Vanguard vs TIAA

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Kathys
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Vanguard vs TIAA

Post by Kathys » Wed Apr 11, 2018 4:01 am

I'm trying to decide whether I should stick with TIAA or transfer over to Vanguard. What I have read here (and other places) people say that Vanguard has lower fees so it's more beneficial. But I'm failing to see that. When I compare funds for example TIAA-CREF Lifecycle Index 2030 Fund Institutional Class
TLHIX vs Vanguard Target Retirement 2030 Fund Investor Shares VTHRX, Vanguard expense ratio is 0.14% vs TIAA 0.1%. Vanguard charges $34/yr admin fee, TIAA doesn't charge me anything. I checked my statements for the past several years and I see no admin fee and I called them to verify and I was told that my employer covers those. So based on that, it's obvious to me that TIAA is cheaper in MY case. Am I missing something, is my comparison wrong?

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oldcomputerguy
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Re: Vanguard vs TIAA

Post by oldcomputerguy » Wed Apr 11, 2018 5:05 am

Kathys wrote:
Wed Apr 11, 2018 4:01 am
I'm trying to decide whether I should stick with TIAA or transfer over to Vanguard. What I have read here (and other places) people say that Vanguard has lower fees so it's more beneficial. But I'm failing to see that. When I compare funds for example TIAA-CREF Lifecycle Index 2030 Fund Institutional Class
TLHIX vs Vanguard Target Retirement 2030 Fund Investor Shares VTHRX, Vanguard expense ratio is 0.14% vs TIAA 0.1%. Vanguard charges $34/yr admin fee, TIAA doesn't charge me anything. I checked my statements for the past several years and I see no admin fee and I called them to verify and I was told that my employer covers those. So based on that, it's obvious to me that TIAA is cheaper in MY case. Am I missing something, is my comparison wrong?
You're comparing apples and oranges. The TIAA fund you listed is an institutional-class fund, while the Vanguard fund you list is an investor-class fund. Fund managers typically provide what you might think of as "bulk discounts" on their funds, charging a lower expense ratio for higher dollar-amount investments. Institutional class is just about at the cheapest end, while Investor class is at the most-expensive end. For an apples-to-apples comparison, the investor-class version of the TIAA fund (TLHRX) has a published net expense ratio of 0.35, which obviously is more expensive than the Vanguard investor-class fund.

In this case, yes, TIAA is cheaper for you due to them offering you the institutional-class shares and your company covering annual expenses.
It’s taken me a lot of years, but I’ve come around to this: If you’re dumb, surround yourself with smart people. And if you’re smart, surround yourself with smart people who disagree with you.

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mrc
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Re: Vanguard vs TIAA

Post by mrc » Wed Apr 11, 2018 5:26 am

I was ready to move to Vanguard until I discovered my former employer (a large university) offered Vanguard TSM/TBM institutional class funds within the plan. Instead of moving from a higher cost house to Vanguard, I moved everything to TIAA. But I only hold Vanguard funds within. We are among the lucky ones :wink:
Honor to the soldier and sailor everywhere, who bravely bears his country's cause. Honor, also, to the citizen who cares for his brother in the field and serves, as best he can, the same cause. —AL

simas
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Re: Vanguard vs TIAA

Post by simas » Wed Apr 11, 2018 5:28 am

"Am I missing something, is my comparison wrong? "

yes, you are setting it up in your mind to get desired conclusion
- apples to oranges comparison on share classes. Institutional shares for Vanguard Funds are significantly below these costs (i.e. I pay 1/3 of the expense ratios you list for funds I get in my 401k account). the question is whether you have access to that share class for Vanguard.
- the $34 fee, who is charging you that? is that for privilege of going through TIAA to buy anything other than their funds? If so, how are you assigning the fee to Vanguard that TIAA is charging you (vs going directly and opening a Vanguard investing account)?

second piece here is mixing up custodians (organization you deal with) and funds (investment products you own), these are not the same and do not have to match.
- Vanguard as custodian is unique in being owned by the Vanguard funds, there are no shareholders to satisfy, no family ownership (Fidelity), etc. does it always have the best technology and options? opinions differ and a lot of people hold Vanguard funds/ETFs through other custodians (for me , for example my 401k plan with employer has access to Vanguard institutional shares and is not an account with Vanguard directly)
- Vanguard funds are run at cost. no markups to line up the pockets of other interests, no special 'temporary management rebate' schemes that other for profit companies run to compete , what you see is what you get.
- you can own Vanguard funds through almost any custodian
- you can own Vanguard brokerage account and put any other funds/stocks/investment products in it from any other company if you wish to.

Having said this, TIAA is not a bad company and if it meets you needs , by all means continue with them. they are reasonably inexpensive, non profit (if I remember it correctly) outfit created to serve specific niche (teachers?). if your plan has access to institutional share classes, it is a good plan

Kathys
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Re: Vanguard vs TIAA

Post by Kathys » Wed Apr 11, 2018 6:12 am

oldcomputerguy wrote:
Wed Apr 11, 2018 5:05 am
Kathys wrote:
Wed Apr 11, 2018 4:01 am
I'm trying to decide whether I should stick with TIAA or transfer over to Vanguard. What I have read here (and other places) people say that Vanguard has lower fees so it's more beneficial. But I'm failing to see that. When I compare funds for example TIAA-CREF Lifecycle Index 2030 Fund Institutional Class
TLHIX vs Vanguard Target Retirement 2030 Fund Investor Shares VTHRX, Vanguard expense ratio is 0.14% vs TIAA 0.1%. Vanguard charges $34/yr admin fee, TIAA doesn't charge me anything. I checked my statements for the past several years and I see no admin fee and I called them to verify and I was told that my employer covers those. So based on that, it's obvious to me that TIAA is cheaper in MY case. Am I missing something, is my comparison wrong?
You're comparing apples and oranges. The TIAA fund you listed is an institutional-class fund, while the Vanguard fund you list is an investor-class fund. Fund managers typically provide what you might think of as "bulk discounts" on their funds, charging a lower expense ratio for higher dollar-amount investments. Institutional class is just about at the cheapest end, while Investor class is at the most-expensive end. For an apples-to-apples comparison, the investor-class version of the TIAA fund (TLHRX) has a published net expense ratio of 0.35, which obviously is more expensive than the Vanguard investor-class fund.

In this case, yes, TIAA is cheaper for you due to them offering you the institutional-class shares and your company covering annual expenses.
OK, point well taken. I don't understand institutional vs investor. I compared these two because they seemed similar to me in terms of having 2030 in the names (yes, I'm that stupid!). But ultimately, why does it matter if I look at the return rates for both of them and the TIAA seems to have a slightly higher average return? Isn't it all about returns at the end?

