What would you do: TIAA traditional vs. TREA?

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ai_3_us
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What would you do: TIAA traditional vs. TREA?

Post by ai_3_us » Thu May 24, 2018 9:40 pm

I am in my mid 20s and have a large portfolio for my age (>0.5 million, mostly in taxable accounts) due to an extremely generous relative. In my current job I have access to a 403(b) with TIAA. The most appealing options there are TIAA traditional (3% guaranteed) and TREA (TIAA real estate). I am currently sending as much of my paycheck as I can to my 403(b) or a separate 457(b) and living off my taxable accounts. The money in my taxable account is essentially in a 3-fund portfolio with a 90/10 AA. I have been primarily buying into TREA since it's a pretty unique position, but after running some models with 3% guaranteed income, it seems like I can really live nicely off of 3% growth in 30-40 years.

Which of the following would you do? (a) keep investing in TREA, (b) keep what I have in TREA (2% of portfolio), but begin investing in TIAA TRAD, (c) transfer everything to TIAA TRAD, (d) none of the above. Invest more in index funds (which I have access to through my 457 or another 403(b) option with Fidelity).

I don't know if this will actually prompt any move on my part, I'm just interested in some thoughts.

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oldzey
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Re: What would you do: TIAA traditional vs. TREA?

Post by oldzey » Thu May 24, 2018 9:51 pm

My portfolio consists of the following:

65% Equity Index Funds (403b, Roth, Taxable)
35% TIAA Traditional (403b - in both RA & GSRA)

That's it - simple and easy to maintain. :beer
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aristotelian
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Re: What would you do: TIAA traditional vs. TREA?

Post by aristotelian » Thu May 24, 2018 9:56 pm

I would do TIAA Traditional in your employer plan, US and International stock funds in your brokerage account.

Personally, I do not have any position in Real Estate. My thinking is that the sector is already included in the index funds, I don't fully understand TREA, and equities have the same or higher expected return over a long timeframe, and I have a long timeframe.

Would be a good idea to move your funds into a Roth IRA as well.

grok87
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Re: What would you do: TIAA traditional vs. TREA?

Post by grok87 » Thu May 24, 2018 9:59 pm

ai_3_us wrote:
Thu May 24, 2018 9:40 pm
I am in my mid 20s and have a large portfolio for my age (>0.5 million, mostly in taxable accounts) due to an extremely generous relative. In my current job I have access to a 403(b) with TIAA. The most appealing options there are TIAA traditional (3% guaranteed) and TREA (TIAA real estate). I am currently sending as much of my paycheck as I can to my 403(b) or a separate 457(b) and living off my taxable accounts. The money in my taxable account is essentially in a 3-fund portfolio with a 90/10 AA. I have been primarily buying into TREA since it's a pretty unique position, but after running some models with 3% guaranteed income, it seems like I can really live nicely off of 3% growth in 30-40 years.

Which of the following would you do? (a) keep investing in TREA, (b) keep what I have in TREA (2% of portfolio), but begin investing in TIAA TRAD, (c) transfer everything to TIAA TRAD, (d) none of the above. Invest more in index funds (which I have access to through my 457 or another 403(b) option with Fidelity).

I don't know if this will actually prompt any move on my part, I'm just interested in some thoughts.
I am invested in TREA but not traditional. I'm not currently employed by a TIAA eligible company so don't have access to traditional at 3% guaranteed i don't think.

but what i wanted to say is that the "guarantee" is only as good as TIAA's claims paying ability. I.e. it is not guaranteed if they go bust, it's not like investing in treasuries. And also there are restrictions in getting your money out i think? like you need to use the 10 year transfer payout annuity? a 10 year treasury pays 3% right now and has immediate liquidity. having a 3% guarantee with liquidity restrictions and subject to TIAA's solvency doesn't seem like such an incredible deal to me...
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ai_3_us
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Re: What would you do: TIAA traditional vs. TREA?

Post by ai_3_us » Thu May 24, 2018 10:05 pm

aristotelian wrote:
Thu May 24, 2018 9:56 pm
... I have a long timeframe.

Would be a good idea to move your funds into a Roth IRA as well.
Sure, as much is going into a Roth as possible each year. I also have a very long timeframe.
grok87 wrote:
Thu May 24, 2018 9:59 pm
but what i wanted to say is that the "guarantee" is only as good as TIAA's claims paying ability. I.e. it is not guaranteed if they go bust, it's not like investing in treasuries. And also there are restrictions in getting your money out i think? like you need to use the 10 year transfer payout annuity? a 10 year treasury pays 3% right now and has immediate liquidity. having a 3% guarantee with liquidity restrictions and subject to TIAA's solvency doesn't seem like such an incredible deal to me...
True, so at the very least it's probably not a good idea to move 100% of my money into TRAD.

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Re: What would you do: TIAA traditional vs. TREA?

Post by tibbitts » Thu May 24, 2018 10:27 pm

grok87 wrote:
Thu May 24, 2018 9:59 pm
ai_3_us wrote:
Thu May 24, 2018 9:40 pm
I am in my mid 20s and have a large portfolio for my age (>0.5 million, mostly in taxable accounts) due to an extremely generous relative. In my current job I have access to a 403(b) with TIAA. The most appealing options there are TIAA traditional (3% guaranteed) and TREA (TIAA real estate). I am currently sending as much of my paycheck as I can to my 403(b) or a separate 457(b) and living off my taxable accounts. The money in my taxable account is essentially in a 3-fund portfolio with a 90/10 AA. I have been primarily buying into TREA since it's a pretty unique position, but after running some models with 3% guaranteed income, it seems like I can really live nicely off of 3% growth in 30-40 years.

Which of the following would you do? (a) keep investing in TREA, (b) keep what I have in TREA (2% of portfolio), but begin investing in TIAA TRAD, (c) transfer everything to TIAA TRAD, (d) none of the above. Invest more in index funds (which I have access to through my 457 or another 403(b) option with Fidelity).

I don't know if this will actually prompt any move on my part, I'm just interested in some thoughts.
I am invested in TREA but not traditional. I'm not currently employed by a TIAA eligible company so don't have access to traditional at 3% guaranteed i don't think.

but what i wanted to say is that the "guarantee" is only as good as TIAA's claims paying ability. I.e. it is not guaranteed if they go bust, it's not like investing in treasuries. And also there are restrictions in getting your money out i think? like you need to use the 10 year transfer payout annuity? a 10 year treasury pays 3% right now and has immediate liquidity. having a 3% guarantee with liquidity restrictions and subject to TIAA's solvency doesn't seem like such an incredible deal to me...
The OP is going to contribute $50k-ish or whatever the limit is out of a salary to both a 457 and 403b (combined) and each may have restrictions on how funds can be invested, so it's not clear that a treasury bond is one of those choices. If you've got the 9+1 withdrawal plan you're at least currently earning over 3% so there is that. There are no guarantees in life, TIAA might not be the US Treasury, but might be about as close as you can come.

ai_3_us
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Re: What would you do: TIAA traditional vs. TREA?

