TIAA-CREF 401k, recently changed jobs

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elixir128
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Joined: Sat Aug 04, 2018 5:24 pm

TIAA-CREF 401k, recently changed jobs

Post by elixir128 » Sat Aug 04, 2018 5:45 pm

My husband and I both recently changed jobs. We previously worked for the same company and each have a 401k through TIAA-CREF that we are no longer contributing to. These accounts each have $350-$450k and are the majority of our retirement holdings. I've only recently began learning about asset allocation and, to my limited-experience eyes, I believe the funds aren't that great.

There are two index fund options: CREF Equity Index R2 (ER 0.3%) and Columbia Mid Cap Index R5 (ER 0.2%). They do have some Lifecycle Funds with expense ratios of 0.45%. All the other funds have higher expense ratios (American Funds EuroPacific Growth Fund R6, CREF Growth R2, CREF Global Equities R2, etc). In regards to bonds, there are two choices: CREF Bond Market R2 (ER 0.37%) and CREF Inflation-Linked Bond R2 (ER 0.31%).

I have 1099 income and believe I can roll mine over into a solo-401k. (I am still researching this. We have Roths and taxable account at Vanguard, but I can't roll over there so looking into other options).

For my husband, though-
1. Any idea which of these funds I should allocate to?
2. Is there any way to roll these funds to another company with better options? It looks like I could do an IRA rollever but then that would stop the backdoor Roth option.

And thank you for having me! I've learned so much by reading old posts, but still in my infancy. First post!

PFInterest
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Joined: Sun Jan 08, 2017 12:25 pm

Re: TIAA-CREF 401k, recently changed jobs

Post by PFInterest » Sat Aug 04, 2018 6:16 pm

Those aren't that bad.....
Yes you can roll to solo 401k.

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

Re: TIAA-CREF 401k, recently changed jobs

Post by student » Sat Aug 04, 2018 6:36 pm

TIAA-CREF R2 is ok but there are better alternatives. However, I do like TIAA Traditional. Before you transfer out, please take a look at it and see whether it will fit your investment objective.

Valuethinker
Posts: 35367
Joined: Fri May 11, 2007 11:07 am

Re: TIAA-CREF 401k, recently changed jobs

Post by Valuethinker » Sun Aug 05, 2018 7:25 am

elixir128 wrote:
Sat Aug 04, 2018 5:45 pm
My husband and I both recently changed jobs. We previously worked for the same company and each have a 401k through TIAA-CREF that we are no longer contributing to. These accounts each have $350-$450k and are the majority of our retirement holdings. I've only recently began learning about asset allocation and, to my limited-experience eyes, I believe the funds aren't that great.

There are two index fund options: CREF Equity Index R2 (ER 0.3%) and Columbia Mid Cap Index R5 (ER 0.2%). They do have some Lifecycle Funds with expense ratios of 0.45%. All the other funds have higher expense ratios (American Funds EuroPacific Growth Fund R6, CREF Growth R2, CREF Global Equities R2, etc). In regards to bonds, there are two choices: CREF Bond Market R2 (ER 0.37%) and CREF Inflation-Linked Bond R2 (ER 0.31%).

I have 1099 income and believe I can roll mine over into a solo-401k. (I am still researching this. We have Roths and taxable account at Vanguard, but I can't roll over there so looking into other options).

For my husband, though-
1. Any idea which of these funds I should allocate to?
2. Is there any way to roll these funds to another company with better options? It looks like I could do an IRA rollever but then that would stop the backdoor Roth option.

And thank you for having me! I've learned so much by reading old posts, but still in my infancy. First post!
If you stay with TIAA CREF then

CREF Equity Index

plus

CREF Bond Market R2

would do it. You could add Inflation-Linked Bond for up to half your bond allocation. You could add Mid Cap Index for up to 15% of your total equity allocation. So if 60/40 then 9%. You could also add Global Equities but to, say, 20% (12% of your equities) as a max in light of higher ER-- it adds diversification but it is not absolutely essential as in the long run US and global equities tend to converge in performance (with long periods of divergence). However overall the funds you have would allow you to create a sensible well diversified portfolio at moderate cost.

0.1% on $100k is $100 p.a. Over 30 years, say, that's not nothing, but it's also not crushing -- it would be an annuity payment of $100 p.a. compounded at the fund's overall return rate. It is possible to get over focused on expense ratios.

beardsworth
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Joined: Fri Jun 15, 2007 4:02 pm

Re: TIAA-CREF 401k, recently changed jobs

Post by beardsworth » Sun Aug 05, 2018 8:07 am

elixir128, you may also wish to post your same informaton and questions to the knowledgeable people on Morningstar's TIAA-centric discussion forum. As far as I know, signing up to post in those forums is still free of charge.

http://socialize.morningstar.com/NewSoc ... 00044.aspx

elixir128
Posts: 4
Joined: Sat Aug 04, 2018 5:24 pm

Re: TIAA-CREF 401k, recently changed jobs

Post by elixir128 » Thu Aug 09, 2018 11:16 am

Thank you to you all for your advice. I appreciate you.

aristotelian
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Re: TIAA-CREF 401k, recently changed jobs

Post by aristotelian » Thu Aug 09, 2018 11:30 am

student wrote:
Sat Aug 04, 2018 6:36 pm
TIAA-CREF R2 is ok but there are better alternatives. However, I do like TIAA Traditional. Before you transfer out, please take a look at it and see whether it will fit your investment objective.
+1 for this approach. I would much rather get the 4% yield of Traditional rather than the bond index yielding ~3% minus the 0.37% fee drag.

elixir128
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Joined: Sat Aug 04, 2018 5:24 pm

Re: TIAA-CREF 401k, recently changed jobs

Post by elixir128 » Thu Aug 09, 2018 1:55 pm

I've taken some time to learn about TIAA-traditional, and posted at the Morningstar site.

