Thoughts on TIAA Traditional and TIAA Real Estate given my AA?

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Escape Velocity
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Thoughts on TIAA Traditional and TIAA Real Estate given my AA?

Post by Escape Velocity » Tue Sep 13, 2016 10:34 am

Hi folks,

Hoping to get your thoughts -- especially from folks that have access to TIAA 403(b) or 401(a) plans -- on a change I am considering to my tax-deferred retirement portfolio.

Background: My company is not-for-profit and therefore offers 403(b) type plans, via TIAA and Fidelity. Many eons ago, I had most of my funds in TIAA, and eventually decided to shift to Fidelity (and found out I had to withdraw over a period of 9 years and 1 day). That frustrated me about TIAA, and I left them behind, and have been using Fidelity ever since.

Now I'm very close to retirement (less than a month -- I actually stopped working on 4 July, but official corporate retirement in next month), and realize there are some offerings I may want to take advantage of, like TIAA Traditional and TIAA Real Estate (and maybe others?).

The other background is, thanks to your help, I've changed my AA from 70/30 as an accumulator then to 60/40, and then with immanent retirement to 30/70 with a plan to shift that back to 50/50 over the next few years. This change was to get me through pre- and post-retirement with my portfolio largely intact (to avoid bad sequence of returns), willing to give up larger returns for decreased volatility. And I remain happy with that decision. So here's what my portfolio looks like right now:

Spartan 500 Index (FXSIS) = 25% (0.05 ER)
Spartan Int'l Index (FSIVX) = 5% (0.05 ER)
Spartan US Bond Index (FTBFX) = 50% (0.07 ER)
Spartan Short-Term Treasury Bond Index (FSBAX) = 20% (0.10 ER)

What I'm considering adding and reallocating a portion to are these two offerings:

TIAA Traditional Annuity - Group Supplemental Retirement Annuity (Guaranteed Min 3%, inclusive of all fees)
TIAA Real Estate Account (0.89 ER)

I have up to 30% of my retirement portfolio that I could shift into TIAA, and due to the nature of the contributions (my money, versus the companies), would have full flexibility to move them around (say between TIAA and Fidelity) without that pesky 9 yr+1 day pay out limitation. I'm only considering those monies.

Here is my initial thinking. Given I am trying to minimize volatility, the TIAA Traditional (Guaranteed 3% min) certainly does that and would seem to be a better choice that my Short-Term Bond Fund. Would you agree? I'm interested in any pros and cons.

And I think there may be a place for TIAA Real Estate. It is actually ownership in commercial real estate, tends to be interest rate insensitive (they buy the buildings for cash), but it would react negatively to a major economic downturn, as some businesses would fold, reducing returns. This happened as a trailing indicator after the 2008 real estate meltdown, after the actually economy tanked. But even there, the depth of the drop was about half that of the market. Otherwise returns are unusually steady at about 6%.

So my question -- for those familiar with these offerings (or anything else noteworthy in the world of TIAA/CREF) -- should I be making these a part of my retirement portfolio? And if so, would you have an opinion on how I might want to adjust my AA assuming I am willing to shift up to 30% of my portfolio into TIAA.

Other factoids: I'm closing in on 60 years old. I plan to defer SS until 70. I'm hoping to do Roth conversions between now and then. And I have other source of income for current living expenses and to pay for Roth conversions (liquidating some of my rental real estate). So I will not need to be tapping my retirement accounts for likely 5 years, and possibly more.

Thanks in advance for any inputs, comments, critiques, and insights.

EV

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Re: Thoughts on TIAA Traditional and TIAA Real Estate given my AA?

Post by Valuethinker » Tue Sep 13, 2016 10:40 am

OK I am not American.

A couple of things strike me:

- if you already have rental RE you don't need TIAA RE. If there turns out to be a bear market in commercial RE, the fund will get hurt. A repeat of the financial crash will hurt it. You are concentrating portfolio risk (compared to a REIT index fund) and manager risk, and you probably don't need it for diversification purposes. For portfolio stability, just hold bonds

- TIAA Trad I don't know enough about. In principle your logic is good but I don't know enough about liquidity restrictions, etc. It can be used as a bond substitute, I believe

If you have a strong belief inflation will exceed expectations, then TIAA RE (and any RE assets) should do better than stocks or any bonds bar TIPS.

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Re: Thoughts on TIAA Traditional and TIAA Real Estate given my AA?