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TheGreyingDuke
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Re: Vanguard vs TIAA

Post by TheGreyingDuke » Wed Apr 11, 2018 6:19 am

Total return is central, for sure, but it has to be risk-adjusted risk return. Does the TIAA portfolio represent the same risk as the one at Vanguard? If it is riskier you would expect to be "rewarded" with a potential higher return.
"Every time I see an adult on a bicycle, I no longer despair for the future of the human race." H.G. Wells

Kathys
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Re: Vanguard vs TIAA

Post by Kathys » Wed Apr 11, 2018 6:35 am

simas wrote:
Wed Apr 11, 2018 5:28 am
"Am I missing something, is my comparison wrong? "

yes, you are setting it up in your mind to get desired conclusion
NOOOO, I have my mind set on moving to Vanguard, that's where my IRA is etc. I'm just afraid that I will make a mistake doing so...
- apples to oranges comparison on share classes. Institutional shares for Vanguard Funds are significantly below these costs (i.e. I pay 1/3 of the expense ratios you list for funds I get in my 401k account). the question is whether you have access to that share class for Vanguard.
- the $34 fee, who is charging you that? is that for privilege of going through TIAA to buy anything other than their funds? If so, how are you assigning the fee to Vanguard that TIAA is charging you (vs going directly and opening a Vanguard investing account)?
I'm not sure what you mean by "is that a privilege of going through TIAA to buy anything other than their funds". I through my employer I have a choice of going with Vanguard, TIAA or Fidelity. I originally selected TIAA (don't know why, no idea what I was doing, still don't), but reading on these forums it seems like Vanguard might be a better choice, but I want to figure out why before I make a mistake moving my money from TIAA to Vanguard.
These fees are written in my retirement package from my employer. This is what it says:
TIAA:
General administrative services include recordkeeping, legal, accounting, consulting, investment advisory and other plan administration services. Some of the expenses for general administrative services are fixed and other expenses such as legal or accounting may vary from year to year. These costs are allocated to each participant in a uniform way.

Vanguard:
An annual plan administration fee of $34 ($8.50 per quarter) is assessed to each retirement, TDA and 457(b) plan account. This fee is automatically deducted from your account balance.

Fidelity:

Plan administrative fees may include legal, accounting, trustee, recordkeeping, and other administrative fees and expenses associated with maintaining the Plan. Some plans may deduct these fees and expenses from individual accounts in the Plan.
Based on the information and direction Fidelity had on file at the time this disclosure was prepared, the plan administrative fees listed below are deducted from Plan accounts. The plans' administrative services may also be paid for through offsets and/or payments associated with one or more of the plans' investment options. As you review this information, please keep in mind that fees are subject to change and that certain plan administrative fees may not be deducted from accounts in some circumstances.
Recordkeeping Fee $9.25 per quarter.
second piece here is mixing up custodians (organization you deal with) and funds (investment products you own), these are not the same and do not have to match.
- Vanguard as custodian is unique in being owned by the Vanguard funds, there are no shareholders to satisfy, no family ownership (Fidelity), etc. does it always have the best technology and options? opinions differ and a lot of people hold Vanguard funds/ETFs through other custodians (for me , for example my 401k plan with employer has access to Vanguard institutional shares and is not an account with Vanguard directly)
- Vanguard funds are run at cost. no markups to line up the pockets of other interests, no special 'temporary management rebate' schemes that other for profit companies run to compete , what you see is what you get.
- you can own Vanguard funds through almost any custodian
- you can own Vanguard brokerage account and put any other funds/stocks/investment products in it from any other company if you wish to.

Having said this, TIAA is not a bad company and if it meets you needs , by all means continue with them. they are reasonably inexpensive, non profit (if I remember it correctly) outfit created to serve specific niche (teachers?). if your plan has access to institutional share classes, it is a good plan
Here are the investment options for each of investing firm I have access to through my employer:

TIAA
CREF Bond Market Account (R3) (QCBMIX) ER: 0.29%
CREF Equity Index Account (R3) (QCEQIX). ER: 0.23%
CREF Global Equities Account (R3) (QCGLIX) ER: 0.33%
CREF Growth Account (R3) (QCGRIX) ER: 0.27%
CREF Inflation-Linked Bond Account (R3) (QCILIX) 0.24%
CREF Money Market Account (R3) (QCMMIX) 0.23%
CREF Social Choice Account (R3) (QCSCIX) 0.27%
CREF Stock Account (R3) (QCSTIX) 0.32%
TIAA Real Estate Account (QREARX) 0.85%
TIAA-CREF Bond Index Fund (Institutional) (TBIIX) 0.12%
TIAA-CREF Equity Index Fund (Institutional) (TIEIX) 0.05%
TIAA-CREF International Equity Index Fund (Institutional) (TCIEX) 0.06%
TIAA-CREF Lifecycle Index 2010 Fund (Institutional) (TLTIX) 0.10%
TIAA-CREF Lifecycle Index 2015 Fund (Institutional) (TLFIX) 0.10%
TIAA-CREF Lifecycle Index 2020 Fund (Institutional) (TLWIX) 0.10%
TIAA-CREF Lifecycle Index 2025 Fund (Institutional) (TLQIX) 0.10%
TIAA-CREF Lifecycle Index 2030 Fund (Institutional) (TLHIX) 0.10%
TIAA-CREF Lifecycle Index 2035 Fund (Institutional) (TLYIX) 0.10%
TIAA-CREF Lifecycle Index 2040 Fund (Institutional) (TLZIX) 0.10%
TIAA-CREF Lifecycle Index 2045 Fund (Institutional) (TLXIX) 0.10%
TIAA-CREF Lifecycle Index 2050 Fund (Institutional) (TLLIX) 0.10%
TIAA-CREF Lifecycle Index 2055 Fund (Institutional) (TTIIX) 0.10%
TIAA-CREF Lifecycle Index 2060 Fund (Institutional) (TVIIX) 0.10%
TIAA-CREF Lifecycle Index Retirement Income Fund (Institutional) (TRILX) 0.10%
TIAA-CREF Money Market Fund (Institutional) (TCIXX) 0.14%
TIAA Traditional Annuity - Group Retirement Annuity
TIAA Traditional Annuity - Retirement Annuity
TIAA Traditional Annuity - Retirement Choice Plus

Vanguard:
Vanguard Total Intl. Stock Index Fund (Inst)
Vanguard Total Stock Market Index Fund (Inst Pl)
Vanguard Institutional Target Retirement 2015 Fund (Inst)
Vanguard Institutional Target Retirement 2020 Fund (Inst)
Vanguard Institutional Target Retirement 2025 Fund (Inst)
Vanguard Institutional Target Retirement 2030 Fund (Inst)
Vanguard Institutional Target Retirement 2035 Fund (Inst)
Vanguard Institutional Target Retirement 2040 Fund (Inst)
Vanguard Institutional Target Retirement 2045 Fund (Inst)
Vanguard Institutional Target Retirement 2050 Fund (Inst)
Vanguard Institutional Target Retirement 2055 Fund (Inst)
Vanguard Institutional Target Retirement 2060 Fund (Inst)
Vanguard Institutional Target Retirement 2065 Fund (Inst)
Vanguard Institutional Target Retirement Income Fund (Inst) Vanguard Total Bond Market Index Fund (Inst)
Vanguard Federal Money Market Fund (Inv)

Fidelity:

Fidelity Freedom Index 2005 Fund - Institutional Premium Class
Fidelity Freedom Index 2010 Fund - Institutional Premium Class
Fidelity Freedom Index 2015 Fund - Institutional Premium Class
Fidelity Freedom Index 2020 Fund - Institutional Premium Class
Fidelity Freedom Index 2025 Fund - Institutional Premium Class
Fidelity Freedom Index 2030 Fund - Institutional Premium Class
Fidelity Freedom Index 2035 Fund - Institutional Premium Class
Fidelity Freedom Index 2040 Fund - Institutional Premium Class
Fidelity Freedom Index 2045 Fund - Institutional Premium Class
Fidelity Freedom Index 2050 Fund - Institutional Premium Class
Fidelity Freedom Index 2055 Fund - Institutional Premium Class
Fidelity Freedom Index 2060 Fund - Institutional Premium Class
Fidelity Freedom Index Income Fund - Institutional Premium Class Fidelity International Index Fund -Institutional Class
Fidelity Total Market Index Fund-Institutional Class
Fidelity U.S. Bond Index Fund -Institutional Class
Fidelity® Investments Money Market Government Portfolio Class I

Kathys
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Re: Vanguard vs TIAA

Post by Kathys » Wed Apr 11, 2018 6:39 am

TheGreyingDuke wrote:
Wed Apr 11, 2018 6:19 am
Does the TIAA portfolio represent the same risk as the one at Vanguard? If it is riskier you would expect to be "rewarded" with a potential higher return.
I don't know. How can I know this? I mean I haven't figured out my portfolio yet. Can't I not build a portfolio at either firm with similar risk?

