Why not go all-in-for-fixed-income to non-liquid TIAA Traditional?

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need403bhelp
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Why not go all-in-for-fixed-income to non-liquid TIAA Traditional?

Post by need403bhelp » Sun Jun 04, 2017 4:52 pm

Thank you, all, for your very helpful suggestions about TIAA-CREF vs Fidelity in my other thread re my new job starting in August.

Pertinent background: I'm 37, will be investing $72k yearly in 403b&457, 90/10 equity/fixed-income allocation. I don't currently have a taxable account and will probably be working on a 20% down payment for a house, but hopefully should be able to get one after that.

TIAA Traditional:
- non-liquid (RA) version has 3% guaranteed interest, 4% current crediting rate, must withdraw over 10 years
- fully liquid (GSRA) version has 3% guaranteed interest, 3.25% crediting rate

Although most people recommended the fully liquid TIAA Traditional version, I was intrigued by DrDubious' quite opposite suggestion (viewtopic.php?f=1&t=220125&p=3394458#p3390115):
DrDubious wrote:Given the higher return, your long horizon, and high cash flow (which I assume isn't going to be hugely sucked up by debt servicing given your aggressive savings plan) I would consider putting all of the "fixed" allocation into the illiquid version of Traditonal. At 10 % of your portfolio with a ton of tax-deferred space, I doubt you are going to feel constrained by the illiquidity, particularly if you have cash on hand and a taxable account. When you consider this money is going to be in a retirement plan, it is presumably somewhat illiquid anyway so you're not giving up too much. Should the interest rate environment change such that bond funds look better than Traditional, you can always change where your new contributions go at that time.

When it is time to increase your "fixed" apportionment, you could consider using the liquid TIAA, get a bond fund via the brokerage window, buy municipal bonds in your taxable account, use savings bonds, etc.
I realize that even a small change in the earnings will result in a large difference over 20-30 years. Thus, at least for the sake of argument, why NOT invest 100% of my fixed income allocation (10% of the entire portfolio) in the non-liquid TIAA Traditional? I realize that this will limit rebalancing, but folks have convinced me that, at least for the first few years, my monthly contributions will form a significant chunk of my total investment and can be used by themselves to rebalance...

Thank you!

avalpert
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Re: Why not go all-in-for-fixed-income to non-liquid TIAA Traditional?

Post by avalpert » Sun Jun 04, 2017 5:08 pm

Who are these most people you speak of?

If I were you I would use TIAA Traditional in the RA for my fixed income - in fact I was you and did. The limitation for that ultimately is that I don't have enough in that account for it to be my entire fixed income portion.

InMyDreams
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Re: Why not go all-in-for-fixed-income to non-liquid TIAA Traditional?

Post by InMyDreams » Sun Jun 04, 2017 5:30 pm

It's not wrong. The question is, what do you want to do?
In exchange for that decreased volatility/guaranteed return rate, you'll also lose liquidity as well as the bond market highs (tho TIAA does go up).

But it is really illiquid. You cannot pull out Traditional until age 60 - tho you can annuitize it any time after separation of service (I think, check with TIAA to be sure). Even at 60 you may only pull out 10% per year.

But with TIAA's system of giving higher returns to money that has been invested longer, it may be a great way for you to build an annuity.

And you don't have to decide to annuitize until you're ready. So you get to retirement and decide to pull it out, or just take interest-payments, or - you're in the drivers seat to decide.

need403bhelp
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Re: Why not go all-in-for-fixed-income to non-liquid TIAA Traditional?

Post by need403bhelp » Sun Jun 04, 2017 5:33 pm

avalpert wrote:Who are these most people you speak of?
A few different folks in other threads seemed to suggest favoring the liquid version. For example:

1. viewtopic.php?f=1&t=220125&p=3394458#p3389882
student wrote:2) Then I guess you have to use the liquid version. Personally for flexibility, I aim to have around no more than a third of my TIAA Traditional in the illiquid version.
2. viewtopic.php?t=212707#p3264889
House Blend wrote:One thing I would not recommend is to put 100% of your fixed income into a flavor of Traditional that has severe restrictions on transfers out. A slice of fixed income, yes,
but not 100%. The problem is that you would be unable to rebalance from fixed income to equity after the next crash.
3. viewtopic.php?t=211688#p3248582
mkikeda wrote:TIAA Traditional functions the same way at my university. GSRA and 457 contributions to TIAA Traditional are essentially liquid stable value funds currently paying in excess of 3%. I allocate as much as possible to these accounts and treat them as part of my bond allocation. New contributions to TIAA Traditional in my primary 403b plan are currently crediting in excess of 4%, but are subject to the 9 years and a day restriction. I allocate a smaller amount to that account. The logic for using TIAA Traditional with that restriction is less compelling.
avalpert wrote:If I were you I would use TIAA Traditional in the RA for my fixed income - in fact I was you and did. The limitation for that ultimately is that I don't have enough in that account for it to be my entire fixed income portion.
Got it, so, just to clarify - you used the RA as 100% of your fixed income? And you would recommend doing this, as opposed to using the liquid GSRA version or some combination of RA & GSRA (which raises complexity a little of my portfolio, but is definitely a practical possibility, although I'm trying to see if 100% RA might be even better in my particular situation)?