Post by ai_3_us » Fri May 25, 2018 11:41 am

tibbitts wrote:
Thu May 24, 2018 10:27 pm
The OP is going to contribute $50k-ish or whatever the limit is out of a salary to both a 457 and 403b (combined) and each may have restrictions on how funds can be invested, so it's not clear that a treasury bond is one of those choices. If you've got the 9+1 withdrawal plan you're at least currently earning over 3% so there is that. There are no guarantees in life, TIAA might not be the US Treasury, but might be about as close as you can come.
What is the 9+1 withdrawal plan?

ResearchMed
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Re: What would you do: TIAA traditional vs. TREA?

Post by ResearchMed » Fri May 25, 2018 12:16 pm

ai_3_us wrote:
Fri May 25, 2018 11:41 am
tibbitts wrote:
Thu May 24, 2018 10:27 pm
The OP is going to contribute $50k-ish or whatever the limit is out of a salary to both a 457 and 403b (combined) and each may have restrictions on how funds can be invested, so it's not clear that a treasury bond is one of those choices. If you've got the 9+1 withdrawal plan you're at least currently earning over 3% so there is that. There are no guarantees in life, TIAA might not be the US Treasury, but might be about as close as you can come.
What is the 9+1 withdrawal plan?
I assume that is what is usually called the 10 year withdrawal of approximately equal payments, but it's really 10 such payments over 9 years and 1 day.

RM
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ai_3_us
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Re: What would you do: TIAA traditional vs. TREA?

Post by ai_3_us » Sun May 27, 2018 12:06 am

ResearchMed wrote:
Fri May 25, 2018 12:16 pm
ai_3_us wrote:
Fri May 25, 2018 11:41 am
tibbitts wrote:
Thu May 24, 2018 10:27 pm
The OP is going to contribute $50k-ish or whatever the limit is out of a salary to both a 457 and 403b (combined) and each may have restrictions on how funds can be invested, so it's not clear that a treasury bond is one of those choices. If you've got the 9+1 withdrawal plan you're at least currently earning over 3% so there is that. There are no guarantees in life, TIAA might not be the US Treasury, but might be about as close as you can come.
What is the 9+1 withdrawal plan?
I assume that is what is usually called the 10 year withdrawal of approximately equal payments, but it's really 10 such payments over 9 years and 1 day.

RM
Ah, then yes that's exactly what I have.

student
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Re: What would you do: TIAA traditional vs. TREA?

Post by student » Sun May 27, 2018 5:55 am

ai_3_us wrote:
Sun May 27, 2018 12:06 am
ResearchMed wrote:
Fri May 25, 2018 12:16 pm
ai_3_us wrote:
Fri May 25, 2018 11:41 am
tibbitts wrote:
Thu May 24, 2018 10:27 pm
The OP is going to contribute $50k-ish or whatever the limit is out of a salary to both a 457 and 403b (combined) and each may have restrictions on how funds can be invested, so it's not clear that a treasury bond is one of those choices. If you've got the 9+1 withdrawal plan you're at least currently earning over 3% so there is that. There are no guarantees in life, TIAA might not be the US Treasury, but might be about as close as you can come.
What is the 9+1 withdrawal plan?
I assume that is what is usually called the 10 year withdrawal of approximately equal payments, but it's really 10 such payments over 9 years and 1 day.

RM
Ah, then yes that's exactly what I have.
Are you sure? With my employer, the 457 contract and my own supplemental 403b contract offer the liquid version of TIAA Traditional with no 9+1 rule. However, the bonus interest rate above the 3% minimum is usually less then the illiquid version at the same vintage. In general, your employer's money goes to the illiquid version (under names such as RA and GRA) and your own money goes to the liquid version (under name such as SRA annd SGRA). RA stands for Retirement Annuity.

headedwest
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Re: What would you do: TIAA traditional vs. TREA?

Post by headedwest » Sun May 27, 2018 6:35 am

I'm with student on this one. My plan offers two versions of Traditional. For what it's worth, I have a total of 35% in it (60% of that is the liquid, lower-interest version; 40% is the illiquid, higher interest version). I also have 10% of overall portfolio in TREA, which seems to be behaving bond-like these days, to address the OP's original question.

afan
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Re: What would you do: TIAA traditional vs. TREA?

Post by afan » Sun May 27, 2018 7:05 am

In the OPs situation I don't see the appeal of TIAA traditional. With 40 years until retirement and many more decades after that I would not have a large portion of my portfolio in such an asset. The expected return is much lower than a balanced portfolio. At least under current TIAA rules getting the money out not only takes many years but once you start taking it out they cut your interest rate. So you lose out for those 9 years while you are emptying the account.

Once upon a time, when TIAA was a nonprofit, it operated for the benefit of it's participants. Now it operates to make a profit at the expense of the participants.

With an illiquid investment when the sponsor changes it's stripes you are stuck.

If you want less volatility put some of your retirement money into intermediate term bonds.

But I hope I am misinterpreting the OPs plans. It sounds like the long term plan is to maximize tax favored retirement contributions, which is great. But it also sounds like OP plans to draw from the taxable account while working??? Bad idea. If OP is temporarily in a relatively low income position but is highly confidential of a large increase in income soon, say currently a medical resident and income will rise once in practice, then this may be OK. Otherwise, it sounds like a dangerous lifestyle creep.

A better plan would be to live within the means permitted by the earned income after maximizing retirement savings.

This will make the taxable account grow faster and it will accustom the OP to the lifestyle that earned income will support. Down the road that could take care of major expenses such as a house or kids' education. If neither of those ever happen, those increased savings will make for a larger margin of safety for retirement or permit retiring earlier.
We don't know how to beat the market on a risk-adjusted basis, and we don't know anyone that does know either | --Swedroe | We assume that markets are efficient, that prices are right | --Fama

student
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Re: What would you do: TIAA traditional vs. TREA?

Post by student » Sun May 27, 2018 7:27 am

afan wrote:
Sun May 27, 2018 7:05 am
Once upon a time, when TIAA was a nonprofit, it operated for the benefit of it's participants. Now it operates to make a profit at the expense of the participants.
I think TIAA is still a nonprofit. It lost its tax-exempt status years ago.

https://www.tiaa.org/public/about-tiaa/ ... s-trustees
"For TIAA's first twenty years, its corporate stock was owned by Carnegie Corporation of New York, which provided TIAA's $500,000 endowment grant. In 1938, Carnegie Corporation turned over ownership of TIAA to the new company, named Trustees of T.I.A.A. Stock. In 1989, Trustees of T.I.A.A. Stock was renamed TIAA Board of Overseers."

I am not arguing whether TIAA's current practice is good or not. I am just saying that it is a nonprofit organization.

tibbitts
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Re: What would you do: TIAA traditional vs. TREA?

Post by tibbitts » Sun May 27, 2018 7:39 am

afan wrote:
Sun May 27, 2018 7:05 am
In the OPs situation I don't see the appeal of TIAA traditional. With 40 years until retirement and many more decades after that I would not have a large portion of my portfolio in such an asset. The expected return is much lower than a balanced portfolio. At least under current TIAA rules getting the money out not only takes many years but once you start taking it out they cut your interest rate. So you lose out for those 9 years while you are emptying the account.