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TheGreyingDuke
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Re: Vanguard vs TIAA

Post by TheGreyingDuke » Wed Apr 11, 2018 7:06 am

Kathys wrote:
Wed Apr 11, 2018 6:39 am
TheGreyingDuke wrote:
Wed Apr 11, 2018 6:19 am
Does the TIAA portfolio represent the same risk as the one at Vanguard? If it is riskier you would expect to be "rewarded" with a potential higher return.
I don't know. How can I know this? I mean I haven't figured out my portfolio yet. Can't I not build a portfolio at either firm with similar risk?
Probably, but you were comparing two funds based on their target date, that could obscure different holdings.
"Every time I see an adult on a bicycle, I no longer despair for the future of the human race." H.G. Wells

Kathys
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Re: Vanguard vs TIAA

Post by Kathys » Wed Apr 11, 2018 7:08 am

TheGreyingDuke wrote:
Wed Apr 11, 2018 7:06 am
Kathys wrote:
Wed Apr 11, 2018 6:39 am
TheGreyingDuke wrote:
Wed Apr 11, 2018 6:19 am
Does the TIAA portfolio represent the same risk as the one at Vanguard? If it is riskier you would expect to be "rewarded" with a potential higher return.
I don't know. How can I know this? I mean I haven't figured out my portfolio yet. Can't I not build a portfolio at either firm with similar risk?
Probably, but you were comparing two funds based on their target date, that could obscure different holdings.
Sure. I just don't know how to evaluate based on what's available to me at each investment firm and based on the fees.

retiredjg
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Re: Vanguard vs TIAA

Post by retiredjg » Wed Apr 11, 2018 7:34 am

Kathys, I wonder if I missed something. You can't move your work plan anyway....unless you no longer work there.

Vanguard is considered great because Vanguard has very low fees. You have very low fees as well, so there is no need to move for low fees.

tibbitts
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Re: Vanguard vs TIAA

Post by tibbitts » Wed Apr 11, 2018 7:45 am

Kathys wrote:
Wed Apr 11, 2018 6:39 am
TheGreyingDuke wrote:
Wed Apr 11, 2018 6:19 am
Does the TIAA portfolio represent the same risk as the one at Vanguard? If it is riskier you would expect to be "rewarded" with a potential higher return.
I don't know. How can I know this? I mean I haven't figured out my portfolio yet. Can't I not build a portfolio at either firm with similar risk?
First, you can discount almost anything anyone tells you about TIAA, because literally employer account is different. TIAA negotiates each employer contract separately, so for essentially the same TIAA investment you'll have someone here praising TIAA and somebody else condemning it.

Yes you can build the a similar portfolio at both (generally), but they are unlikely to have the same expense ratio.

To me the reason to have TIAA is Traditional and Real Estate, which can't be duplicated at Vanguard or elsewhere. But my employer has only the highest-cost TIAA investment options available, so the rest of the TIAA offerings aren't that appealing to me.

student
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Re: Vanguard vs TIAA

Post by student » Wed Apr 11, 2018 7:46 am

The funds available from all three companies are good and low cost. From your post, I gather that you are a beginner. I suggest that you leave everything at TIAA for now, take a year to read more about investing and cost, and make a decision in one year.

Kathys
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Re: Vanguard vs TIAA

Post by Kathys » Wed Apr 11, 2018 7:49 am

retiredjg wrote:
Wed Apr 11, 2018 7:34 am
Kathys, I wonder if I missed something. You can't move your work plan anyway....unless you no longer work there.

Vanguard is considered great because Vanguard has very low fees. You have very low fees as well, so there is no need to move for low fees.
Hi retiredjg, yes I can move my work plan. My retirement plan from my current job offers investments at Vanguard, TIAA and Fidelity. I talked to my retirement office yesterday and they said I can move from 403b at TIAA to 403b at Vanguard. I also called Vanguardto confirm that and they also said that is allowed under my plan. I also asked if my plan from my previous employer which is at TIAA right now can be rolled into my currents employer plan if I transfer to 403b at Vanguard and was told that that's allowed as well.

retiredjg
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Re: Vanguard vs TIAA

Post by retiredjg » Wed Apr 11, 2018 7:54 am

Yes, you can move within the work plan. It sounded to me like you wanted to move your 403b to your own account at Vanguard.

All of your choices sound good. I would not worry too much about making a bad choice if you watch the costs.

Da5id
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Re: Vanguard vs TIAA

Post by Da5id » Wed Apr 11, 2018 8:09 am

Kathys wrote:
Wed Apr 11, 2018 4:01 am
I'm trying to decide whether I should stick with TIAA or transfer over to Vanguard. What I have read here (and other places) people say that Vanguard has lower fees so it's more beneficial. But I'm failing to see that. When I compare funds for example TIAA-CREF Lifecycle Index 2030 Fund Institutional Class
TLHIX vs Vanguard Target Retirement 2030 Fund Investor Shares VTHRX, Vanguard expense ratio is 0.14% vs TIAA 0.1%. Vanguard charges $34/yr admin fee, TIAA doesn't charge me anything. I checked my statements for the past several years and I see no admin fee and I called them to verify and I was told that my employer covers those. So based on that, it's obvious to me that TIAA is cheaper in MY case. Am I missing something, is my comparison wrong?
Others have covered institutional vs individual. I'd also say that while costs matter, particularly if the balance isn't huge the annual difference in costs isn't all that much here, namely $35 + 0.0004 x <the balance>. If you have 20K there, that is $43 per year total. All things being equal, I'd save the $43 per year. But if things aren't equal -- one fund is more convenient, or you like the holdings better on one 2030 fund than another for some reason -- not clear that the $43 should make your choice for you. This isn't the stark difference of .05% ER vs 1% ER, this is much more marginal. I think when considering expense ratios, one should consider the actual dollar amount involved and whether it is material to you.

goingup
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Re: Vanguard vs TIAA

Post by goingup » Wed Apr 11, 2018 8:17 am

Yes, I'd choose the TIAA Target Fund. Lower cost and no administration fee in your plan.

DoTheMath
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Re: Vanguard vs TIAA

Post by DoTheMath » Wed Apr 11, 2018 8:33 am

student wrote:
Wed Apr 11, 2018 7:46 am
The funds available from all three companies are good and low cost. From your post, I gather that you are a beginner. I suggest that you leave everything at TIAA for now, take a year to read more about investing and cost, and make a decision in one year.
+100

Your first priority is to stop, take a breath, and learn enough so that you are confident and knowledgable about your decisions. There is no hurry. If you take a few months or more to sort things out, that's fine. And your decisions don't have to be perfect. Get the big things right and you'll already be in the top 5% of all retirement investors.

The question you are asking is a good one, but it doesn't have an automatic yes/no answer. By way of analogy, asking about TIAA vs. Vanguard is like asking between Target and Walmart. One isn't automatically better than the other. It depends on what you are looking for and how much they are charging. A lot of the questions the people here are asking are to drill down and figure out some of the differences between the two providers in your situation.