need403bhelp
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Re: Why not go all-in-for-fixed-income to non-liquid TIAA Traditional?

Post by need403bhelp » Sun Jun 04, 2017 5:36 pm

InMyDreams wrote:It's not wrong. The question is, what do you want to do?
In exchange for that decreased volatility/guaranteed return rate, you'll also lose liquidity as well as the bond market highs (tho TIAA does go up).

But it is really illiquid. You cannot pull out Traditional until age 60 - tho you can annuitize it any time after separation of service (I think, check with TIAA to be sure). Even at 60 you may only pull out 10% per year.
Got it. I suppose I didn't quite understand this portion. I was just under the impression (assumption) that you could pull out at any time over a 10 year period.

Something to think about. Although it still may not affect much in terms of the choice... (i.e., staying in the same job for your while life seems super rare these days).
InMyDreams wrote:But with TIAA's system of giving higher returns to money that has been invested longer, it may be a great way for you to build an annuity.

And you don't have to decide to annuitize until you're ready. So you get to retirement and decide to pull it out, or just take interest-payments, or - you're in the drivers seat to decide.
Thank you so much for the clarification of the advantages of the TIAA Traditional near retirement.

GMT-8
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Re: Why not go all-in-for-fixed-income to non-liquid TIAA Traditional?

Post by GMT-8 » Sun Jun 04, 2017 5:55 pm

My wife had 50% TIAA Traditional and 50% CREF allocation while working. Then she left the school and the account was dormant. After 20 years the CREF balance was triple her TIAA balance, which we thought was wrong. But the numbers were right.

So we said let's move the TIAA portion to her plan's low-cost Vanguard option. They said, OK, that $7k a year for 9 years. Once we did that, there is no turning back, changing mind, adjusting allocation. NOTHING. NO CHANGES. NONE. NADA.

Inflexible, yes. Too inflexible for me. Her funds are now half transferred to Vanguard and have grown far beyond what TIAA was promising ... yes, I know it's not an annuity now but we can understand and control it.

GMT-8
Last edited by GMT-8 on Sun Jun 04, 2017 5:57 pm, edited 1 time in total.

livesoft
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Re: Why not go all-in-for-fixed-income to non-liquid TIAA Traditional?

Post by livesoft » Sun Jun 04, 2017 5:55 pm

need403bhelp wrote:Got it. I suppose I didn't quite understand this portion. I was just under the impression (assumption) that you could pull out at any time over a 10 year period.
I think you can use the 10-year (9-years and a day) transfer payout annuity at ANY time. I did a TPA starting in my 40's.

I don't see a major problem starting with all-in-for-fixed-income to non-liquid TIAA TA now. Lots of folks did that in the 1970's, 1980's, and 1990's, and beyond because it was the only offering.

You can always change where your contributions go at any time and leave any existing TIAA TA holdings to ferment for the future.

One thing: TIAA with 3% and more looks great now, but after interest rates go up, you may find that TIAA TA is paying less than intermediate-term bonds. That's just the nature of the beast. Over the long-term, TIAA TA return just averages out to an intermediate-term bond fund return. It hides volatility while doing so, but it doesn't create a higher long-term return because hiding volatility costs something.
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need403bhelp
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Re: Why not go all-in-for-fixed-income to non-liquid TIAA Traditional?

Post by need403bhelp » Sun Jun 04, 2017 5:57 pm

GMT-8 wrote:My wife had 50% TIAA Traditional and 50% CREF. After 20 years the CREF was triple her TIAA balance, which we thought was wrong. But the numbers were right.

So we said let's move the TIAA to her plan's low-cost Vanguard option. They said, OK, that $7k a year for 9 years. Once we did that, there's no turning back, changing mind, adjusting allocation. NOTHING. NO CHANGES. NONE.