Once upon a time, when TIAA was a nonprofit, it operated for the benefit of it's participants. Now it operates to make a profit at the expense of the participants.

With an illiquid investment when the sponsor changes it's stripes you are stuck.

If you want less volatility put some of your retirement money into intermediate term bonds.

But I hope I am misinterpreting the OPs plans. It sounds like the long term plan is to maximize tax favored retirement contributions, which is great. But it also sounds like OP plans to draw from the taxable account while working??? Bad idea. If OP is temporarily in a relatively low income position but is highly confidential of a large increase in income soon, say currently a medical resident and income will rise once in practice, then this may be OK. Otherwise, it sounds like a dangerous lifestyle creep.

A better plan would be to live within the means permitted by the earned income after maximizing retirement savings.

This will make the taxable account grow faster and it will accustom the OP to the lifestyle that earned income will support. Down the road that could take care of major expenses such as a house or kids' education. If neither of those ever happen, those increased savings will make for a larger margin of safety for retirement or permit retiring earlier.
Not following this even remotely, but that's partly because the OP hasn't explained the alternatives available in the various plans or what the long-term plans are.

Although the profit vs. non-profile story isn't quite as simple as you describe, that standard would disqualify virtually every financial provider used by every Boglehead.

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Re: What would you do: TIAA traditional vs. TREA?

Post by The Wizard » Sun May 27, 2018 9:48 am

For the OP, I think it's fine to have a mix of both types of Trad along with TREA in the non-stock portion of your account.
I would aim to have at least 70% of your holdings in stock funds at your young age.
Use the liquid Trad for rebalancing into stocks after the next crash and hold the illiquid Trad for annuitization for lifetime income a few decades from now.

Keep an eye on TREA growth rates. It had slacked off down to around 4% a while ago but has improved up closer to 6% lately...
Attempted new signature...

tibbitts
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Re: What would you do: TIAA traditional vs. TREA?

Post by tibbitts » Sun May 27, 2018 10:56 am

The Wizard wrote:
Sun May 27, 2018 9:48 am
For the OP, I think it's fine to have a mix of both types of Trad along with TREA in the non-stock portion of your account.
I would aim to have at least 70% of your holdings in stock funds at your young age.
Use the liquid Trad for rebalancing into stocks after the next crash and hold the illiquid Trad for annuitization for lifetime income a few decades from now.

Keep an eye on TREA growth rates. It had slacked off down to around 4% a while ago but has improved up closer to 6% lately...
Not sure what anyone would do if the rate slacks off though. The problem is that by the time a trend develops and someone reacts to that, it might be that the trend will reverse, and you've got trading restrictions in place. I don't think a lot of people called this little (maybe temporary) blip up, looking at Greenstreet or other indicators.

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jjustice
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Re: What would you do: TIAA traditional vs. TREA?

Post by jjustice » Sun May 27, 2018 11:08 am

I basically second Wizard's advice. My qualification would be that 70% equities is rich even for a young person. People are requiring a smaller equity risk premium these days, so equities may not be the money-makers in the future that they were in the past. I might completely agree with Wizard if the 70% meant 55% stocks plus 15% TREA.

I agree with having both liquid and illiquid Traditional. You need the liquid version for rebalancing, but I think that people tend to overestimate how much they need to have in their rebalancing fund. 5% of your total assets would be enough. Remember stocks are only a portion of your assets, and by the time they have dropped in a bear market the amount that is currently 5% of your total assets will be an ample supply of dry powder for buying stocks at reduced prices.

John

NoHeat
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Re: What would you do: TIAA traditional vs. TREA?

Post by NoHeat » Sun May 27, 2018 11:26 am

For the OP’s young age, re. TIAA traditional (stable value fund)
* In an RA account where TIAA traditional is not liquid, I would wait a couple of decades before transferring funds into it.
* However, in an SRA (supplemental salary reduction account), TIAA Traditional is fully liquid, so that it is essentially a superior money market fund (rock-solid, doesn’t ever go down, and returns more than any money market account, at least for me), and in such an account TIAA Traditional is a wonderful place to park cash.

TIAA Real Estate is unique, and I use it for low-volatility diversification into real estate. Maybe that’s what the OP seeks. However, it’s best not for holding indefinitely, but rather for holding only until it starts to tank as it did about ten years ago. It has a unique time-lag pricing feature, due to relying on quarterly appraisals of its holdings, so that its price will greatly lag REITs, which can serve as an indicator. This fund is one of the few long-lasting investments designed in a way that makes timing work. When people say timing doesn’t work, they weren’t thinking about TIAA Real Estate. If you just hold it and don’t exploit that feature, you are subsidizing those of us who do.

afan
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Re: What would you do: TIAA traditional vs. TREA?

Post by afan » Sun May 27, 2018 11:59 am

student wrote:
Sun May 27, 2018 7:27 am
afan wrote:
Sun May 27, 2018 7:05 am
Once upon a time, when TIAA was a nonprofit, it operated for the benefit of it's participants. Now it operates to make a profit at the expense of the participants.
I think TIAA is still a nonprofit. It lost its tax-exempt status years ago.

https://www.tiaa.org/public/about-tiaa/ ... s-trustees
"For TIAA's first twenty years, its corporate stock was owned by Carnegie Corporation of New York, which provided TIAA's $500,000 endowment grant. In 1938, Carnegie Corporation turned over ownership of TIAA to the new company, named Trustees of T.I.A.A. Stock. In 1989, Trustees of T.I.A.A. Stock was renamed TIAA Board of Overseers."

I am not arguing whether TIAA's current practice is good or not. I am just saying that it is a nonprofit organization.
You are correct and I was being sloppy.
But it is not the same organization.
We don't know how to beat the market on a risk-adjusted basis, and we don't know anyone that does know either | --Swedroe | We assume that markets are efficient, that prices are right | --Fama

afan
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Re: What would you do: TIAA traditional vs. TREA?

Post by afan » Sun May 27, 2018 12:01 pm

tibbitts wrote:
Sun May 27, 2018 7:39 am
afan wrote:
Sun May 27, 2018 7:05 am
In the OPs situation I don't see the appeal of TIAA traditional. With 40 years until retirement and many more decades after that I would not have a large portion of my portfolio in such an asset. The expected return is much lower than a balanced portfolio. At least under current TIAA rules getting the money out not only takes many years but once you start taking it out they cut your interest rate. So you lose out for those 9 years while you are emptying the account.

Once upon a time, when TIAA was a nonprofit, it operated for the benefit of it's participants. Now it operates to make a profit at the expense of the participants.

With an illiquid investment when the sponsor changes it's stripes you are stuck.

If you want less volatility put some of your retirement money into intermediate term bonds.

But I hope I am misinterpreting the OPs plans. It sounds like the long term plan is to maximize tax favored retirement contributions, which is great. But it also sounds like OP plans to draw from the taxable account while working??? Bad idea. If OP is temporarily in a relatively low income position but is highly confidential of a large increase in income soon, say currently a medical resident and income will rise once in practice, then this may be OK. Otherwise, it sounds like a dangerous lifestyle creep.