It sounds like you're interested in a low cost target date index fund. That's an excellent choice. From what you've listed, all three of your choices offer these. There may be slight differences in performance/risk/etc. between the 20xx fund at TIAA vs. Vanguard but I think any difference is something which only becomes relevant if you're trying to move yourself from the top 5% to the top 3%.

The question then becomes which is the cheapest. You are interested in the total cost: mainly the Expense Ratio, but also including any additional fees they may tack on. These costs are plan dependent. Your employer negotiates their prices with each of the providers. To know the total cost to you, you'll have to look in your plan documents or talk to the appropriate people at your employer. It's worth doing this to know what you're paying. Vanguard funds are generally cheap, but not if you're losing an extra .5% a year to fees which you could avoid by going with one of the others.

Or you could say screw it, I don't care if Vanguard is a little more expensive*, that's the one I want to go with. Even though Walmart is often less expensive then Target, I can't tolerate the depressing, morgue-like atmosphere of Walmart and am willing to pay more to not shop there.

* Warning! A small difference in cost can add up to tens of thousands of dollars or more over the years! Little becomes big with the passage of time.
“I am losing precious days. I am degenerating into a machine for making money. I am learning nothing in this trivial world of men. I must break away and get out into the mountains...” -- John Muir

Kathys
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Re: Vanguard vs TIAA

Post by Kathys » Wed Apr 11, 2018 8:52 am

tibbitts wrote:
Wed Apr 11, 2018 7:45 am
Kathys wrote:
Wed Apr 11, 2018 6:39 am
TheGreyingDuke wrote:
Wed Apr 11, 2018 6:19 am
Does the TIAA portfolio represent the same risk as the one at Vanguard? If it is riskier you would expect to be "rewarded" with a potential higher return.
I don't know. How can I know this? I mean I haven't figured out my portfolio yet. Can't I not build a portfolio at either firm with similar risk?
First, you can discount almost anything anyone tells you about TIAA, because literally employer account is different. TIAA negotiates each employer contract separately, so for essentially the same TIAA investment you'll have someone here praising TIAA and somebody else condemning it.

Yes you can build the a similar portfolio at both (generally), but they are unlikely to have the same expense ratio.

To me the reason to have TIAA is Traditional and Real Estate, which can't be duplicated at Vanguard or elsewhere. But my employer has only the highest-cost TIAA investment options available, so the rest of the TIAA offerings aren't that appealing to me.
OK, thanks. Makes sense that my plan is specific to employer so what people are saying is not exactly accurate for my situation

Kathys
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Re: Vanguard vs TIAA

Post by Kathys » Wed Apr 11, 2018 8:55 am

student wrote:
Wed Apr 11, 2018 7:46 am
The funds available from all three companies are good and low cost. From your post, I gather that you are a beginner. I suggest that you leave everything at TIAA for now, take a year to read more about investing and cost, and make a decision in one year.
Well, I don't think I will ever understand more to be honest. I've been with TIAA for the past 18 years, I think I want to get a better return on my investment so I'm kind of anxious to make some kind of change.

Kathys
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Re: Vanguard vs TIAA

Post by Kathys » Wed Apr 11, 2018 8:59 am

Da5id wrote:
Wed Apr 11, 2018 8:09 am
Kathys wrote:
Wed Apr 11, 2018 4:01 am
I'm trying to decide whether I should stick with TIAA or transfer over to Vanguard. What I have read here (and other places) people say that Vanguard has lower fees so it's more beneficial. But I'm failing to see that. When I compare funds for example TIAA-CREF Lifecycle Index 2030 Fund Institutional Class
TLHIX vs Vanguard Target Retirement 2030 Fund Investor Shares VTHRX, Vanguard expense ratio is 0.14% vs TIAA 0.1%. Vanguard charges $34/yr admin fee, TIAA doesn't charge me anything. I checked my statements for the past several years and I see no admin fee and I called them to verify and I was told that my employer covers those. So based on that, it's obvious to me that TIAA is cheaper in MY case. Am I missing something, is my comparison wrong?
Others have covered institutional vs individual. I'd also say that while costs matter, particularly if the balance isn't huge the annual difference in costs isn't all that much here, namely $35 + 0.0004 x <the balance>. If you have 20K there, that is $43 per year total. All things being equal, I'd save the $43 per year. But if things aren't equal -- one fund is more convenient, or you like the holdings better on one 2030 fund than another for some reason -- not clear that the $43 should make your choice for you. This isn't the stark difference of .05% ER vs 1% ER, this is much more marginal. I think when considering expense ratios, one should consider the actual dollar amount involved and whether it is material to you.
My balance is a bit over $200,000. So is the $43 per year total a lot? I don't know what it means for the fund to be convenient. I don't know if one 2030 fund is better than the other, hence I compared them and was told that I can't compare them because they are like apples vs oranges so I don't know how to evaluate it.

Kathys
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Re: Vanguard vs TIAA

Post by Kathys » Wed Apr 11, 2018 9:01 am

goingup wrote:
Wed Apr 11, 2018 8:17 am
Yes, I'd choose the TIAA Target Fund. Lower cost and no administration fee in your plan.
So the fact that the TIAA Target Fund is institutional-class fund it's OK? It seemed to me from the previous posts that that was something not good.

Kathys
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Re: Vanguard vs TIAA

Post by Kathys » Wed Apr 11, 2018 9:15 am

DoTheMath wrote:
Wed Apr 11, 2018 8:33 am
student wrote:
Wed Apr 11, 2018 7:46 am
The funds available from all three companies are good and low cost. From your post, I gather that you are a beginner. I suggest that you leave everything at TIAA for now, take a year to read more about investing and cost, and make a decision in one year.
+100

Your first priority is to stop, take a breath, and learn enough so that you are confident and knowledgable about your decisions. There is no hurry. If you take a few months or more to sort things out, that's fine. And your decisions don't have to be perfect. Get the big things right and you'll already be in the top 5% of all retirement investors.
What do you mean by "get the big things right"? I'm investing already, does that mean I got the big things right? What are considered big things?
The question you are asking is a good one, but it doesn't have an automatic yes/no answer. By way of analogy, asking about TIAA vs. Vanguard is like asking between Target and Walmart. One isn't automatically better than the other. It depends on what you are looking for and how much they are charging. A lot of the questions the people here are asking are to drill down and figure out some of the differences between the two providers in your situation.
Right, how can I help with that? I posted the fees and what my investment options are. Is there something else I should provide?
It sounds like you're interested in a low cost target date index fund. That's an excellent choice. From what you've listed, all three of your choices offer these. There may be slight differences in performance/risk/etc. between the 20xx fund at TIAA vs. Vanguard but I think any difference is something which only becomes relevant if you're trying to move yourself from the top 5% to the top 3%.

The question then becomes which is the cheapest. You are interested in the total cost: mainly the Expense Ratio, but also including any additional fees they may tack on. These costs are plan dependent. Your employer negotiates their prices with each of the providers. To know the total cost to you, you'll have to look in your plan documents or talk to the appropriate people at your employer. It's worth doing this to know what you're paying. Vanguard funds are generally cheap, but not if you're losing an extra .5% a year to fees which you could avoid by going with one of the others.
So I know what the costs are. They are:
TIAA:
General administrative services include recordkeeping, legal, accounting, consulting, investment advisory and other plan administration services. Some of the expenses for general administrative services are fixed and other expenses such as legal or accounting may vary from year to year. These costs are allocated to each participant in a uniform way.

Vanguard:
An annual plan administration fee of $34 ($8.50 per quarter) is assessed to each retirement, TDA and 457(b) plan account. This fee is automatically deducted from your account balance.