Post by masteraleph » Tue Sep 13, 2016 3:17 pm

As far as I can see, if you can easily switch the short bonds to TIAA Traditional, there's absolutely no downside- I mean, you're automatically getting a higher percentage by a significant margin, without downside risk for the value of the fund. In theory, it's more risky because TIAA Cref could go under, but I'd consider that pretty unlikely; it's up to you how you feel about that issue (that's assuming this is the SRA/GSRA, which is liquid, and based on your percentage, it is).

On RE- I have it in my portfolio, but I also don't own any rental property. It's mostly commercial property, to my understanding, so it is different, but that still might be a lot of your assets tied up in real estate.

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Escape Velocity
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Re: Thoughts on TIAA Traditional and TIAA Real Estate given my AA?

Post by Escape Velocity » Tue Sep 13, 2016 3:50 pm

Valuethinker wrote:if you already have rental RE you don't need TIAA RE. If there turns out to be a bear market in commercial RE, the fund will get hurt. A repeat of the financial crash will hurt it. You are concentrating portfolio risk (compared to a REIT index fund) and manager risk, and you probably don't need it for diversification purposes. For portfolio stability, just hold bonds
masteraleph wrote:On RE- I have it in my portfolio, but I also don't own any rental property. It's mostly commercial property, to my understanding, so it is different, but that still might be a lot of your assets tied up in real estate.
These are things I have been thinking about. Personally, I'm going to "divest" of two properties in the next few years, so that will reduce, but not eliminate, my personal rental RE. And my understanding is that TIAA RE and REITs are not very closely correlated. So I think it is a bit of a different animal.

That said, I think if I do move to put some funds into TIAA RE, it will probably be limited to 5% until I understand it better.

And yes, masteraleph, I am only considering the full liquidity funds for the TIAA Traditional. Thanks for both of your votes of confidence for that vs Short Term bonds. Any nay sayers out there? I'll probably make a switch next week, barring contrary feedback. Thanks very much.

EV

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Re: Thoughts on TIAA Traditional and TIAA Real Estate given my AA?

Post by KyleAAA » Tue Sep 13, 2016 4:04 pm

You are correct that the TIAA Real Estate fund is quite a different beast than your average REIT fund. What percentage of your portfolio do you intend to allocate to real estate? If your current holdings are less than that, buy the TIAA RE fund to make up the difference. Otherwise, don't (but revisit when you divest). The TIAA fund is a good one and I wish I had access to it.

Regarding the annuity, I don't have much to say other than that most retirees are probably under-annuitized. If you can get by with 1-2% of your portfolio, don't bother. If you absolutely need 4% you might want to look into an annuity. But deferring social security until age 70 is essentially the same thing as buying an annuity at extremely favorable prices, so that alone argues for not annuitizing.

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Re: Thoughts on TIAA Traditional and TIAA Real Estate given my AA?

Post by Escape Velocity » Mon Sep 19, 2016 4:15 am

Thanks to all for the replies so far. This is a bump to see if anyone who has access to TIAA investments has opinions about TIAA Traditional (using employee-sourced funds for full liquidity) and TIAA Real Estate.

I'm getting ready to pull the trigger. My resulting 30/70 AA would changes as follows (only the Bond side is changing):

From:
- Intermediate Bonds = 50%
- Short-Term Bonds = 20%

To:
- Intermediate Bonds = 35%
- TIAA Real Estate = 5%
- TIAA Traditional = 30%

I'm interested to hear of any liquidity issues or restrictions. I believe I can avoid them, but I'm still new to these TIAA options, so welcome any red flags.

And as I've mentioned in previous threads, I'm now at 30/70 due to my immanent transition into retirement, and expect that to shift back toward 50/50 over the next 10 years. It is to help me SWAN, and to prevent a major market crash from impeding my retirement decision.

Thanks in advance,

EV

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Re: Thoughts on TIAA Traditional and TIAA Real Estate given my AA?

Post by ResearchMed » Mon Sep 19, 2016 7:42 am

Escape Velocity wrote:Thanks to all for the replies so far. This is a bump to see if anyone who has access to TIAA investments has opinions about TIAA Traditional (using employee-sourced funds for full liquidity) and TIAA Real Estate.

I'm getting ready to pull the trigger. My resulting 30/70 AA would changes as follows (only the Bond side is changing):

From:
- Intermediate Bonds = 50%
- Short-Term Bonds = 20%

To:
- Intermediate Bonds = 35%
- TIAA Real Estate = 5%
- TIAA Traditional = 30%

I'm interested to hear of any liquidity issues or restrictions. I believe I can avoid them, but I'm still new to these TIAA options, so welcome any red flags.