Inflexible, yes. Too inflexible for me. Her funds are now half transferred to Vanguard and have grown far beyond what TIAA is promising ... yes, I know it's not an annuity now but we can understand and control it.

GMT-8
Thank you so much for sharing your/your wife's experience with the non-liquid TIAA traditional option and what happens when you decide to transfer the funds. Thank you again!

NiceUnparticularMan
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Re: Why not go all-in-for-fixed-income to non-liquid TIAA Traditional?

Post by NiceUnparticularMan » Sun Jun 04, 2017 5:59 pm

All my reasons for investing in fixed-income require liquidity.

need403bhelp
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Re: Why not go all-in-for-fixed-income to non-liquid TIAA Traditional?

Post by need403bhelp » Sun Jun 04, 2017 6:01 pm

livesoft wrote:
need403bhelp wrote:Got it. I suppose I didn't quite understand this portion. I was just under the impression (assumption) that you could pull out at any time over a 10 year period.
I think you can use the 10-year (9-years and a day) transfer payout annuity at ANY time. I did a TPA starting in my 40's.
Thank you so much for sharing your helpful experience that you were able to use the transfer payout annuity starting in your 40's.
livesoft wrote:I don't see a major problem starting with all-in-for-fixed-income to non-liquid TIAA TA now. Lots of folks did that in the 1970's, 1980's, and 1990's, and beyond because it was the only offering.

You can always change where your contributions go at any time and leave any existing TIAA TA holdings to ferment for the future.

One thing: TIAA with 3% and more looks great now, but after interest rates go up, you may find that TIAA TA is paying less than intermediate-term bonds. That's just the nature of the beast. Over the long-term, TIAA TA return just averages out to an intermediate-term bond fund return. It hides volatility while doing so, but it doesn't create a higher long-term return because hiding volatility costs something.
Thank you for the reminder that, over the long-term, TIAA TA return just averages out to an intermediate-term bond fund return, so there may not be a significant advantage holding funds in TIAA TA over 20-30 years compared to holding intermediate-term bond funds (or, I assume, just a compherensive US bond index fund).

Thank you!

need403bhelp
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Re: Why not go all-in-for-fixed-income to non-liquid TIAA Traditional?

Post by need403bhelp » Sun Jun 04, 2017 6:02 pm

NiceUnparticularMan wrote:All my reasons for investing in fixed-income require liquidity.
Thank you so much for sharing your thoughts (presumably you are talking about rebalancing).

livesoft
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Re: Why not go all-in-for-fixed-income to non-liquid TIAA Traditional?

Post by livesoft » Sun Jun 04, 2017 6:13 pm

Don't forget there is a difference between 1 and 2 below (sent to me by e-mail):

(1) taking money out of Traditional in your RA to invest in Total Bond, Stock, Inflation-Linked Bond, or the Real Estate Account still within your RA.

(2) taking money out of your 403(b) to put in your checking account.


TIAA doesn’t restrict (1) except for the 10 payments (that's with the RA, not the GSRA).

The IRS restricts (2) in the sense of tax penalties.

In the sense of (2), TIAA is no more restricted than your 401(k) or your IRA.

And note that when I did the TPA thing, I just moved my TIAA-TA money into TIAA Real Estate Account and did not withdraw from my 403(b).
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NiceUnparticularMan
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Re: Why not go all-in-for-fixed-income to non-liquid TIAA Traditional?

Post by NiceUnparticularMan » Sun Jun 04, 2017 6:14 pm

need403bhelp wrote:
NiceUnparticularMan wrote:All my reasons for investing in fixed-income require liquidity.
Thank you so much for sharing your thoughts (presumably you are talking about rebalancing).
Actually, I primarily see fixed-income during accumulation as a way of insuring against the possibility something will interrupt my contributions at the same time markets are down, in which case I could use them to substitute for the interrupted contributions. Additionally, they are a deep emergency fund which could cover unexpected withdrawals. Retirement-period logic is similar--they provide against ill-timed and/or unexpectedly large withdrawals.

I also do rebalance with them, but that's more a minor psychological thing.

need403bhelp
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Re: Why not go all-in-for-fixed-income to non-liquid TIAA Traditional?

Post by need403bhelp » Sun Jun 04, 2017 6:17 pm

livesoft wrote:Don't forget there is a difference between 1 and 2 below (sent to me by e-mail):

(1) taking money out of Traditional in your RA to invest in Total Bond, Stock, Inflation-Linked Bond, or the Real Estate Account still within your RA.