Fidelity:

Plan administrative fees may include legal, accounting, trustee, recordkeeping, and other administrative fees and expenses associated with maintaining the Plan. Some plans may deduct these fees and expenses from individual accounts in the Plan.
Based on the information and direction Fidelity had on file at the time this disclosure was prepared, the plan administrative fees listed below are deducted from Plan accounts. The plans' administrative services may also be paid for through offsets and/or payments associated with one or more of the plans' investment options. As you review this information, please keep in mind that fees are subject to change and that certain plan administrative fees may not be deducted from accounts in some circumstances.
Recordkeeping Fee $9.25 per quarter.
Or you could say screw it, I don't care if Vanguard is a little more expensive*, that's the one I want to go with. Even though Walmart is often less expensive then Target, I can't tolerate the depressing, morgue-like atmosphere of Walmart and am willing to pay more to not shop there.
Well, in my case which one is Walmart and which one is TIAA?
* Warning! A small difference in cost can add up to tens of thousands of dollars or more over the years! Little becomes big with the passage of time.
That's why I'm asking questions before moving from one plan to another.

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Re: Vanguard vs TIAA

Post by onourway » Wed Apr 11, 2018 9:16 am

Kathys wrote:
Wed Apr 11, 2018 8:55 am
Well, I don't think I will ever understand more to be honest. I've been with TIAA for the past 18 years, I think I want to get a better return on my investment so I'm kind of anxious to make some kind of change.
One thing that's important to understand is that changes one makes to their investments very often end up reducing returns. Often the best thing you can do is just stand still.

As such it's important to take your time and make sure you understand why you are making a change. Then maybe sit on it for a couple of months and see if you still feel the same way.

Kathys
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Re: Vanguard vs TIAA

Post by Kathys » Wed Apr 11, 2018 9:18 am

onourway wrote:
Wed Apr 11, 2018 9:16 am

One thing that's important to understand is that changes one makes to their investments very often end up reducing returns. Often the best thing you can do is just stand still.
That's what I did for the past 18 years. I sat still not touching my investments. I'm thinking it's time to reevaluate.
As such it's important to take your time and make sure you understand why you are making a change. Then maybe sit on it for a couple of months and see if you still feel the same way.
I'm making the change because I'm not happy with my return rate. I already sat on it for 6 months

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Re: Vanguard vs TIAA

Post by onourway » Wed Apr 11, 2018 9:26 am

Kathys wrote:
Wed Apr 11, 2018 9:18 am
I'm making the change because I'm not happy with my return rate. I already sat on it for 6 months
What, exactly are you not happy about? Can you define that? Because the 10 year return for TIAA 2030 fund and the Vanguard 2030 fund are nearly identical. Getting better return requires taking on more risk.

You should consider changing your investments if you have closely evaluated your need, willingness, and ability to take risk, and determined a target asset allocation based on that evaluation. Or because you are in a high-cost investment that is hampering you. That does not appear to be the case, so a change to investments should only be made if they no longer meet your desired asset allocation.

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Re: Vanguard vs TIAA

Post by Da5id » Wed Apr 11, 2018 9:33 am

Kathys wrote:
Wed Apr 11, 2018 8:59 am
My balance is a bit over $200,000. So is the $43 per year total a lot? I don't know what it means for the fund to be convenient. I don't know if one 2030 fund is better than the other, hence I compared them and was told that I can't compare them because they are like apples vs oranges so I don't know how to evaluate it.
So it is about $115/year given your balance. And sure you can compare the funds. In deciding where to invest, IMHO asset allocation comes before cost (as long as cost isn't ridiculous). These funds asset allocations are quite similar. ~70% stocks, etc. The TIAA one has few random things like direct real estate, inflation protected assets, and short term bonds. But they are so small as to probably not move the needle. I think the decision of one or the other isn't really that stark a difference personally. If you think it is close to a wash, I'd take the cheaper one, as you presumably wouldn't feel you are getting anything for your $115.

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Re: Vanguard vs TIAA

Post by Kathys » Wed Apr 11, 2018 9:34 am

onourway wrote:
Wed Apr 11, 2018 9:26 am
Kathys wrote:
Wed Apr 11, 2018 9:18 am
I'm making the change because I'm not happy with my return rate. I already sat on it for 6 months
What, exactly are you not happy about? Can you define that? Because the 10 year return for TIAA 2030 fund and the Vanguard 2030 fund are nearly identical. Getting better return requires taking on more risk.

You should consider changing your investments if you have closely evaluated your need, willingness, and ability to take risk, and determined a target asset allocation based on that evaluation. Or because you are in a high-cost investment that is hampering you. That does not appear to be the case, so a change to investments should only be made if they no longer meet your desired asset allocation.
I'm currently NOT investing in any Target Fund. I'm investing in TIAA-CREF Lifecycle Index Retirement Income Fund (Institutional) (TRILX). I wanted to figure out if I would be better off with Vanguard Target Fund vs TIAA's

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Re: Vanguard vs TIAA

Post by Da5id » Wed Apr 11, 2018 9:36 am

Kathys wrote:
Wed Apr 11, 2018 9:18 am
I'm making the change because I'm not happy with my return rate. I already sat on it for 6 months
In the wisdom of the the patron saint of these forums, "don't do something, just stand there". I think it applies here.

Sounds like you want to go chase return. The general way to do that is to take on more risk. Do you feel that the 70% stocks in these 2 balanced funds isn't enough for your circumstances? If so you could pick a later date target fund. It will have more stocks. It will in the long haul probably return more, but with more risk.

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Re: Vanguard vs TIAA

Post by Kathys » Wed Apr 11, 2018 9:36 am

Da5id wrote:
Wed Apr 11, 2018 9:33 am
Kathys wrote:
Wed Apr 11, 2018 8:59 am
My balance is a bit over $200,000. So is the $43 per year total a lot? I don't know what it means for the fund to be convenient. I don't know if one 2030 fund is better than the other, hence I compared them and was told that I can't compare them because they are like apples vs oranges so I don't know how to evaluate it.
So it is about $115/year given your balance. And sure you can compare the funds. In deciding where to invest, IMHO asset allocation comes before cost (as long as cost isn't ridiculous). These funds asset allocations are quite similar. ~70% stocks, etc. The TIAA one has few random things like direct real estate, inflation protected assets, and short term bonds. But they are so small as to probably not move the needle. I think the decision of one or the other isn't really that stark a difference personally. If you think it is close to a wash, I'd take the cheaper one, as you presumably wouldn't feel you are getting anything for your $115.
How did you arrive at $115?

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Re: Vanguard vs TIAA

Post by Kathys » Wed Apr 11, 2018 9:37 am

Da5id wrote:
Wed Apr 11, 2018 9:36 am
Kathys wrote:
Wed Apr 11, 2018 9:18 am
I'm making the change because I'm not happy with my return rate. I already sat on it for 6 months
In the wisdom of the the patron saint of these forums, "don't do something, just stand there". I think it applies here.

Sounds like you want to go chase return. The general way to do that is to take on more risk. Do you feel that the 70% stocks in these 2 balanced funds isn't enough for your circumstances? If so you could pick a later date target fund. It will have more stocks. It will in the long haul probably return more, but with more risk.
I'm currently NOT investing in any Target Fund. I'm investing in TIAA-CREF Lifecycle Index Retirement Income Fund (Institutional) (TRILX). I wanted to figure out if I would be better off with Vanguard Target Fund vs TIAA's

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Re: Vanguard vs TIAA

Post by onourway » Wed Apr 11, 2018 9:38 am

Kathys wrote:
Wed Apr 11, 2018 9:34 am
I'm currently NOT investing in any Target Fund. I'm investing in TIAA-CREF Lifecycle Index Retirement Income Fund (Institutional) (TRILX). I wanted to figure out if I would be better off with Vanguard Target Fund vs TIAA's
This is an asset allocation question then primarily, since you've determined that a) you can't change your investment provider because you are tied to what your employer offers, and b) the options are already low cost.