A better plan would be to live within the means permitted by the earned income after maximizing retirement savings.

This will make the taxable account grow faster and it will accustom the OP to the lifestyle that earned income will support. Down the road that could take care of major expenses such as a house or kids' education. If neither of those ever happen, those increased savings will make for a larger margin of safety for retirement or permit retiring earlier.
Not following this even remotely, but that's partly because the OP hasn't explained the alternatives available in the various plans or what the long-term plans are.

Although the profit vs. non-profile story isn't quite as simple as you describe, that standard would disqualify virtually every financial provider used by every Boglehead.
The point is not whether it is a nonprofit, but corporate behavior.
We don't know how to beat the market on a risk-adjusted basis, and we don't know anyone that does know either | --Swedroe | We assume that markets are efficient, that prices are right | --Fama

tibbitts
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Re: What would you do: TIAA traditional vs. TREA?

Post by tibbitts » Sun May 27, 2018 12:02 pm

NoHeat wrote:
Sun May 27, 2018 11:26 am
For the OP’s young age, re. TIAA traditional (stable value fund)
* In an RA account where TIAA traditional is not liquid, I would wait a couple of decades before transferring funds into it.
* However, in an SRA (supplemental salary reduction account), TIAA Traditional is fully liquid, so that it is essentially a superior money market fund (rock-solid, doesn’t ever go down, and returns more than any money market account, at least for me), and in such an account TIAA Traditional is a wonderful place to park cash.

TIAA Real Estate is unique, and I use it for low-volatility diversification into real estate. Maybe that’s what the OP seeks. However, it’s best not for holding indefinitely, but rather for holding only until it starts to tank as it did about ten years ago. It has a unique time-lag pricing feature, due to relying on quarterly appraisals of its holdings, so that its price will greatly lag REITs, which can serve as an indicator. This fund is one of the few long-lasting investments designed in a way that makes timing work. When people say timing doesn’t work, they weren’t thinking about TIAA Real Estate. If you just hold it and don’t exploit that feature, you are subsidizing those of us who do.
As far as I know timing TREA worked one time in history under circumstances that will be different next time. At the very least timing will be different the next time around, due to the increased frequency of appraisals combined with increased exchange restrictions.

tibbitts
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Re: What would you do: TIAA traditional vs. TREA?

Post by tibbitts » Sun May 27, 2018 12:03 pm

afan wrote:
Sun May 27, 2018 12:01 pm
tibbitts wrote:
Sun May 27, 2018 7:39 am
afan wrote:
Sun May 27, 2018 7:05 am
In the OPs situation I don't see the appeal of TIAA traditional. With 40 years until retirement and many more decades after that I would not have a large portion of my portfolio in such an asset. The expected return is much lower than a balanced portfolio. At least under current TIAA rules getting the money out not only takes many years but once you start taking it out they cut your interest rate. So you lose out for those 9 years while you are emptying the account.

Once upon a time, when TIAA was a nonprofit, it operated for the benefit of it's participants. Now it operates to make a profit at the expense of the participants.

With an illiquid investment when the sponsor changes it's stripes you are stuck.

If you want less volatility put some of your retirement money into intermediate term bonds.

But I hope I am misinterpreting the OPs plans. It sounds like the long term plan is to maximize tax favored retirement contributions, which is great. But it also sounds like OP plans to draw from the taxable account while working??? Bad idea. If OP is temporarily in a relatively low income position but is highly confidential of a large increase in income soon, say currently a medical resident and income will rise once in practice, then this may be OK. Otherwise, it sounds like a dangerous lifestyle creep.

A better plan would be to live within the means permitted by the earned income after maximizing retirement savings.

This will make the taxable account grow faster and it will accustom the OP to the lifestyle that earned income will support. Down the road that could take care of major expenses such as a house or kids' education. If neither of those ever happen, those increased savings will make for a larger margin of safety for retirement or permit retiring earlier.
Not following this even remotely, but that's partly because the OP hasn't explained the alternatives available in the various plans or what the long-term plans are.

Although the profit vs. non-profile story isn't quite as simple as you describe, that standard would disqualify virtually every financial provider used by every Boglehead.
The point is not whether it is a nonprofit, but corporate behavior.
As opposed to, oh, say... Wells Fargo?

ai_3_us
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Re: What would you do: TIAA traditional vs. TREA?

Post by ai_3_us » Sun May 27, 2018 2:51 pm

student wrote:
Sun May 27, 2018 5:55 am
ai_3_us wrote:
Sun May 27, 2018 12:06 am
ResearchMed wrote:
Fri May 25, 2018 12:16 pm
ai_3_us wrote:
Fri May 25, 2018 11:41 am
tibbitts wrote:
Thu May 24, 2018 10:27 pm
The OP is going to contribute $50k-ish or whatever the limit is out of a salary to both a 457 and 403b (combined) and each may have restrictions on how funds can be invested, so it's not clear that a treasury bond is one of those choices. If you've got the 9+1 withdrawal plan you're at least currently earning over 3% so there is that. There are no guarantees in life, TIAA might not be the US Treasury, but might be about as close as you can come.
What is the 9+1 withdrawal plan?
I assume that is what is usually called the 10 year withdrawal of approximately equal payments, but it's really 10 such payments over 9 years and 1 day.

RM
Ah, then yes that's exactly what I have.
Are you sure? With my employer, the 457 contract and my own supplemental 403b contract offer the liquid version of TIAA Traditional with no 9+1 rule. However, the bonus interest rate above the 3% minimum is usually less then the illiquid version at the same vintage. In general, your employer's money goes to the illiquid version (under names such as RA and GRA) and your own money goes to the liquid version (under name such as SRA annd SGRA). RA stands for Retirement Annuity.
Yes, I now see that my plan has three options: RA, SRA (supplemental), and GSRA (group supplemental). But, when I try to change my investments I am only allowed the GSRA option (there is no matching by my employer with this plan :( ).

ai_3_us
Posts: 104
Joined: Mon Jan 09, 2017 7:53 pm

Re: What would you do: TIAA traditional vs. TREA?

Post by ai_3_us » Sun May 27, 2018 2:51 pm

afan wrote:
Sun May 27, 2018 7:05 am
In the OPs situation I don't see the appeal of TIAA traditional. With 40 years until retirement and many more decades after that I would not have a large portion of my portfolio in such an asset. The expected return is much lower than a balanced portfolio. At least under current TIAA rules getting the money out not only takes many years but once you start taking it out they cut your interest rate. So you lose out for those 9 years while you are emptying the account.

Once upon a time, when TIAA was a nonprofit, it operated for the benefit of it's participants. Now it operates to make a profit at the expense of the participants.

With an illiquid investment when the sponsor changes it's stripes you are stuck.

If you want less volatility put some of your retirement money into intermediate term bonds.