(2) taking money out of your 403(b) to put in your checking account.


TIAA doesn’t restrict (1) except for the 10 payments (that's with the RA, not the GSRA).

The IRS restricts (2) in the sense of tax penalties.

In the sense of (2), TIAA is no more restricted than your 401(k) or your IRA.

And note that when I did the TPA thing, I just moved my TIAA-TA money into TIAA Real Estate Account and did not withdraw from my 403(b).
Got it. This point I definitely understand.

If I were to withdraw, it would probably be into the low-cost Vanguard total US bond fund in my 403b's TIAA offering.

Definitely no withdrawing out of the 403b itself.

Thank you again!

need403bhelp
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Re: Why not go all-in-for-fixed-income to non-liquid TIAA Traditional?

Post by need403bhelp » Sun Jun 04, 2017 6:20 pm

NiceUnparticularMan wrote:
need403bhelp wrote:Thank you so much for sharing your thoughts (presumably you are talking about rebalancing).
Actually, I primarily see fixed-income during accumulation as a way of insuring against the possibility something will interrupt my contributions at the same time markets are down, in which case I could use them to substitute for the interrupted contributions. Additionally, they are a deep emergency fund which could cover unexpected withdrawals. Retirement-period logic is similar--they provide against ill-timed and/or unexpectedly large withdrawals.

I also do rebalance with them, but that's more a minor psychological thing.
Thank you so much for clarifying that you see the fixed-income portion during accumulation as a way to insure against not being able to make contributions when markets are down. Thank you, also, for clarifying that you see this portion during retirement as a buffer against ill-timed and/or unexpectedly large withdrawals (assuming ill-timed means with respect to the stock market - i.e., not having to withdraw from equities when they are down).

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Re: Why not go all-in-for-fixed-income to non-liquid TIAA Traditional?

Post by beardsworth » Sun Jun 04, 2017 7:00 pm

need403bhelp wrote: TIAA Traditional:
- non-liquid (RA) version has 3% guaranteed interest, 4% current crediting rate, must withdraw over 10 years
I'm getting caught on the language of "must" withdraw over 10 years.

It is true that if you seek to access the principal in your Retirement Annuity accumulation of TIAA Traditional in a cash-like way, you'd be doing it through a Transfer Payout Annuity, and it would be spread out over those years.

But TIAA itself does not require that you "must" access the money in that way, and a Transfer Payout Annuity is only one of several ways to use that TIAA Traditional accumulation. Among others are lifetime annuity income; receipt of "interest only" payments (available on RA/GRA contracts but not on annuities whose names include the term "Supplemental"); and, beginning at age 70.5, Required Minimum Distributions pursuant to the federal tax code.

avalpert
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Re: Why not go all-in-for-fixed-income to non-liquid TIAA Traditional?

Post by avalpert » Sun Jun 04, 2017 7:17 pm

need403bhelp wrote:
Got it, so, just to clarify - you used the RA as 100% of your fixed income? And you would recommend doing this, as opposed to using the liquid GSRA version or some combination of RA & GSRA (which raises complexity a little of my portfolio, but is definitely a practical possibility, although I'm trying to see if 100% RA might be even better in my particular situation)?
Well yes I did, but to be fair my contributions to the GSRA contract were double the contribution to the RA and both together represented maybe <30% of my total contributions so it didn't take long for me to use the GSRA as well for fixed income.

My reason for having fixed income is to have some safe assets for the long run, I like TIAA for that purpose (the alternative for me are intermediate term treasuries and TIPS). I don't think re-balancing matters all that much during your early accumulation phase as it is nearly always done with new money.

need403bhelp
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Re: Why not go all-in-for-fixed-income to non-liquid TIAA Traditional?

Post by need403bhelp » Sun Jun 04, 2017 7:50 pm

beardsworth wrote:
need403bhelp wrote: TIAA Traditional:
- non-liquid (RA) version has 3% guaranteed interest, 4% current crediting rate, must withdraw over 10 years
I'm getting caught on the language of "must" withdraw over 10 years.

It is true that if you seek to access the principal in your Retirement Annuity accumulation of TIAA Traditional in a cash-like way, you'd be doing it through a Transfer Payout Annuity, and it would be spread out over those years.