It seems that the TIAA-traditional may be a better option than either the CREF Bond Market Account (R2) or the CREF Inflation-Linked Bond Account (R2) as it has a guaranteed return. I don't really understand the fees with the TIAA Traditional though. Their rep told me my plan has the GRA account and it is a guaranteed 4% return with withdrawals allowed to be taken out over five years.

https://www.tiaa.org/public/pdf/ffs/878094101-GRA.pdf
https://www.tiaa.org/public/pdf/ffs/194408225.pdf

Would Fidelity or E-trade Solo 401k have any bond funds that are similar?
Am I thinking this through right?

megabad
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Joined: Fri Jun 01, 2018 4:00 pm

Re: TIAA-CREF 401k, recently changed jobs

Post by megabad » Thu Aug 09, 2018 2:50 pm

While I am a fan of TIAA traditional, most of the recent contracts are 3% guaranteed (for now), not 4% so I might double check the rules on your vintages. As you indicated, TIAA traditional is not truly liquid either. This may or may not be a concern for you. Assuming the contract is 3% guaranteed, I think it is a good option for a portion of the fixed income side of your portfolio depending on your circumstances. TIAA traditional does not really have "fees" in the normal sense since it is an annuity contract. You put in x, you get out y.

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House Blend
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Re: TIAA-CREF 401k, recently changed jobs

Post by House Blend » Thu Aug 09, 2018 3:54 pm

elixir128 wrote:
Thu Aug 09, 2018 1:55 pm
It seems that the TIAA-traditional may be a better option than either the CREF Bond Market Account (R2) or the CREF Inflation-Linked Bond Account (R2) as it has a guaranteed return. I don't really understand the fees with the TIAA Traditional though. Their rep told me my plan has the GRA account and it is a guaranteed 4% return with withdrawals allowed to be taken out over five years.

https://www.tiaa.org/public/pdf/ffs/878094101-GRA.pdf
https://www.tiaa.org/public/pdf/ffs/194408225.pdf

Would Fidelity or E-trade Solo 401k have any bond funds that are similar?
Am I thinking this through right?
0. There's nothing like this available elsewhere.

1. Not all providers of Solo 401(k)'s will allow incoming rollovers. If yours does, then you could roll your TIAA account into that Solo 401(k), but not your spouse's. So, you may want to keep his TIAA account at TIAA, to keep the backdoor Roth option open for him.

2. It's dangerous to rely on what you think you heard a TIAA rep say.

The main catch is this paragraph in the first document you linked:
For Group Retirement Annuity (GRA) contracts, and subject to the terms of your employer's plan, lump-sum withdrawals are available from the TIAA Traditional account only within 120 days after termination of employment and are subject to a 2.5% surrender charge. All other withdrawals and transfers from the account must be paid in ten annual installments.
This means, for example, no way to rebalance out of Traditional and into equities, if this is your only allocation to fixed income. If you have other accounts with a fixed income allocation, and can do your rebalancing elsewhere, this should not be a problem.

The "five year withdrawal" that you think you heard was probably a discussion of the infinitude of annuitization options. You can convert the account to either lifetime income, or income for various fixed periods. Perhaps five years is the shortest. This may not be what you want, although I could see it making sense for someone who wants 5 years of (fully taxable!) income between the start of retirement and the onset of social security.

3. As megabad mentioned, the 4% "guarantee" may not mean what you think it means. The guarantees are:
a. Every dollar you contribute/transfer in will always earn at least 3% during accumulation mode.
b. The dollars you contribute *today* are guaranteed to earn 4% APY until 3/1/2019. After that they will earn some other rate (but at least 3%).
c. If you contribute/transfer in any dollars next month, those dollars will earn some other rate. That rate will also be guaranteed until 3/1/2019.

elixir128
Posts: 4
Joined: Sat Aug 04, 2018 5:24 pm

Re: TIAA-CREF 401k, recently changed jobs

Post by elixir128 » Thu Aug 09, 2018 6:12 pm

Thank you for this feedback and helpful information.

I believe the rep was giving me bad information. He quoted 4% guarantee and I asked for a document with the details. I pointed out the 3% on the statement and he said that was lowest it could go for future investments, but if I put in money today then would be 4% minimum ongoing based upon the rate today (which I guess is true---until 3/1/19) but he said it would never change.

I also appreciate you pointing out the wording in the document, as it specifically says 10 annual incremental withdrawals and he said if more than >$5000 in account, then requirement is 5 years.

I sometimes wonder if it is even worth talking to directly as I get so many wrong answers. I learn so much more reading through these boards.

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