But I hope I am misinterpreting the OPs plans. It sounds like the long term plan is to maximize tax favored retirement contributions, which is great. But it also sounds like OP plans to draw from the taxable account while working??? Bad idea. If OP is temporarily in a relatively low income position but is highly confidential of a large increase in income soon, say currently a medical resident and income will rise once in practice, then this may be OK. Otherwise, it sounds like a dangerous lifestyle creep.

A better plan would be to live within the means permitted by the earned income after maximizing retirement savings.

This will make the taxable account grow faster and it will accustom the OP to the lifestyle that earned income will support. Down the road that could take care of major expenses such as a house or kids' education. If neither of those ever happen, those increased savings will make for a larger margin of safety for retirement or permit retiring earlier.
I intentionally left out details with regard to my income/future plans/etc. I am very comfortable with my current plan. In short, I am drawing from taxable accts right now so that I can stash 100% of my income in retirement accts. All in all I am putting more money into savings every year than I am spending, I am just moving that money from taxable to retirement. And for what it's worth I am doing this with an income in the 12% tax bracket, I am not at all concerned about "lifestyle creep."

I also just found out that I do indeed have the liquid version of TRAD.

ai_3_us
Posts: 104
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Re: What would you do: TIAA traditional vs. TREA?

Post by ai_3_us » Sun May 27, 2018 2:55 pm

NoHeat wrote:
Sun May 27, 2018 11:26 am
For the OP’s young age, re. TIAA traditional (stable value fund)
* However, in an SRA (supplemental salary reduction account), TIAA Traditional is fully liquid, so that it is essentially a superior money market fund (rock-solid, doesn’t ever go down, and returns more than any money market account, at least for me), and in such an account TIAA Traditional is a wonderful place to park cash.
This is more or less what I was thinking. However I am now thinking about how the liquidity helps me. The other options in my TIAA account are not good, so I don't know how moving money out of TRAD and around in the account actually helps me take advantage of the liquidity of the fund, unless I roll over at some point.

student
Posts: 2530
Joined: Fri Apr 03, 2015 6:58 am

Re: What would you do: TIAA traditional vs. TREA?

Post by student » Sun May 27, 2018 3:02 pm

ai_3_us wrote:
Sun May 27, 2018 2:51 pm
student wrote:
Sun May 27, 2018 5:55 am
ai_3_us wrote:
Sun May 27, 2018 12:06 am
ResearchMed wrote:
Fri May 25, 2018 12:16 pm
ai_3_us wrote:
Fri May 25, 2018 11:41 am


What is the 9+1 withdrawal plan?
I assume that is what is usually called the 10 year withdrawal of approximately equal payments, but it's really 10 such payments over 9 years and 1 day.

RM
Ah, then yes that's exactly what I have.
Are you sure? With my employer, the 457 contract and my own supplemental 403b contract offer the liquid version of TIAA Traditional with no 9+1 rule. However, the bonus interest rate above the 3% minimum is usually less then the illiquid version at the same vintage. In general, your employer's money goes to the illiquid version (under names such as RA and GRA) and your own money goes to the liquid version (under name such as SRA annd SGRA). RA stands for Retirement Annuity.
Yes, I now see that my plan has three options: RA, SRA (supplemental), and GSRA (group supplemental). But, when I try to change my investments I am only allowed the GSRA option (there is no matching by my employer with this plan :( ).
The money that your employer puts in go into the RA account. I find it very strange that you are not allowed to change investments in your RA and SRA accounts. First, we need to know which investments are available in each plan. For example, you can see what are available for Harvard. https://www.tiaa.org/public/tcm/harvard ... nId=100312
Last edited by student on Sun May 27, 2018 3:02 pm, edited 1 time in total.

ai_3_us
Posts: 104
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Re: What would you do: TIAA traditional vs. TREA?

Post by ai_3_us » Sun May 27, 2018 3:02 pm

The Wizard wrote:
Sun May 27, 2018 9:48 am
For the OP, I think it's fine to have a mix of both types of Trad along with TREA in the non-stock portion of your account.
I would aim to have at least 70% of your holdings in stock funds at your young age.
Use the liquid Trad for rebalancing into stocks after the next crash and hold the illiquid Trad for annuitization for lifetime income a few decades from now.

Keep an eye on TREA growth rates. It had slacked off down to around 4% a while ago but has improved up closer to 6% lately...
I currently have > 70% of my holdings in stock funds, and am comfortable with this position given my long-term outlook and solid career prospects. I do however have a question about how the liquidity of the fund helps. All of the other options in my TIAA account are not something I would invest in. My 403(b) has two options: TIAA and Fidelity. In the Fidelity account, there are great options, but the TIAA account essentially only has TRAD and TREA that I am even remotely interested in. I don't think I can transfer between the two (unless partial rollovers are allowed? Probably after I am out of this job, which will be soon). So, how would the liquidity help me before the age of 59.5? Should I expect to do a partial rollover?

ai_3_us
Posts: 104
Joined: Mon Jan 09, 2017 7:53 pm

Re: What would you do: TIAA traditional vs. TREA?

Post by ai_3_us » Sun May 27, 2018 3:18 pm

student wrote:
Sun May 27, 2018 3:02 pm
ai_3_us wrote:
Sun May 27, 2018 2:51 pm
student wrote:
Sun May 27, 2018 5:55 am
ai_3_us wrote:
Sun May 27, 2018 12:06 am
ResearchMed wrote:
Fri May 25, 2018 12:16 pm


I assume that is what is usually called the 10 year withdrawal of approximately equal payments, but it's really 10 such payments over 9 years and 1 day.

RM
Ah, then yes that's exactly what I have.
Are you sure? With my employer, the 457 contract and my own supplemental 403b contract offer the liquid version of TIAA Traditional with no 9+1 rule. However, the bonus interest rate above the 3% minimum is usually less then the illiquid version at the same vintage. In general, your employer's money goes to the illiquid version (under names such as RA and GRA) and your own money goes to the liquid version (under name such as SRA annd SGRA). RA stands for Retirement Annuity.
Yes, I now see that my plan has three options: RA, SRA (supplemental), and GSRA (group supplemental). But, when I try to change my investments I am only allowed the GSRA option (there is no matching by my employer with this plan :( ).
The money that your employer puts in go into the RA account. I find it very strange that you are not allowed to change investments in your RA and SRA accounts. First, we need to know which investments are available in each plan. For example, you can see what are available for Harvard. https://www.tiaa.org/public/tcm/harvard ... nId=100312
Ah, I see the issue now. My employer has two plans: The "Retirement plan" and the "Voluntary retirement plan." I am only eligible for the voluntary one. For some reason my account lists all three of:

https://www.tiaa.org/public/pdf/ffs/878094101-RA.pdf
https://www.tiaa.org/public/pdf/ffs/878094101-SRA.pdf
https://www.tiaa.org/public/pdf/ffs/878094101-GSRA.pdf

in my available options, but when I go to "change my investments" I see only the GSRA option. When I look at the corresponding page (from what you sent) I see that only the GSRA option is available in the "Voluntary retirement plan" and the other three are all available in the "Retirement plan." So TIAA must be confused about what it's telling me. But it's true, only the GSRA option is available to me with this plan.

student
Posts: 2530
Joined: Fri Apr 03, 2015 6:58 am

Re: What would you do: TIAA traditional vs. TREA?