But TIAA itself does not require that you "must" access the money in that way, and a Transfer Payout Annuity is only one of several ways to use that TIAA Traditional accumulation. Among others are lifetime annuity income; receipt of "interest only" payments (available on RA/GRA contracts but not on annuities whose names include the term "Supplemental"); and, beginning at age 70.5, Required Minimum Distributions pursuant to the federal tax code.
Thank you, so much, for the helpful additional information. The "must" withdraw phrase was my own simplification to be concise (but, perhaps, as you point out, not very accurate) and definitely not TIAA's language. Thank you again!

need403bhelp
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Re: Why not go all-in-for-fixed-income to non-liquid TIAA Traditional?

Post by need403bhelp » Sun Jun 04, 2017 8:01 pm

avalpert wrote:
need403bhelp wrote:
Got it, so, just to clarify - you used the RA as 100% of your fixed income? And you would recommend doing this, as opposed to using the liquid GSRA version or some combination of RA & GSRA (which raises complexity a little of my portfolio, but is definitely a practical possibility, although I'm trying to see if 100% RA might be even better in my particular situation)?
Well yes I did, but to be fair my contributions to the GSRA contract were double the contribution to the RA and both together represented maybe <30% of my total contributions so it didn't take long for me to use the GSRA as well for fixed income.

My reason for having fixed income is to have some safe assets for the long run, I like TIAA for that purpose (the alternative for me are intermediate term treasuries and TIPS). I don't think re-balancing matters all that much during your early accumulation phase as it is nearly always done with new money.
Thank you, so much, for clarifying that you used the TIAA Traditional as your fixed income portion but that you contributed to both the GSRA and RA contracts. I don't 100% understand the structure of your first sentence, but perhaps you are saying that you started with contributions to the RA contract, but since RA & GSRA represented <30% of your total contributions you then also began to contribute to the GSRA and ended up having twice as much in your GSRA as you did in your RA contract. (I apologize if I am misunderstanding your first sentence).

Thank you, also, for sharing your reason for having fixed income - safe assets for the long run.

avalpert
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Re: Why not go all-in-for-fixed-income to non-liquid TIAA Traditional?

Post by avalpert » Sun Jun 04, 2017 8:27 pm

need403bhelp wrote:
avalpert wrote:
need403bhelp wrote:
Got it, so, just to clarify - you used the RA as 100% of your fixed income? And you would recommend doing this, as opposed to using the liquid GSRA version or some combination of RA & GSRA (which raises complexity a little of my portfolio, but is definitely a practical possibility, although I'm trying to see if 100% RA might be even better in my particular situation)?
Well yes I did, but to be fair my contributions to the GSRA contract were double the contribution to the RA and both together represented maybe <30% of my total contributions so it didn't take long for me to use the GSRA as well for fixed income.

My reason for having fixed income is to have some safe assets for the long run, I like TIAA for that purpose (the alternative for me are intermediate term treasuries and TIPS). I don't think re-balancing matters all that much during your early accumulation phase as it is nearly always done with new money.
Thank you, so much, for clarifying that you used the TIAA Traditional as your fixed income portion but that you contributed to both the GSRA and RA contracts. I don't 100% understand the structure of your first sentence, but perhaps you are saying that you started with contributions to the RA contract, but since RA & GSRA represented <30% of your total contributions you then also began to contribute to the GSRA and ended up having twice as much in your GSRA as you did in your RA contract. (I apologize if I am misunderstanding your first sentence).

Thank you, also, for sharing your reason for having fixed income - safe assets for the long run.
So the way it worked at my wife's employer was that her first couple percent of annual contributions and the company contribution went into the RA and all her contributions after that went into the GSRA. So contributions to the GSRA were larger than to the RA, I didn't really have any control over that and don't know how that originated.

need403bhelp
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Re: Why not go all-in-for-fixed-income to non-liquid TIAA Traditional?

Post by need403bhelp » Sun Jun 04, 2017 8:37 pm

avalpert wrote:So the way it worked at my wife's employer was that her first couple percent of annual contributions and the company contribution went into the RA and all her contributions after that went into the GSRA. So contributions to the GSRA were larger than to the RA, I didn't really have any control over that and don't know how that originated.
Got it. Thank you so much for the clarification.

Luckily, my employer lets me choose allocations and even the specific company (T-C or Fidelity being the two best options for Bogleheads-style investing) for different contributions. For employer contributions, if I choose T-C, then only the Traditional RA contract is available. However, I can also easily choose Fidelity for employer contributions, and use my voluntary contributions and 457 contributions to invest in the Traditional GSRA contract.

Thank you again for all of your help!

NiceUnparticularMan
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Re: Why not go all-in-for-fixed-income to non-liquid TIAA Traditional?