And as I've mentioned in previous threads, I'm now at 30/70 due to my immanent transition into retirement, and expect that to shift back toward 50/50 over the next 10 years. It is to help me SWAN, and to prevent a major market crash from impeding my retirement decision.

Thanks in advance,

EV
I'm not sure how your plan works, but in our plan, the terms/restrictions (that higher rate, but 9 years + 1 day Transfer Payout Annuity) are identical for EmployEE and EmployER contributions. The difference is that the EmployEE contributed funds (and returns) in our plan may be removed or rolled over (with taxes and penalties IF appropriate) before termination with Employer.

That is, in our plan, the EmployEE contributed portion of Trad Ann does NOT have "full liquidity".
But you plan may differ, of course. Just double check.

And in our plan, we don't have access to the higher liquidity/lower rate Trad Ann.

We have a fair amount in TREA, and are watching the returns there carefully.
We did time it back in 2008, and got back in later. However, with the new restrictions on adding money, unless we removed an awful lot, we would not be able to replace it into TREA "later".
But as we approach actual retirement, we are re-evaluating our overall allocations anyway.

RM
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CFM300
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Re: Thoughts on TIAA Traditional and TIAA Real Estate given my AA?

Post by CFM300 » Mon Sep 19, 2016 11:49 am

Escape Velocity wrote:I'm interested to hear of any liquidity issues or restrictions. I believe I can avoid them, but I'm still new to these TIAA options, so welcome any red flags.
You should be very cautious about investing in TIAA Traditional if you value liquidity. You already learned this lesson once. Why risk it again with partial understanding?

TIAA Traditional comes in many varieties, each with their own withdrawal and pay-out penalties. You must clearly identify the specific variety of TIAA Traditional available to you and then careful research your withdrawal options.

The second page of this document might help you:

http://www1.tiaa-cref.org/ucm/groups/co ... 058768.pdf

In summary,

Retirement Annuity (RA)
Made in 10 annual installments over nine years and one day. Lump-sum withdrawals and transfers are not available.

Group Retirement Annuity (GRA)
If the plan permits, available in a lump sum within 120 days of terminating employment, subject to a 2.5% surrender charge. Otherwise, made in 10 annual installments over nine years and one day.

Retirement Choice (RC) Annuity
Made in 84 monthly payments. If plan permits, available in a lump sum within 120 days of terminating employment, subject to a 2.5% surrender Charge.

Supplemental Retirement Annuity (SRA)
Available any time, subject to plan rules.

Group Supplemental Retirement Annuity (GSRA)
Available any time, subject to plan rules.

Retirement Choice Plus (RCP) Annuity
Available any time, subject to plan rules.

In your original post, you describe the variety of TIAA Traditional you're now considering as "Group Supplemental Retirement Annuity". If that's accurate, and if the pdf I linked and quoted is accurate, then it appears that you would have complete liquidity... SUBJECT TO PLAN RULES.

So I think you need to talk with plan administrators or call TIAA directly and get clarification about your specific plan.

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Re: Thoughts on TIAA Traditional and TIAA Real Estate given my AA?

Post by The Wizard » Mon Sep 19, 2016 12:33 pm

You want to be AWARE of the Trad liquidity variations, not SCARED of them.
I moved a modest sum into illiquid Trad in a GRA yielding 4.0% a while back. I may annuitize that account later, I'm not sure.

I also have liquid Trad yielding 3.0% in my GSRAs, which I can withdraw in retirement or use to rebalance with.

And while TREA has been plateauing the past few months, a number of TIAA participants have 30% or more in that...
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Escape Velocity
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Re: Thoughts on TIAA Traditional and TIAA Real Estate given my AA?

Post by Escape Velocity » Mon Sep 19, 2016 3:15 pm

Much thanks for the feedback and suggestions.

CFM300: "In your original post, you describe the variety of TIAA Traditional you're now considering as "Group Supplemental Retirement Annuity". If that's accurate, and if the pdf I linked and quoted is accurate, then it appears that you would have complete liquidity... SUBJECT TO PLAN RULES.
So I think you need to talk with plan administrators or call TIAA directly and get clarification about your specific plan."

I did that today (speak with a plan adminstrator), so I believe I do have complete liquidity within GSRA.

I've learned however, there are more restrictions on both in-flow and out-flow for TIAA Real Estate. In particular, after moving $150K in, one would be required to set up scheduled, recurring transfers to deposit additional funds. And I'm told you can remove it all at one time, but if you want multiple withdrawals, again that needs to be scheduled and periodic. I can live with that for now, as I intend to move in my 5%, and see where things go -- if the economy takes a sharp downward spiral, I'll watch it closely and may well move it all into a bond fund. We'll see -- at least I can get access to it if desired.