Post by student » Sun May 27, 2018 3:27 pm

ai_3_us wrote:
Sun May 27, 2018 3:18 pm
student wrote:
Sun May 27, 2018 3:02 pm
ai_3_us wrote:
Sun May 27, 2018 2:51 pm
student wrote:
Sun May 27, 2018 5:55 am
ai_3_us wrote:
Sun May 27, 2018 12:06 am


Ah, then yes that's exactly what I have.
Are you sure? With my employer, the 457 contract and my own supplemental 403b contract offer the liquid version of TIAA Traditional with no 9+1 rule. However, the bonus interest rate above the 3% minimum is usually less then the illiquid version at the same vintage. In general, your employer's money goes to the illiquid version (under names such as RA and GRA) and your own money goes to the liquid version (under name such as SRA annd SGRA). RA stands for Retirement Annuity.
Yes, I now see that my plan has three options: RA, SRA (supplemental), and GSRA (group supplemental). But, when I try to change my investments I am only allowed the GSRA option (there is no matching by my employer with this plan :( ).
The money that your employer puts in go into the RA account. I find it very strange that you are not allowed to change investments in your RA and SRA accounts. First, we need to know which investments are available in each plan. For example, you can see what are available for Harvard. https://www.tiaa.org/public/tcm/harvard ... nId=100312
Ah, I see the issue now. My employer has two plans: The "Retirement plan" and the "Voluntary retirement plan." I am only eligible for the voluntary one. For some reason my account lists all three of:

https://www.tiaa.org/public/pdf/ffs/878094101-RA.pdf
https://www.tiaa.org/public/pdf/ffs/878094101-SRA.pdf
https://www.tiaa.org/public/pdf/ffs/878094101-GSRA.pdf

in my available options, but when I go to "change my investments" I see only the GSRA option. When I look at the corresponding page (from what you sent) I see that only the GSRA option is available in the "Voluntary retirement plan" and the other three are all available in the "Retirement plan." So TIAA must be confused about what it's telling me. But it's true, only the GSRA option is available to me with this plan.
ok. Within the GSRA, they must have investment choices other TIAA Traditional and TIAA Real Estate, right?

ai_3_us
Posts: 104
Joined: Mon Jan 09, 2017 7:53 pm

Re: What would you do: TIAA traditional vs. TREA?

Post by ai_3_us » Sun May 27, 2018 3:34 pm

student wrote:
Sun May 27, 2018 3:27 pm
ai_3_us wrote:
Sun May 27, 2018 3:18 pm
student wrote:
Sun May 27, 2018 3:02 pm
ai_3_us wrote:
Sun May 27, 2018 2:51 pm
student wrote:
Sun May 27, 2018 5:55 am


Are you sure? With my employer, the 457 contract and my own supplemental 403b contract offer the liquid version of TIAA Traditional with no 9+1 rule. However, the bonus interest rate above the 3% minimum is usually less then the illiquid version at the same vintage. In general, your employer's money goes to the illiquid version (under names such as RA and GRA) and your own money goes to the liquid version (under name such as SRA annd SGRA). RA stands for Retirement Annuity.
Yes, I now see that my plan has three options: RA, SRA (supplemental), and GSRA (group supplemental). But, when I try to change my investments I am only allowed the GSRA option (there is no matching by my employer with this plan :( ).
The money that your employer puts in go into the RA account. I find it very strange that you are not allowed to change investments in your RA and SRA accounts. First, we need to know which investments are available in each plan. For example, you can see what are available for Harvard. https://www.tiaa.org/public/tcm/harvard ... nId=100312
Ah, I see the issue now. My employer has two plans: The "Retirement plan" and the "Voluntary retirement plan." I am only eligible for the voluntary one. For some reason my account lists all three of:

https://www.tiaa.org/public/pdf/ffs/878094101-RA.pdf
https://www.tiaa.org/public/pdf/ffs/878094101-SRA.pdf
https://www.tiaa.org/public/pdf/ffs/878094101-GSRA.pdf

in my available options, but when I go to "change my investments" I see only the GSRA option. When I look at the corresponding page (from what you sent) I see that only the GSRA option is available in the "Voluntary retirement plan" and the other three are all available in the "Retirement plan." So TIAA must be confused about what it's telling me. But it's true, only the GSRA option is available to me with this plan.
ok. Within the GSRA, they must have investment choices other TIAA Traditional and TIAA Real Estate, right?
Yes. When I say "GSRA" I am referring specifically to the type of TIAA Traditional option. There is also a "Social Choice," "CREF Stock Account," and "Money Market" account. All of which have higher expense ratios than I would consider which is why I left them out initially.

student
Posts: 2530
Joined: Fri Apr 03, 2015 6:58 am

Re: What would you do: TIAA traditional vs. TREA?

Post by student » Sun May 27, 2018 3:44 pm

ai_3_us wrote:
Sun May 27, 2018 3:34 pm
student wrote:
Sun May 27, 2018 3:27 pm
ai_3_us wrote:
Sun May 27, 2018 3:18 pm
student wrote:
Sun May 27, 2018 3:02 pm
ai_3_us wrote:
Sun May 27, 2018 2:51 pm


Yes, I now see that my plan has three options: RA, SRA (supplemental), and GSRA (group supplemental). But, when I try to change my investments I am only allowed the GSRA option (there is no matching by my employer with this plan :( ).
The money that your employer puts in go into the RA account. I find it very strange that you are not allowed to change investments in your RA and SRA accounts. First, we need to know which investments are available in each plan. For example, you can see what are available for Harvard. https://www.tiaa.org/public/tcm/harvard ... nId=100312
Ah, I see the issue now. My employer has two plans: The "Retirement plan" and the "Voluntary retirement plan." I am only eligible for the voluntary one. For some reason my account lists all three of:

https://www.tiaa.org/public/pdf/ffs/878094101-RA.pdf
https://www.tiaa.org/public/pdf/ffs/878094101-SRA.pdf
https://www.tiaa.org/public/pdf/ffs/878094101-GSRA.pdf

in my available options, but when I go to "change my investments" I see only the GSRA option. When I look at the corresponding page (from what you sent) I see that only the GSRA option is available in the "Voluntary retirement plan" and the other three are all available in the "Retirement plan." So TIAA must be confused about what it's telling me. But it's true, only the GSRA option is available to me with this plan.
ok. Within the GSRA, they must have investment choices other TIAA Traditional and TIAA Real Estate, right?
Yes. When I say "GSRA" I am referring specifically to the type of TIAA Traditional option. There is also a "Social Choice," "CREF Stock Account," and "Money Market" account. All of which have higher expense ratios than I would consider which is why I left them out initially.
Ah. I see. I use TIAA Traditional for my fixed income. Our plan also has low cost institutional mutual funds that are as cheap as Vanguard. Since you do not have them, then one option is to just stick with these two options as you have planned.

ai_3_us
Posts: 104
Joined: Mon Jan 09, 2017 7:53 pm

Re: What would you do: TIAA traditional vs. TREA?