If you have determined that the 2030 Target fund is appropriate for you, there is no harm in making the switch immediately.

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Re: Vanguard vs TIAA

Post by Da5id » Wed Apr 11, 2018 9:38 am

Kathys wrote:
Wed Apr 11, 2018 9:36 am
Da5id wrote:
Wed Apr 11, 2018 9:33 am
Kathys wrote:
Wed Apr 11, 2018 8:59 am
My balance is a bit over $200,000. So is the $43 per year total a lot? I don't know what it means for the fund to be convenient. I don't know if one 2030 fund is better than the other, hence I compared them and was told that I can't compare them because they are like apples vs oranges so I don't know how to evaluate it.
So it is about $115/year given your balance. And sure you can compare the funds. In deciding where to invest, IMHO asset allocation comes before cost (as long as cost isn't ridiculous). These funds asset allocations are quite similar. ~70% stocks, etc. The TIAA one has few random things like direct real estate, inflation protected assets, and short term bonds. But they are so small as to probably not move the needle. I think the decision of one or the other isn't really that stark a difference personally. If you think it is close to a wash, I'd take the cheaper one, as you presumably wouldn't feel you are getting anything for your $115.
How did you arrive at $115?
The fixed cost difference (admin fee) is $35/year
The expense ratio difference between the funds is .04%. .0004x200000 = $80

Sum those for $115.

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Re: Vanguard vs TIAA

Post by Da5id » Wed Apr 11, 2018 9:40 am

Kathys wrote:
Wed Apr 11, 2018 9:37 am
Da5id wrote:
Wed Apr 11, 2018 9:36 am
Kathys wrote:
Wed Apr 11, 2018 9:18 am
I'm making the change because I'm not happy with my return rate. I already sat on it for 6 months
In the wisdom of the the patron saint of these forums, "don't do something, just stand there". I think it applies here.

Sounds like you want to go chase return. The general way to do that is to take on more risk. Do you feel that the 70% stocks in these 2 balanced funds isn't enough for your circumstances? If so you could pick a later date target fund. It will have more stocks. It will in the long haul probably return more, but with more risk.
I'm currently NOT investing in any Target Fund. I'm investing in TIAA-CREF Lifecycle Index Retirement Income Fund (Institutional) (TRILX). I wanted to figure out if I would be better off with Vanguard Target Fund vs TIAA's
I see. So you previously felt that TRILX (with 40% stocks) was appropriate. You now feel like 70% stocks is the way to go. That is a big change in risk level. But OK, if you feel like taking on more risk is the right thing. Funds are pretty similar IMHO, won't go wrong with either.

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Re: Vanguard vs TIAA

Post by oldcomputerguy » Wed Apr 11, 2018 9:42 am

Kathys wrote:
Wed Apr 11, 2018 6:12 am
OK, point well taken. I don't understand institutional vs investor.
It's really not hard. Think of the mutual fund as the fund company's product that they sell. The charge a certain "price" for their product, the price being the amount they siphon off each year from your holdings, that amount being set by the expense ratio. So in a way, the expense ratio indicates the cost of participating in the fund.

Like any business, if business is good and they sell a lot of product (i.e. if a lot of people invest their money), then they can afford to charge a lower price per and still make enough income to meet their own expenses.

Mutual funds typically offer multiple "share classes", each of which has a different minimum investment and its own expense ratio. The lowest-level shares have the lowest minimum investment (for example, $3000 at Vanguard, $2500 at Fidelity), but the highest expense ratio. This share class is sometimes called "investor" shares. The next share class up has a higher minimum investment ($10,000 at Vanguard and Fidelity), but a lower expense ratio. The fund company can afford to offer a lower ER on those shares because there is more total $ invested in those shares.

The highest level of share classes typically have rock-bottom expense ratios (in the neighborhood of 0.02% to 0.03%) but have insanely high minimum investment amounts ($5M, $10M, $100M), and for that reason investment in those share classes typically only is done by the large "institutional" investors (mutual fund companies, 401k plans, pension managers, etc).

It's important to remember that the underlying holdings are the same for each share class of a mutual fund. The only things that change between share classes are the required minimum investment and the expense ratio. So other than lower expense ratio and higher minimum, there is nothing in an institutional share class that you don't get in an investment share class, it just requires a higher investment and costs less in expenses. (Of course, lower expenses mean better after-expense returns to you, which is why higher-level share class investments are preferable.)

Often, a large company will present a mutual fund company with the prospect of a huge amount of participation from 401k participants, enough to justify them offering the Institutional version of a fund. I'm guessing that's why you have the Institutional version of the TIAA target retirement fund available.
Last edited by oldcomputerguy on Wed Apr 11, 2018 9:50 am, edited 1 time in total.
It’s taken me a lot of years, but I’ve come around to this: If you’re dumb, surround yourself with smart people. And if you’re smart, surround yourself with smart people who disagree with you.

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Re: Vanguard vs TIAA

Post by Kathys » Wed Apr 11, 2018 9:45 am

onourway wrote:
Wed Apr 11, 2018 9:38 am
Kathys wrote:
Wed Apr 11, 2018 9:34 am
I'm currently NOT investing in any Target Fund. I'm investing in TIAA-CREF Lifecycle Index Retirement Income Fund (Institutional) (TRILX). I wanted to figure out if I would be better off with Vanguard Target Fund vs TIAA's
This is an asset allocation question then primarily, since you've determined that a) you can't change your investment provider because you are tied to what your employer offers, and b) the options are already low cost.

If you have determined that the 2030 Target fund is appropriate for you, there is no harm in making the switch immediately.
I can change my investment provider. That's why I'm stuck. I don't know which to chose.

Kathys
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Re: Vanguard vs TIAA

Post by Kathys » Wed Apr 11, 2018 9:47 am

Da5id wrote:
Wed Apr 11, 2018 9:38 am
Kathys wrote:
Wed Apr 11, 2018 9:36 am
Da5id wrote:
Wed Apr 11, 2018 9:33 am
Kathys wrote:
Wed Apr 11, 2018 8:59 am
My balance is a bit over $200,000. So is the $43 per year total a lot? I don't know what it means for the fund to be convenient. I don't know if one 2030 fund is better than the other, hence I compared them and was told that I can't compare them because they are like apples vs oranges so I don't know how to evaluate it.
So it is about $115/year given your balance. And sure you can compare the funds. In deciding where to invest, IMHO asset allocation comes before cost (as long as cost isn't ridiculous). These funds asset allocations are quite similar. ~70% stocks, etc. The TIAA one has few random things like direct real estate, inflation protected assets, and short term bonds. But they are so small as to probably not move the needle. I think the decision of one or the other isn't really that stark a difference personally. If you think it is close to a wash, I'd take the cheaper one, as you presumably wouldn't feel you are getting anything for your $115.
How did you arrive at $115?
The fixed cost difference (admin fee) is $35/year
The expense ratio difference between the funds is .04%. .0004x200000 = $80

Sum those for $115.
Thanks!