Thanks all, EV

ResearchMed
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Re: Thoughts on TIAA Traditional and TIAA Real Estate given my AA?

Post by ResearchMed » Mon Sep 19, 2016 3:22 pm

Escape Velocity wrote:Much thanks for the feedback and suggestions.

CFM300: "In your original post, you describe the variety of TIAA Traditional you're now considering as "Group Supplemental Retirement Annuity". If that's accurate, and if the pdf I linked and quoted is accurate, then it appears that you would have complete liquidity... SUBJECT TO PLAN RULES.
So I think you need to talk with plan administrators or call TIAA directly and get clarification about your specific plan."

I did that today (speak with a plan adminstrator), so I believe I do have complete liquidity within GSRA.

I've learned however, there are more restrictions on both in-flow and out-flow for TIAA Real Estate. In particular, after moving $150K in, one would be required to set up scheduled, recurring transfers to deposit additional funds. And I'm told you can remove it all at one time, but if you want multiple withdrawals, again that needs to be scheduled and periodic. I can live with that for now, as I intend to move in my 5%, and see where things go -- if the economy takes a sharp downward spiral, I'll watch it closely and may well move it all into a bond fund. We'll see -- at least I can get access to it if desired.

Thanks all, EV
With respect to TREA, double check that your PLAN allows everything that TIAA says can "work".
Our plan will NOT allow any additional monies to be placed into TREA period. (For us, not even if the balance drops below $150k or even to zero.)

Also, about withdrawals, I don't know about any "periodic" types.
In general (and again, what matters to YOU is what YOUR plan allows) is that one can remove as much as one wishes but ONLY ONCE PER QUARTER. That can be early or late in the quarter, but if it's early, there won't be another chance until the next quarter.

RM
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Re: Thoughts on TIAA Traditional and TIAA Real Estate given my AA?

Post by Levett » Mon Sep 19, 2016 3:30 pm

"You already learned this lesson once."

Sorry. I missed the "lesson."

Is it liquidity? That doesn't matter for those of us for whom the Traditional account is a "keeper."

I love the illiquidity--it protects against the panic of the masses, as witnessed by the panic plunge in TIAA Real Estate in 2008-2009.

Lev

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Re: Thoughts on TIAA Traditional and TIAA Real Estate given my AA?

Post by The Wizard » Mon Sep 19, 2016 4:15 pm

Levett wrote:"You already learned this lesson once."

Sorry. I missed the "lesson."

Is it liquidity? That doesn't matter for those of us for whom the Traditional account is a "keeper."

I love the illiquidity--it protects against the panic of the masses, as witnessed by the panic plunge in TIAA Real Estate in 2008-2009.

Lev
Obviously. I tend to agree. :)
But......there are issues the average TIAA participant needs to be aware of:
1) retiree can't withdraw arbitrary monthly amounts from illiquid Trad to live on
2) you can't use $$ in illiquid Trad to rebalance into stock funds when the situation calls for it
3) arguably the best thing you can do with illiquid Trad is to annuitize it for lifetime monthly income at some point in retirement

I've done 3) with a portion of my accumulation...
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Levett
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Re: Thoughts on TIAA Traditional and TIAA Real Estate given my AA?

Post by Levett » Mon Sep 19, 2016 5:54 pm

Wizard,

Ditto. :D

Lev

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Re: Thoughts on TIAA Traditional and TIAA Real Estate given my AA?

Post by CFM300 » Tue Sep 20, 2016 11:33 pm

Levett wrote:"You already learned this lesson once."

Sorry. I missed the "lesson."

Is it liquidity? That doesn't matter for those of us for whom the Traditional account is a "keeper."

I love the illiquidity--it protects against the panic of the masses, as witnessed by the panic plunge in TIAA Real Estate in 2008-2009.

Lev
OP said that s/he was frustrated by the 9-year withdrawal requirement of a previous TIAA Traditional investment.

So the lesson for the OP, obviously, is to fully understand the liquidity of instruments before investing money. To minimize future frustration.

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Re: Thoughts on TIAA Traditional and TIAA Real Estate given my AA?

Post by livesoft » Wed Sep 21, 2016 2:45 am

FWIW, I have an old 403(b) with TIAA that is a little more than 10% of our total portfolio value nowadays. It is invested in TIAA Real Estate and the TIAA traditional annuity paying 3% minimum very much like the OP proposes to do.