Post by ai_3_us » Sun May 27, 2018 3:48 pm

student wrote:
Sun May 27, 2018 3:44 pm
ai_3_us wrote:
Sun May 27, 2018 3:34 pm
student wrote:
Sun May 27, 2018 3:27 pm
ai_3_us wrote:
Sun May 27, 2018 3:18 pm
student wrote:
Sun May 27, 2018 3:02 pm


The money that your employer puts in go into the RA account. I find it very strange that you are not allowed to change investments in your RA and SRA accounts. First, we need to know which investments are available in each plan. For example, you can see what are available for Harvard. https://www.tiaa.org/public/tcm/harvard ... nId=100312
Ah, I see the issue now. My employer has two plans: The "Retirement plan" and the "Voluntary retirement plan." I am only eligible for the voluntary one. For some reason my account lists all three of:

https://www.tiaa.org/public/pdf/ffs/878094101-RA.pdf
https://www.tiaa.org/public/pdf/ffs/878094101-SRA.pdf
https://www.tiaa.org/public/pdf/ffs/878094101-GSRA.pdf

in my available options, but when I go to "change my investments" I see only the GSRA option. When I look at the corresponding page (from what you sent) I see that only the GSRA option is available in the "Voluntary retirement plan" and the other three are all available in the "Retirement plan." So TIAA must be confused about what it's telling me. But it's true, only the GSRA option is available to me with this plan.
ok. Within the GSRA, they must have investment choices other TIAA Traditional and TIAA Real Estate, right?
Yes. When I say "GSRA" I am referring specifically to the type of TIAA Traditional option. There is also a "Social Choice," "CREF Stock Account," and "Money Market" account. All of which have higher expense ratios than I would consider which is why I left them out initially.
Ah. I see. I use TIAA Traditional for my fixed income. Our plan also has low cost institutional mutual funds that are as cheap as Vanguard. Since you do not have them, then one option is to just stick with these two options as you have planned.
Oh I see. I imagine these aren't available in this account because they are available through Fidelity with the same plan.

student
Posts: 2530
Joined: Fri Apr 03, 2015 6:58 am

Re: What would you do: TIAA traditional vs. TREA?

Post by student » Sun May 27, 2018 4:01 pm

ai_3_us wrote:
Sun May 27, 2018 3:48 pm
Oh I see. I imagine these aren't available in this account because they are available through Fidelity with the same plan.
As long as you have a wide range of low cost funds across both vendors, you are good. Of course, this makes rebalancing somewhat difficult. Nevertheless, they can be overcame as you have other accounts to work with.

ai_3_us
Posts: 104
Joined: Mon Jan 09, 2017 7:53 pm

Re: What would you do: TIAA traditional vs. TREA?

Post by ai_3_us » Sun May 27, 2018 4:05 pm

student wrote:
Sun May 27, 2018 4:01 pm
ai_3_us wrote:
Sun May 27, 2018 3:48 pm
Oh I see. I imagine these aren't available in this account because they are available through Fidelity with the same plan.
As long as you have a wide range of low cost funds across both vendors, you are good. Of course, this makes rebalancing somewhat difficult. Nevertheless, they can be overcame as you have other accounts to work with.
Would this require frequent rollovers between the two vendors? I have never done a rollover so I don't know how much of a pain they are.

ResearchMed
Posts: 7172
Joined: Fri Dec 26, 2008 11:25 pm

Re: What would you do: TIAA traditional vs. TREA?

Post by ResearchMed » Sun May 27, 2018 4:47 pm

ai_3_us wrote:
Sun May 27, 2018 4:05 pm
student wrote:
Sun May 27, 2018 4:01 pm
ai_3_us wrote:
Sun May 27, 2018 3:48 pm
Oh I see. I imagine these aren't available in this account because they are available through Fidelity with the same plan.
As long as you have a wide range of low cost funds across both vendors, you are good. Of course, this makes rebalancing somewhat difficult. Nevertheless, they can be overcame as you have other accounts to work with.
Would this require frequent rollovers between the two vendors? I have never done a rollover so I don't know how much of a pain they are.
Rebalancing with two separate accounts?
Not a problem.

You could just sell equities in one account, and purchase bonds (or TIAA Trad Ann, or whatever) in the other account... once you have money in both accounts, obviously.
We don't find that rebalancing to be difficult at all.

Our 403b plan now allows us to use TIAA (very limited choices), Fidelity, and/or Vanguard, with the latter two both having brokerage options (meaning an almost uncountable number of funds from a large number of other fund families, IF we wanted those...).

RM
This signature is a placebo. You are in the control group.

ai_3_us
Posts: 104
Joined: Mon Jan 09, 2017 7:53 pm

Re: What would you do: TIAA traditional vs. TREA?

Post by ai_3_us » Sun May 27, 2018 5:09 pm

ResearchMed wrote:
Sun May 27, 2018 4:47 pm
ai_3_us wrote:
Sun May 27, 2018 4:05 pm
student wrote:
Sun May 27, 2018 4:01 pm
ai_3_us wrote:
Sun May 27, 2018 3:48 pm
Oh I see. I imagine these aren't available in this account because they are available through Fidelity with the same plan.
As long as you have a wide range of low cost funds across both vendors, you are good. Of course, this makes rebalancing somewhat difficult. Nevertheless, they can be overcame as you have other accounts to work with.
Would this require frequent rollovers between the two vendors? I have never done a rollover so I don't know how much of a pain they are.
Rebalancing with two separate accounts?
Not a problem.

You could just sell equities in one account, and purchase bonds (or TIAA Trad Ann, or whatever) in the other account... once you have money in both accounts, obviously.
We don't find that rebalancing to be difficult at all.

Our 403b plan now allows us to use TIAA (very limited choices), Fidelity, and/or Vanguard, with the latter two both having brokerage options (meaning an almost uncountable number of funds from a large number of other fund families, IF we wanted those...).

RM
I understand how to rebalance in multiple accounts, but I don't understand how to use an account with only fixed income (or TIAA Real Estate, which I don't consider exactly equity) to rebalance since I can't put money in it is I please. For example, if I have x dollars in there now invested in fixed income and I want to rebalance by adding more equity to my portfolio overall, I can't use the $ in the TIAA account to do that, since I don't think there is a viable equity option.

ResearchMed
Posts: 7172
Joined: Fri Dec 26, 2008 11:25 pm

Re: What would you do: TIAA traditional vs. TREA?

Post by ResearchMed » Sun May 27, 2018 5:19 pm

ai_3_us wrote:
Sun May 27, 2018 5:09 pm
ResearchMed wrote:
Sun May 27, 2018 4:47 pm
ai_3_us wrote:
Sun May 27, 2018 4:05 pm
student wrote:
Sun May 27, 2018 4:01 pm
ai_3_us wrote:
Sun May 27, 2018 3:48 pm
Oh I see. I imagine these aren't available in this account because they are available through Fidelity with the same plan.
As long as you have a wide range of low cost funds across both vendors, you are good. Of course, this makes rebalancing somewhat difficult. Nevertheless, they can be overcame as you have other accounts to work with.
Would this require frequent rollovers between the two vendors? I have never done a rollover so I don't know how much of a pain they are.
Rebalancing with two separate accounts?
Not a problem.