Kathys
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Re: Vanguard vs TIAA

Post by Kathys » Wed Apr 11, 2018 9:48 am

Da5id wrote:
Wed Apr 11, 2018 9:40 am
Kathys wrote:
Wed Apr 11, 2018 9:37 am
Da5id wrote:
Wed Apr 11, 2018 9:36 am
Kathys wrote:
Wed Apr 11, 2018 9:18 am
I'm making the change because I'm not happy with my return rate. I already sat on it for 6 months
In the wisdom of the the patron saint of these forums, "don't do something, just stand there". I think it applies here.

Sounds like you want to go chase return. The general way to do that is to take on more risk. Do you feel that the 70% stocks in these 2 balanced funds isn't enough for your circumstances? If so you could pick a later date target fund. It will have more stocks. It will in the long haul probably return more, but with more risk.
I'm currently NOT investing in any Target Fund. I'm investing in TIAA-CREF Lifecycle Index Retirement Income Fund (Institutional) (TRILX). I wanted to figure out if I would be better off with Vanguard Target Fund vs TIAA's
I see. So you previously felt that TRILX (with 40% stocks) was appropriate. You now feel like 70% stocks is the way to go. That is a big change in risk level. But OK, if you feel like taking on more risk is the right thing. Funds are pretty similar IMHO, won't go wrong with either.
Thanks. I had no idea what I was doing and was scared of losing money. Now I'm less scared.

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Re: Vanguard vs TIAA

Post by onourway » Wed Apr 11, 2018 9:49 am

Kathys wrote:
Wed Apr 11, 2018 9:45 am
I can change my investment provider. That's why I'm stuck. I don't know which to chose.
Ok, I see your post now outlining the options. In that case, I would personally lean towards Vanguard but the end result between the two is likely to be indistinguishable.

Kathys
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Re: Vanguard vs TIAA

Post by Kathys » Wed Apr 11, 2018 9:53 am

oldcomputerguy wrote:
Wed Apr 11, 2018 9:42 am
Kathys wrote:
Wed Apr 11, 2018 6:12 am
OK, point well taken. I don't understand institutional vs investor.
It's really not hard. Think of the mutual fund as the fund company's product that they sell. The charge a certain "price" for their product, the price being the amount they siphon off each year from your holdings, that amount being set by the expense ratio. So in a way, the expense ratio indicates the cost of participating in the fund.

Like any business, if business is good and they sell a lot of product (i.e. if a lot of people invest their money), then they can afford to charge a lower price per and still make enough income to meet their own expenses.

Mutual funds typically offer multiple "share classes", each of which has a different minimum investment and its own expense ratio. The lowest-level shares have the lowest minimum investment (for example, $3000 at Vanguard, $2500 at Fidelity), but the highest expense ratio. This share class is sometimes called "investor" shares. The next share class up has a higher minimum investment ($10,000 at Vanguard and Fidelity), but a lower expense ratio. The fund company can afford to offer a lower ER on those shares because there is more total $ invested in those shares.

The highest level of share classes typically have rock-bottom expense ratios (in the neighborhood of 0.02% to 0.03%) but have insanely high minimum investment amounts ($5M, $10M, $100M), and for that reason investment in those share classes typically only is done by the large "institutional" investors (mutual fund companies, 401k plans, pension managers, etc).

It's important to remember that the underlying holdings are the same for each share class of a mutual fund. The only things that change between share classes are the required minimum investment and the expense ratio. So other than lower expense ratio and higher minimum, there is nothing in an institutional share class that you don't get in an investment share class, it just requires a higher investment and costs less in expenses. (Of course, lower expenses mean better after-expense returns to you, which is why higher-level share class investments are preferable.)

Often, a large company will present a mutual fund company with the prospect of a huge amount of participation from 401k participants, enough to justify them offering the Institutional version of a fund. I'm guessing that's why you have the Institutional version of the TIAA target retirement fund available.
So why is institutional worse than investor class fund?

Kathys
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Re: Vanguard vs TIAA

Post by Kathys » Wed Apr 11, 2018 9:55 am

onourway wrote:
Wed Apr 11, 2018 9:49 am
Kathys wrote:
Wed Apr 11, 2018 9:45 am
I can change my investment provider. That's why I'm stuck. I don't know which to chose.
Ok, I see your post now outlining the options. In that case, I would personally lean towards Vanguard but the end result between the two is likely to be indistinguishable.
So in this case why would you lean towards Vanguard?

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Re: Vanguard vs TIAA

Post by onourway » Wed Apr 11, 2018 10:01 am

Kathys wrote:
Wed Apr 11, 2018 9:55 am
So in this case why would you lean towards Vanguard?
My preference in general is for Vanguard funds. I believe their motivations are most closely aligned with the individual investors, and they are industry leaders in index fund management (which is typically why Vanguard index funds will have slightly better returns than their competitors). TIAA is a fine choice if you have no other options and/or the cost in your particular plan is low enough, but I place them as 4th or 5th among my choice of custodians.

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Re: Vanguard vs TIAA

Post by oldcomputerguy » Wed Apr 11, 2018 10:01 am

Kathys wrote:
Wed Apr 11, 2018 9:53 am
So why is institutional worse than investor class fund?
Who said it was? I don't think I said that.

If I had two investment options available to me in my 401k, one an S&P500 institutional share class and the other an S&P500 investor share class, I'd jump on the institutional class in a heartbeat. Remember, the only difference is the minimum investment and the expense ratio.
It’s taken me a lot of years, but I’ve come around to this: If you’re dumb, surround yourself with smart people. And if you’re smart, surround yourself with smart people who disagree with you.

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Re: Vanguard vs TIAA

Post by Kathys » Wed Apr 11, 2018 10:13 am

oldcomputerguy wrote:
Wed Apr 11, 2018 10:01 am
Kathys wrote:
Wed Apr 11, 2018 9:53 am
So why is institutional worse than investor class fund?
Who said it was? I don't think I said that.

If I had two investment options available to me in my 401k, one an S&P500 institutional share class and the other an S&P500 investor share class, I'd jump on the institutional class in a heartbeat. Remember, the only difference is the minimum investment and the expense ratio.
OK, sorry then I misunderstood your original post when you stated that I was comparing apples to oranges and you gave an example of the investor-class version of the TIAA fund (TLHRX) that I should be comparing the Vanguard one to. Well, in my case then, I am comparing oranges to oranges, since I do have a choice of Vanguard Target Retirement 2030 Fund Investor Shares VTHRX and TIAA-CREF Lifecycle Index 2030 Fund Institutional Class TLHIX and not TIAA TLHRX. I mean why would I be comparing TIAA TLHRX if I that's not one of my choices? Why would I care how much it's expense ratio is in comparison to TIAA-CREF Lifecycle Index 2030 Fund Institutional Class TLHIX if I that's not something I can invest in any way.

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Re: Vanguard vs TIAA

Post by billfromct » Wed Apr 11, 2018 10:18 am

One thing you may want to check is if you do utilize Vanguard for your employer retirement plan, can your employer Vanguard plan be accessed through your normal Vanguard "log on".

If that's the case, it may be worth the extra few basis points in the expense ratio to have that convenience & simplicity.

As I'm getting closer to taking my IRA required minimum distributions (RMDs), I'm consolidating my financial accounts to Vanguard & my local credit union.

Simple is better; for me anyway.

bill

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Re: Vanguard vs TIAA

Post by Kathys » Wed Apr 11, 2018 10:20 am

billfromct wrote:
Wed Apr 11, 2018 10:18 am
One thing you may want to check is if you do utilize Vanguard for your employer retirement plan, can your employer Vanguard plan be accessed through your normal Vanguard "log on".