I have finished with a transfer payout annuity so I have no more liquidity issues with my TIAA TA assets, but I no longer receive the higher interest rates either.

This account in my portfolio is in "set-and-forget" mode. The TIAA Real Estate account is sometimes my worst performing fund for a year or more. So far in 2016, it is easily my worst performing fund.

My opinion is that the OP has done some VERY SIGNIFICANT asset allocation changes going from 60/40 to 30/70 with the intent to go to 50/50. They state they are comfortable doing this. The proposed idea of putting 30% of the portfolio back into TIAA TA and TIAA REA is just more comfort food to hide volatility and won't do any harm.

However, once one realizes that even with TIAA products, there is no free lunch, I don't think it will make any significant difference in any future outcomes for the OP whether they do the TIAA thing or not. That is, the OP could shift some assets to TIAA or not. It just won't matter.

I have learned to love volatility and no longer need to minimize volatility. That has done more for my comfort level than anything else. So in retirement, I just keep my fixed income asset allocation to around 30% of the portfolio and no where near 70% or even 50%.
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Re: Thoughts on TIAA Traditional and TIAA Real Estate given my AA?

Post by Escape Velocity » Wed Sep 21, 2016 6:22 am

Folks,

OP here. And thanks for keeping the conversation going. Yes, I was previously frustrated about the requirement for 9 years + 1 day payout once I decided to change horses. That was youthful ignorance on my part, and yes, that less has been learned.

Livesoft,

I appreciate you relating your situation, and also how you think about volatility these day. I can envision getting back to that mindset in the future. Certainly had that in the past as an accumulator, but need to work through this new terrain after becoming a decumulator.

I have submitted the paperwork and after however long bureaucracies take, I will be at my new target AA (still same 30/70, but now with large fixed income portion, and lower percentage of intermediate bonds and no short-term bonds.

Thanks to all for your inputs, comments, red flags, and first-hand experiences.

EV

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Re: Thoughts on TIAA Traditional and TIAA Real Estate given my AA?

Post by traveltoomuch » Wed Sep 21, 2016 4:04 pm

I'd double-check the minimum guaranteed rate for NEW money going into TIAA Traditional - I'm shocked that you can still get 3%. If you can, no objections to using it!

I am a fan of TREA, but not in livesoft's "set-and-forget" mode - it's the one part of my portfolio where my IPS specifically instructs me to do market timing, based on watching the Vanguard REIT Index (VNQ) and the Green Street CPPI. If I decide to pull out of TREA, the plan is to pull everything all at once specifically because of the trading restriction. Implicitly, I'm not allowed to buy back into until the following quarter (at least), in case the triggering conditions are met again. My VNQ-based "trigger" has already been tripped in 2016, but I've been staying in based on the CPPI - it's a very narrow thing, though.

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Re: Thoughts on TIAA Traditional and TIAA Real Estate given my AA?

Post by livesoft » Wed Sep 21, 2016 4:09 pm

^ Yes, market timing TREA is the subject of this thread: viewtopic.php?t=123075
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Re: Thoughts on TIAA Traditional and TIAA Real Estate given my AA?

Post by jasg » Wed Sep 21, 2016 5:50 pm

After 30 some years with a trivial amount in an old TIAA RA 403b, I found that I could roll my Fidelity 401k and TIRA into a GSRA in my old employer's TIAA 403b.

It offers VG index funds, so I feel I got the best of both worlds.

I was limited to $150k for TREA in the GSRA but found I could also hold it in the old RA so I have been able to exceed the limit.

As noted above, in the GSRA - Trad is fully liquid, no nine year rule.

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Re: Thoughts on TIAA Traditional and TIAA Real Estate given my AA?

Post by tibbitts » Thu Sep 22, 2016 6:04 pm

traveltoomuch wrote:I'd double-check the minimum guaranteed rate for NEW money going into TIAA Traditional - I'm shocked that you can still get 3%. If you can, no objections to using it!

I am a fan of TREA, but not in livesoft's "set-and-forget" mode - it's the one part of my portfolio where my IPS specifically instructs me to do market timing, based on watching the Vanguard REIT Index (VNQ) and the Green Street CPPI. If I decide to pull out of TREA, the plan is to pull everything all at once specifically because of the trading restriction. Implicitly, I'm not allowed to buy back into until the following quarter (at least), in case the triggering conditions are met again. My VNQ-based "trigger" has already been tripped in 2016, but I've been staying in based on the CPPI - it's a very narrow thing, though.
How often would your triggers have moved you in and out of TREA during its history, and would those moves have been productive? How have you changed the triggers based on the post-2009 trading restrictions?

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