You could just sell equities in one account, and purchase bonds (or TIAA Trad Ann, or whatever) in the other account... once you have money in both accounts, obviously.
We don't find that rebalancing to be difficult at all.

Our 403b plan now allows us to use TIAA (very limited choices), Fidelity, and/or Vanguard, with the latter two both having brokerage options (meaning an almost uncountable number of funds from a large number of other fund families, IF we wanted those...).

RM
I understand how to rebalance in multiple accounts, but I don't understand how to use an account with only fixed income (or TIAA Real Estate, which I don't consider exactly equity) to rebalance since I can't put money in it is I please. For example, if I have x dollars in there now invested in fixed income and I want to rebalance by adding more equity to my portfolio overall, I can't use the $ in the TIAA account to do that, since I don't think there is a viable equity option.
Sorry... I misunderstood.

For us, at least, it isn't difficult to transfer among the vendors *within* the plan.
It's easier than rolling over, because it's all "one big plan".
But it's still annoying, and not at all like moving money between funds in the same account.

Perhaps you could arrange future contributions so that you have some extra money for rebalancing in the non-TIAA account?
Perhaps a bond fund, or even a money market fund?
How often do you expect to rebalance? And what size amounts?

Or, given that rebalancing is typically at the margins, and not huge percentages, and not frequent, perhaps you could move money from liquid Trad Ann to the Stock fund if you need to rebalance in that direction?
And IF necessary, then in several years make adjustment between accounts?

RM
This signature is a placebo. You are in the control group.

student
Posts: 2530
Joined: Fri Apr 03, 2015 6:58 am

Re: What would you do: TIAA traditional vs. TREA?

Post by student » Sun May 27, 2018 5:24 pm

ResearchMed wrote:
Sun May 27, 2018 5:19 pm
ai_3_us wrote:
Sun May 27, 2018 5:09 pm
ResearchMed wrote:
Sun May 27, 2018 4:47 pm
ai_3_us wrote:
Sun May 27, 2018 4:05 pm
student wrote:
Sun May 27, 2018 4:01 pm


As long as you have a wide range of low cost funds across both vendors, you are good. Of course, this makes rebalancing somewhat difficult. Nevertheless, they can be overcame as you have other accounts to work with.
Would this require frequent rollovers between the two vendors? I have never done a rollover so I don't know how much of a pain they are.
Rebalancing with two separate accounts?
Not a problem.

You could just sell equities in one account, and purchase bonds (or TIAA Trad Ann, or whatever) in the other account... once you have money in both accounts, obviously.
We don't find that rebalancing to be difficult at all.

Our 403b plan now allows us to use TIAA (very limited choices), Fidelity, and/or Vanguard, with the latter two both having brokerage options (meaning an almost uncountable number of funds from a large number of other fund families, IF we wanted those...).

RM
I understand how to rebalance in multiple accounts, but I don't understand how to use an account with only fixed income (or TIAA Real Estate, which I don't consider exactly equity) to rebalance since I can't put money in it is I please. For example, if I have x dollars in there now invested in fixed income and I want to rebalance by adding more equity to my portfolio overall, I can't use the $ in the TIAA account to do that, since I don't think there is a viable equity option.
Sorry... I misunderstood.

For us, at least, it isn't difficult to transfer among the vendors *within* the plan.
It's easier than rolling over, because it's all "one big plan".
But it's still annoying, and not at all like moving money between funds in the same account.

Perhaps you could arrange future contributions so that you have some extra money for rebalancing in the non-TIAA account?
Perhaps a bond fund, or even a money market fund?
How often do you expect to rebalance? And what size amounts?

Or, given that rebalancing is typically at the margins, and not huge percentages, and not frequent, perhaps you could move money from liquid Trad Ann to the Stock fund if you need to rebalance in that direction?
And IF necessary, then in several years make adjustment between accounts?

RM
As far as I know, our plan also allows transfer between different vendors but there additional paperwork involved. I think ResearchMed's suggestion is good. Personally I don't rebalance very often. Sometimes I just direct new money to the appropriate funds if I feel that my allocation is off.

NoHeat
Posts: 186
Joined: Sun Sep 18, 2016 10:13 am

Re: What would you do: TIAA traditional vs. TREA?

Post by NoHeat » Sun May 27, 2018 11:08 pm

ai_3_us wrote:
Sun May 27, 2018 3:34 pm

Yes. When I say "GSRA" I am referring specifically to the type of TIAA Traditional option. There is also a "Social Choice," "CREF Stock Account," and "Money Market" account. All of which have higher expense ratios than I would consider
Those choices were the same as in my plan until about 20 years ago. Now my plan also has offerings from Vanguard and low-fee institutional versions of funds from Pimco, Templeton, American Funds, etc. Maybe your plan’s offerings will broaden similarly in the future.

Meanwhile, of the offerings available to you now, CREF stock fund or Social Choice are both equity funds that will offer performance close to that of the SP500, which is ok for building wealth while in one’s 20s and beyond. I would choose one of those two funds and not worry about it. If you do allocate some to TIAA Real Estate, you can exchange that into TIAA Traditional when and if you find that the commercial real estate market is tanking but the fund hasn’t yet.

A GSRA is a voluntary plan, so it will allow rollovers into an IRA which will broaden your choices immensely, but you might have to wait until about age 55 for that, depending on your plan.

ai_3_us
Posts: 104
Joined: Mon Jan 09, 2017 7:53 pm

Re: What would you do: TIAA traditional vs. TREA?

Post by ai_3_us » Tue May 29, 2018 11:24 am

NoHeat wrote:
Sun May 27, 2018 11:08 pm
ai_3_us wrote:
Sun May 27, 2018 3:34 pm

Yes. When I say "GSRA" I am referring specifically to the type of TIAA Traditional option. There is also a "Social Choice," "CREF Stock Account," and "Money Market" account. All of which have higher expense ratios than I would consider
Those choices were the same as in my plan until about 20 years ago. Now my plan also has offerings from Vanguard and low-fee institutional versions of funds from Pimco, Templeton, American Funds, etc. Maybe your plan’s offerings will broaden similarly in the future.

Meanwhile, of the offerings available to you now, CREF stock fund or Social Choice are both equity funds that will offer performance close to that of the SP500, which is ok for building wealth while in one’s 20s and beyond. I would choose one of those two funds and not worry about it. If you do allocate some to TIAA Real Estate, you can exchange that into TIAA Traditional when and if you find that the commercial real estate market is tanking but the fund hasn’t yet.

A GSRA is a voluntary plan, so it will allow rollovers into an IRA which will broaden your choices immensely, but you might have to wait until about age 55 for that, depending on your plan.
I have access to vanguard institutional funds through my other vendor, Fidelity, so I will stick with those instead of the worse TIAA options for my 403(b).

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