Post by NiceUnparticularMan » Mon Jun 05, 2017 8:12 am

need403bhelp wrote:
NiceUnparticularMan wrote:
need403bhelp wrote:Thank you so much for sharing your thoughts (presumably you are talking about rebalancing).
Actually, I primarily see fixed-income during accumulation as a way of insuring against the possibility something will interrupt my contributions at the same time markets are down, in which case I could use them to substitute for the interrupted contributions. Additionally, they are a deep emergency fund which could cover unexpected withdrawals. Retirement-period logic is similar--they provide against ill-timed and/or unexpectedly large withdrawals.

I also do rebalance with them, but that's more a minor psychological thing.
Thank you so much for clarifying that you see the fixed-income portion during accumulation as a way to insure against not being able to make contributions when markets are down. Thank you, also, for clarifying that you see this portion during retirement as a buffer against ill-timed and/or unexpectedly large withdrawals (assuming ill-timed means with respect to the stock market - i.e., not having to withdraw from equities when they are down).
That's right. There is a general well-known problem with taking large fixed withdrawals during retirement if the stock markets are down. But I am also worried about how my contributions/withdrawals could be negatively impacted by the same factors that would cause the stock markets to be down (meaning contributions could go down or withdrawals could go up at the same time as a bad stock market event). That concern applies to both accumulation and retirement, and therefore I would always want my fixed-income available either to make up for lower contributions or to be withdrawn if necessary.

That said, I am not saying this is necessarily a problem for this particular investment. I'm not an expert on the rules, and it looks to me like there is some possibility of using them for these purposes--I would have to carefully evaluate whether the rules would allow me to do what I would want to do in various circumstances.

Personally, I am not interested at all in using fixed-income for long-term buy-and-hold investments. I view them purely as risk-management tools. And I think many people end up committing a certain percentage to fixed-income for risk-management purposes, then get frustrated with the low returns, then start pursuing higher returns, and in the process forget what risk-management purpose those instruments were supposed to be serving in the first place.

nolapepper
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Re: Why not go all-in-for-fixed-income to non-liquid TIAA Traditional?

Post by nolapepper » Mon Jun 05, 2017 11:57 am

I find that as I am getting older, I have more difficulty to deal with complicated things. I want to simplify things. This TIAA traditional RA part is something I think I will have trouble to understand in the future. LOL I actually having trouble understanding now already!@

I have two parts:
1. matching plan RA 4%
2. deferred annuity plan GSRA 3%-3.25%

I just called TIAA and figured out the two parts. RA is in the institute matching part and is restricted. The GSRA is my extra contribution and is the flexible part without the 10 year restriction. I do not have a lot in the RA so I guess it is fine to accept the 10 year restriction.
Last edited by nolapepper on Mon Jun 05, 2017 2:19 pm, edited 1 time in total.

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whodidntante
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Re: Why not go all-in-for-fixed-income to non-liquid TIAA Traditional?

Post by whodidntante » Mon Jun 05, 2017 12:29 pm

Because it will probably underperform what I currently own.

Because I don't want my fate tied to the fate of an insurance company.

Because I'm not willing to accept the liquidity restrictions for 100% of my fixed income.

But if you prefer it, go ahead.

need403bhelp
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Re: Why not go all-in-for-fixed-income to non-liquid TIAA Traditional?

Post by need403bhelp » Mon Jun 05, 2017 3:17 pm

NiceUnparticularMan wrote:
need403bhelp wrote:Thank you so much for clarifying that you see the fixed-income portion during accumulation as a way to insure against not being able to make contributions when markets are down. Thank you, also, for clarifying that you see this portion during retirement as a buffer against ill-timed and/or unexpectedly large withdrawals (assuming ill-timed means with respect to the stock market - i.e., not having to withdraw from equities when they are down).
That's right. There is a general well-known problem with taking large fixed withdrawals during retirement if the stock markets are down. But I am also worried about how my contributions/withdrawals could be negatively impacted by the same factors that would cause the stock markets to be down (meaning contributions could go down or withdrawals could go up at the same time as a bad stock market event). That concern applies to both accumulation and retirement, and therefore I would always want my fixed-income available either to make up for lower contributions or to be withdrawn if necessary.

That said, I am not saying this is necessarily a problem for this particular investment. I'm not an expert on the rules, and it looks to me like there is some possibility of using them for these purposes--I would have to carefully evaluate whether the rules would allow me to do what I would want to do in various circumstances.