If that's the case, it may be worth the extra few basis points in the expense ratio to have that convenience & simplicity.

As I'm getting closer to taking my IRA required minimum distributions (RMDs), I'm consolidating my financial accounts to Vanguard & my local credit union.

Simple is better; for me anyway.

bill
Yes, I can access it through normal log in. I had it before and when I login to my online account I see my employer's plan in there (with $0 currently), since I was with Vanguard before.

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Re: Vanguard vs TIAA

Post by whomever » Wed Apr 11, 2018 10:26 am

1)I concur with 'leave things alone for a while and research'

2)Minor ER differences don't always make a huge difference over time: For example, below is a link charting the growth of $10k in TLHIX and VTHRX over the last 10 years. The difference is a little under fifty bucks, over 10 years. That's as likely the result of minor asset allocation difference as anything (for example, VTHRX currently has 27% foreign stocks vs. 21% for TLHIX).

http://quotes.morningstar.com/chart/fun ... A%5B%5D%7D

So, I'd advise thinking long and hard about the asset allocation you want, and then pick whatever reasonably low fee[1] funds match that allocation.



[1]It's worth remembering where the 'watch your fees!' advice comes from - you can find funds with 2.0% annual fees and perhaps commissions and loads on top of that. With those numbers, the fees make a big dollar difference in the account balance over the years. But at the low end of the fee schedule - e.g. whether the fund has 0.05% or 0.10% fees - the absolute dollar amount over the years isn't that different.

For example, suppose we invest $100k in an asset that returns exactly 3% per year, for 20 years. We have three funds that invest in this asset - Fund_1.0 that charges 1%, Fund_0.1 that charges .1%, and Fund_0.05 that charges .05%. After 20 years the balances will be:

Fund_1.0 - $148595
Fund_0.1 - $177136
Fund_0.05 - $178866

Fund_1.0 costs you $30K, but Fund0.05 only gains $1730. Now, on one hand, all other things being equal, $1730 will buy a nice weekend in Vegas. OTOH, it's $86 a year - and unless the funds are actually identical, their performance will likely vary more than that because of the asset differences.

Kathys
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Re: Vanguard vs TIAA

Post by Kathys » Wed Apr 11, 2018 10:47 am

whomever wrote:
Wed Apr 11, 2018 10:26 am
1)I concur with 'leave things alone for a while and research'

2)Minor ER differences don't always make a huge difference over time: For example, below is a link charting the growth of $10k in TLHIX and VTHRX over the last 10 years. The difference is a little under fifty bucks, over 10 years. That's as likely the result of minor asset allocation difference as anything (for example, VTHRX currently has 27% foreign stocks vs. 21% for TLHIX).

http://quotes.morningstar.com/chart/fun ... A%5B%5D%7D

So, I'd advise thinking long and hard about the asset allocation you want, and then pick whatever reasonably low fee[1] funds match that allocation.



[1]It's worth remembering where the 'watch your fees!' advice comes from - you can find funds with 2.0% annual fees and perhaps commissions and loads on top of that. With those numbers, the fees make a big dollar difference in the account balance over the years. But at the low end of the fee schedule - e.g. whether the fund has 0.05% or 0.10% fees - the absolute dollar amount over the years isn't that different.

For example, suppose we invest $100k in an asset that returns exactly 3% per year, for 20 years. We have three funds that invest in this asset - Fund_1.0 that charges 1%, Fund_0.1 that charges .1%, and Fund_0.05 that charges .05%. After 20 years the balances will be:

Fund_1.0 - $148595
Fund_0.1 - $177136
Fund_0.05 - $178866

Fund_1.0 costs you $30K, but Fund0.05 only gains $1730. Now, on one hand, all other things being equal, $1730 will buy a nice weekend in Vegas. OTOH, it's $86 a year - and unless the funds are actually identical, their performance will likely vary more than that because of the asset differences.
Thanks.

wolf359
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Re: Vanguard vs TIAA

Post by wolf359 » Wed Apr 11, 2018 11:04 am

Article on TIAA late last year in New York Times: https://www.nytimes.com/2017/10/21/busi ... -tiaa.html

It may not apply in this case -- just be aware of this potential conflict with use of in-house products.

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oldcomputerguy
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Re: Vanguard vs TIAA

Post by oldcomputerguy » Wed Apr 11, 2018 11:21 am

Kathys wrote:
Wed Apr 11, 2018 10:13 am
OK, sorry then I misunderstood your original post when you stated that I was comparing apples to oranges and you gave an example of the investor-class version of the TIAA fund (TLHRX) that I should be comparing the Vanguard one to.
I apologize if my post did not answer your question. I was responding to the question in your original post, which was why the Vanguard fund you cited had a higher expense ratio than did the TIAA fund. The comparison I was commenting on was the comparison between an institutional-class fund and an investor-class fund, which was the "apples to oranges" I mentioned. One cannot validly compare after-expense performance between funds of two different share classes; it's simply not a valid comparison. Nor does it make sense to try to benchmark the expense ratio of an investor-share fund against that of an institutional-share fund; by definition, the two will be different.

Your initial quote started off with the question of whether you should transfer from TIAA to Vanguard. Using the 2030 fund that you cited in your first post, purely as an example, we find the following:

TIAA-CREF Lifecycle Index 2030 Fund (Institutional) (TLHIX) -- 0.10%
Vanguard Institutional Target Retirement 2030 Fund (Inst) [url+](VTTWX)[/url] -- 0.09%

So in answer to the question regarding expense ratios in your original post, the Vanguard fund is indeed slightly lower in ER than the corresponding TIAA-CREF fund, when comparing institutional-class to institutional-class. But the difference is not likely to be that significant over the life of your investment career.

Comparing returns of these two funds (using them again purely as examples), the TIAA fund returned 11.62% over the last year, while the Vanguard fund returned 11.25%, which is not wildly different.

Responders here have mentioned that you need to look at the risk of whatever you decide to invest in. This put simply means: how much of the underlying fund is exposed to the risk of the stock market? This is an important question to answer. Just because two funds from two different providers both have the same target year in the name does not mean that their holdings are the same, nor does it mean that the fund necessarily is allocated as you would prefer. Even if your plan calls for retirement in twelve years, a "2030" fund might not have the asset allocation you desire.

For example, the TIAA 2030 fund in your plan currently holds approximately 48% in U.S. stock, 21% in international stock, and 30% in bonds. The Vanguard 2030 fund holds approximately 42% in U.S. stock, 28% in international stock, and about 29% in bonds. These are not large differences, and represent approximately the same risk (70% stocks / 30% bonds). So in this case, there is not really a reason on the risk side to prefer one of these over the other.

That being said, it's important to note that the retirement year shown in the fund title is literally a guess by the fund provider of just what you will want your asset allocation to be. In the case of the 2030 funds, a 70/30 allocation might or might not be one that you personally are comfortable with. If it is not, there is no reason you cannot invest in a fund that is more aggressive (more stocks) or conservative (less stocks). More aggressive funds will have a later target date, more conservative funds will have an earlier target date. It's up to you and whatever you want your asset allocation to be. But you should always look at the underlying holdings in a fund to determine if it's where you want to be.

Bottom line, there does not seem to be a hard-and-fast reason to prefer TIAA over Vanguard (or vice versa) in this particular case. You have a wide variety of institutional-class investment options under either provider, which likely would make most here envious. Take some time, decide on your desired allocation, choose one provider or the other, and stay the course.
It’s taken me a lot of years, but I’ve come around to this: If you’re dumb, surround yourself with smart people. And if you’re smart, surround yourself with smart people who disagree with you.

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