big problem if you stay at the same employer for your whole career and you plan carefully, with a ten year planning horizon, as you approach retirement. In my case, I did not appreciate the ten year roll out requirement until I actually retired....

Unlike my wife and me, our two adult sons have each already changed employers one or two times early in their careers. Each time they have transferred their retirement balances to Vanguard, partly for better ERs, but mostly to manage their retirement accounts as simply as possible and avoid having separate accounts at each of their past employers. For them, having a ten year roll out tail on their accounts at each employer would have presented a problem early in their careers. I suppose stlrick might say "So what, if they were getting a favorable interest rate on their savings". However, I think they still would have seen the transfer constraint as a problem. That is why I suggested that the OP should not get involved with TIAA's traditional/annuity contracts, even if the account management fees and fund ERs were similar at TIAA and Fidelity.
I think you should agree that not knowing about the 10 year roll out requirement (actually, 9 years and a day) is no one's fault but your own, unless you had a truly incompetent human resources office. It has always been a prominent point in any information I have received from TIAA or my employer. As for what you are now supposing I might say about your sons, no, I would say that it depends on their situation. You seem quick to generalize. This was my only disagreement with your original post in which you advised the OP to NEVER get involved with TIAA. The point of my reply was that what didn't work for you works for some. It may not work for your sons; it's not for me to say. I have changed employers, all of which had TIAA, and moving has been no problem at all.

jasg
Posts: 85
Joined: Wed May 08, 2013 7:10 pm

Re: Fidelity vs TIAA-CREF for new retirement account

Post by jasg » Wed Nov 29, 2017 2:47 pm

I had a similar choice to make but close to retirement instead of at the beginning. At age 64, I rolled my Fidelity 401k to TIAA.

In my 20s I worked for an employer that set up a small TIAA-CREF RA (regular Retirement Account) for me. I left the account open and almost 40 years later discovered that I could open a GSRA - "Group Supplemental" RA along with the RA. It allowed access to all the TIAA mutual funds and annuity options. In the GSRA, TRAD was fully liquid (no 10 year provision) and TREA was available. The program also included Institutional class Vanguard funds.

I now have used TRAD and TREA as fantastic diversification and bond equivalents while keeping the rest of my retirement in a Vanguard Three-fund portfolio - but with Institutional instead of Admiral class funds.

I am glad that I never closed out that tiny TIAA account.

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