Personally, I am not interested at all in using fixed-income for long-term buy-and-hold investments. I view them purely as risk-management tools. And I think many people end up committing a certain percentage to fixed-income for risk-management purposes, then get frustrated with the low returns, then start pursuing higher returns, and in the process forget what risk-management purpose those instruments were supposed to be serving in the first place.
Thank you, so much, for the clarification. Thank you, also, for highlighting that you view fixed-income as primarily risk-management tools. As such, chasing higher returns for this portion of the portfolio is not something that you do if it interferes with the risk-management purpose of the fixed-income portion.

need403bhelp
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Re: Why not go all-in-for-fixed-income to non-liquid TIAA Traditional?

Post by need403bhelp » Mon Jun 05, 2017 3:23 pm

whodidntante wrote:Because it will probably underperform what I currently own.
Out of curiosity, in what is your current fixed-income allocation invested?
whodidntante wrote:Because I don't want my fate tied to the fate of an insurance company.

Because I'm not willing to accept the liquidity restrictions for 100% of my fixed income.

But if you prefer it, go ahead.
Thank you for sharing your viewpoints.

Northster
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Re: Why not go all-in-for-fixed-income to non-liquid TIAA Traditional?

Post by Northster » Mon Jun 05, 2017 3:32 pm

I used the interest only payout for several years in my 60s and now face a decision on annuity vs. RMD. I made a spreadsheet comparing the options and found that while the annuity gave stronger income in the early years, after the guarantee period you have only the income, whereas with RMD you retain residual value for many years. Looking at the total of income received and assets remaining I decided on the RMD. But your needs may differ.

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Re: Why not go all-in-for-fixed-income to non-liquid TIAA Traditional?

Post by The Wizard » Mon Jun 05, 2017 3:46 pm

Consider having about half your Trad in an RA and half in an SEA. That was close to what I had prior to retirement, though my Trad total wasn't a very big percentage. I also had/have a stake in their junk bond fund TIHYX.

Then consider annuitizing that RA Trad for lifetime income in retirement. About 2/3 of my retirement income derives from TIAA payout phase annuities, not just Trad, but CREF Stock and TREA as well. This has caused some Lifestyle Creep in retirement, but I'm ok with that...
Attempted new signature...

need403bhelp
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Re: Why not go all-in-for-fixed-income to non-liquid TIAA Traditional?

Post by need403bhelp » Mon Jun 05, 2017 4:07 pm

Northster wrote:I used the interest only payout for several years in my 60s and now face a decision on annuity vs. RMD. I made a spreadsheet comparing the options and found that while the annuity gave stronger income in the early years, after the guarantee period you have only the income, whereas with RMD you retain residual value for many years. Looking at the total of income received and assets remaining I decided on the RMD. But your needs may differ.
Thank you so much for sharing your experiences during the payout portion of the TIAA Traditional.

need403bhelp
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Re: Why not go all-in-for-fixed-income to non-liquid TIAA Traditional?

Post by need403bhelp » Mon Jun 05, 2017 4:07 pm

nolapepper wrote:I find that as I am getting older, I have more difficulty to deal with complicated things. I want to simplify things. This TIAA traditional RA part is something I think I will have trouble to understand in the future. LOL I actually having trouble understanding now already!@

I have two parts:
1. matching plan RA 4%
2. deferred annuity plan GSRA 3%-3.25%

I just called TIAA and figured out the two parts. RA is in the institute matching part and is restricted. The GSRA is my extra contribution and is the flexible part without the 10 year restriction. I do not have a lot in the RA so I guess it is fine to accept the 10 year restriction.
Got it, thank you so much. It sounds like you are okay with the liquidity restriction as it is a small percentage of your overall assets and even of your fixed-income allocation.

need403bhelp
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Re: Why not go all-in-for-fixed-income to non-liquid TIAA Traditional?

Post by need403bhelp » Mon Jun 05, 2017 4:09 pm

The Wizard wrote:Consider having about half your Trad in an RA and half in an SEA. That was close to what I had prior to retirement, though my Trad total wasn't a very big percentage. I also had/have a stake in their junk bond fund TIHYX.

Then consider annuitizing that RA Trad for lifetime income in retirement. About 2/3 of my retirement income derives from TIAA payout phase annuities, not just Trad, but CREF Stock and TREA as well. This has caused some Lifestyle Creep in retirement, but I'm ok with that...
Thank you for sharing your advice and your experiences re the payout and how it has affected your retirement.

I'm not 100% sure what the SEA portion is? I am glad that it worked well for you!

need403bhelp
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Re: Why not go all-in-for-fixed-income to non-liquid TIAA Traditional?

Post by need403bhelp » Mon Jun 05, 2017 4:11 pm

Interestingly, I just talked to the TIAA-CREF representative for our plan, and he actually recommended that I go with the fully liquid version (GSRA) rather than the non-liquid version (RA), as I am quite young and should value liquidity (that was his reason, I didn't specifically ask more clarification).

He also managed that I can start a transfer payout annuity (TPA) within the plan itself at any age.

Thank you again for all of your suggestions!

Miriam2
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Re: Why not go all-in-for-fixed-income to non-liquid TIAA Traditional?

Post by Miriam2 » Mon Jun 05, 2017 4:18 pm

The Wizard wrote:Consider having about half your Trad in an RA and half in an SEA. That was close to what I had prior to retirement, though my Trad total wasn't a very big percentage. I also had/have a stake in their junk bond fund TIHYX.

Then consider annuitizing that RA Trad for lifetime income in retirement. About 2/3 of my retirement income derives from TIAA payout phase annuities, not just Trad, but CREF Stock and TREA as well. This has caused some Lifestyle Creep in retirement, but I'm ok with that...
Wizard!! - Is being Number 1 in Taylor's S&P 500 Contest as of the close of the bell today considered Lifestyle Creep?? :D

Standings - as of 6/5/2017 4:06 pm
Rank - Name - Guess
1 The Wizard 2435.85
2 dtee 2435.26
3 calendario 2435.06
4 Aflyfishnnut 2437.63
5 AllAboard 2434.34
6 mortalsonofmortal 2434.00
7 BTDT 2438.49
8 badbreath 2438.56
9 bulbul 2438.68
10 binvesting 2438.80

https://www.lostoak.com/ls/diehards/con ... fault.aspx

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whodidntante
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Re: Why not go all-in-for-fixed-income to non-liquid TIAA Traditional?

Post by whodidntante » Mon Jun 05, 2017 5:31 pm

need403bhelp wrote:
whodidntante wrote:Because it will probably underperform what I currently own.
Out of curiosity, in what is your current fixed-income allocation invested?

Sure. I put the fund names in bold in case you don't want to read my commentary on why I own what I own.

Purely fixed income, I hold T. Rowe Price New Income. It's an intermediate term bond fund with slightly higher risk than a broad bond index and slightly higher yield. This wouldn't be my first choice, but it is what I can buy in my 401k. The fund there is a little better than retail investors can buy, because they rebate me 0.25% of my holdings in the fund each year. So the fund has an effective SEC yield of 2.65%.

I also hold T. Rowe Price Stable Value in my 401k. That is partly because my portfolio is cashless, e.g. no separate taxable emergency fund. If something major comes up, I sell stock to pay for it, then sell stable value to buy stock. I do this to improve tax efficiency and increase returns across my portfolio.

I follow a total return approach, and I am open to alternative sources of return (meaning not beta). To implement alternatives I hold AQR Market Neutral and AQR Long Short Equity. If the yield on bonds were to become high again, e.g. 6% or so, I would probably sell AQR Market Neutral and buy bonds.

need403bhelp
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Re: Why not go all-in-for-fixed-income to non-liquid TIAA Traditional?

Post by need403bhelp » Mon Jun 05, 2017 9:09 pm

whodidntante wrote:Sure. I put the fund names in bold in case you don't want to read my commentary on why I own what I own.

Purely fixed income, I hold T. Rowe Price New Income. It's an intermediate term bond fund with slightly higher risk than a broad bond index and slightly higher yield. This wouldn't be my first choice, but it is what I can buy in my 401k. The fund there is a little better than retail investors can buy, because they rebate me 0.25% of my holdings in the fund each year. So the fund has an effective SEC yield of 2.65%.

I also hold T. Rowe Price Stable Value in my 401k. That is partly because my portfolio is cashless, e.g. no separate taxable emergency fund. If something major comes up, I sell stock to pay for it, then sell stable value to buy stock. I do this to improve tax efficiency and increase returns across my portfolio.

I follow a total return approach, and I am open to alternative sources of return (meaning not beta). To implement alternatives I hold AQR Market Neutral and AQR Long Short Equity. If the yield on bonds were to become high again, e.g. 6% or so, I would probably sell AQR Market Neutral and buy bonds.
Thank you so much for the list of funds that you hold earning more than TIAA Traditional in bold as well as your commentary on why you own them. Thank you again!

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