Workplace plan changing from Fidelity to TIAA or DCP (ICMA-RC) (Virginia)

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Topic Author
Rain
Posts: 37
Joined: Sun Aug 12, 2018 6:24 am

Workplace plan changing from Fidelity to TIAA or DCP (ICMA-RC) (Virginia)

Post by Rain »

I am grateful for help I received about a year ago in simplifying my portfolio and prioritizing contributions. I now have an upcoming change in my workplace retirement plan that requires that I make a few new decisions. I think that I have those decisions made, but wanted to run them by the Bogleheads for additional insights.

My employer (state of Virginia) has removed Fidelity from its line-up of providers for one of the plans I have access to. The new providers are TIAA and DCP (record kept by ICMA-RC). I must choose one of the two providers for new contributions. I can leave my balance at Fidelity (currently 34% of investments) or move the balance to one of the new providers.

The state contributes 10.4% of my salary into this account, and it doesn't accept employee contributions. I'm planning to retire/semi-retire in 4 years, and estimating roughly $40K-$45K of new contributions in the account before retirement.

I have two other workplace retirement accounts at Fidelity which can continue to receive new contributions and stay put. These are with the same employer but are not affected by the upcoming change.

I think that my best option is TIAA--moving the balance and contributing new funds to BlackRock U.S. Debt Index Fund M. I could easily be missing something important and so I'm posting my details in the hopes of a review.

My thinking so far:
  • I believe that TIAA is well-established with a good reputation.
  • The fees are roughly the same ($35.50 higher annual fee with TIAA but .01% lower ER which is about a wash for the current balance).
  • I'm having trouble wrapping my head around TIAA Traditional RC even after reading discussions here and on the TIAA website. If I understand correctly, I could take a lump sum within 120 days of retirement (with 2.5% penalty) or monthly pay out of the balance over 7 years. I'm planning to retire as early as 2023 and DH before me. Adding more taxable income to the pension we expect to start in 2027, plus any part time income, and we may start to push up against ACA eligibility if it still exists then. So, I'm thinking that a bond fund is better to keep our income options flexible.

Emergency funds: 3 months of expenses
Debt: Mortgage $10K @ 5.25%; Car $14K @ 1.24%; Car $17K @ 2.74%
Tax Filing Status: Married filing jointly
Tax Rate: 12% Federal; 6% State
State of Residence: VA
Ages: 51 (her), 57 (him), no children
Desired Asset allocation: 60% stocks / 40% bonds
Desired international allocation: 30% of stocks
Total retirement portfolio: $830K
Pension: $15K-$17K (him) starting 2027
Gross salary: $98K (her), $50K (him)


Retirement assets

Her 403b at Fidelity (51% of portfolio)
34% FID Total Market Index (FSKAX) (.015%) 
16% FID International Index (FSPSX) (.035%)
1% FID US Bond Index (FXNAX) (.025%)

Her 401a at Fidelity (35% of portfolio)**** This is the account in question
35% FID US Bond Index (FXNAX) (.025%)
Employer contributes 10.4% of salary.

Her 401a Match at Fidelity (2% of portfolio)
2% FID Total Market Index (FSKAX) (.015%)
Employer match of contributions to her 403b up to $500/year.

Her Roth IRA at Fidelity (1% of portfolio)
1% FID Total Market Index (FSKAX) (.015%)

His 403b at Lincoln Financial (8% of portfolio)
6% VG 500 Index (VFIAX) (.04%)
2% VG Total Bond Market Index (VBTLX) (.05%)

His HSA at Lively/TD Ameritrade (1% of portfolio)
1% SPDR Portfolio Total Market (SPTM) (.03%)

His Roth IRA at Fidelity (2% of portfolio)
2% FID Total Market Index (FSKAX)(.015%) 


2019 Contributions
  • His HSA--$8K
  • His Roth--$7K
  • Her Roth--$7K
  • His 403b--on track for $25K
  • Her 403b--on track for $16K


Investment Options for Her 401a

TIAA
Ticker symbols not provided. Additional info is at https://www.tiaa.org/public/tcm/vrs/vie ... nvestments. Annual Record-Keeping Fee: $66. This fee can be offset by revenue credits applied back to the account.

BlackRock Short-Term Investment Fund W (.08%)
BlackRock Equity Index Fund J (.01%)
BlackRock U.S. Treasury Inflation-Protected Securities Fund M (.03%)
BlackRock MSCI ACWI ex-U.S. IMI Index (.11%)
BlackRock MSCI ACWI IMI Index Non-Lendable Fund M (.05%)
BlackRock Russell 2500 Index Fund M (.04%)
TIAA Real Estate Account (.83%)
BlackRock U.S. Debt Index Fund M (.03%)
TIAA Traditional Annuity--Retirement Choice (.49%)
BlackRock LifePath Index Retirement Fund O (.08%)
add'l target date funds at same ER as above
Self-Directed Brokerage Window


DCP (ICMA-RC)
Ticker symbols not provided. Additional info is at https://www.varetirement.org/orphedcp/i ... files.html. Annual Record-Keeping Fee: $30.50.

Stock Fund (.02%)--The Stock Fund invests in units of BlackRock's Equity Index Fund F.
International Stock Fund (.07%)--The International Stock Fund invests in units of BlackRock's MSCI ACWI ex-U.S. IMI Index Fund F.
Small/Mid-Cap Stock Fund (.03%)
Global Real Estate Fund (.09%)
Bond Fund (.04%)--The Bond Fund invests in units of BlackRock's U.S. Debt Index Fund M. The U.S. Debt Index Fund M invests in the master Fund F.
Money Market Fund (.08%)
Stable Value Fund (.26%)
Inflation-Protected Bond Fund (.03%)
High-Yield Bond Fund (.40%)
Retirement Portfolio (.08%)
Target Date 2025 Portfolio (.08%)--additional target dates listed with same ER
Virginia Retirement System Investment Portfolio (VRSIP) (.58%)
Self-Directed Brokerage Window--with TD Ameritrade; must leave $2500 in core accounts; haven't found yet if there are additional annual record-keeping fees


Fidelity--funds are here now
Annual Record-Keeping Fee: $60. This fee can be offset by revenue credits applied back to the account to cover an administrative/record-keeping fee. I've added FEE CREDIT next to the ones that are eligible, but the revenue credit is not guaranteed. Current holdings marked with **

Fidelity Extended Market Index (FSMAX) (.045%)
Fidelity Diversified International K (FDIKX) (.69%) FEE CREDIT.20%
Fidelity Dividend Growth K (FDGKX) (.40%) FEE CREDIT.20%
Fidelity Low-Priced Stock K (FLPKX) (.53%) FEE CREDIT.20%
Fidelity Real Estate Investment (FRESX) (.76%) FEE CREDIT .35%
Fidelity Worldwide (FWWFX) (.94%) FEE CREDIT .35%
Fidelity Freedom Income K (.42%) FEE CREDIT .20%
Fidelity Freedom 2025 K (.56%)--add'l target date funds listed with ER's from .42% to .65%) FEE CREDIT .20%
Fidelity High Income (SPHIX)(.70%) FEE CREDIT.20%
Fidelity Inflation-Protected Bond Index (FIPDX)(.05%)
**Fidelity US Bond Index (FXNAX) (.025%)
Stable Value Fund (.26%)
Fidelity Government Money Market (SPAXX)(.42%) FEE CREDIT .20%
Self-Directed Brokerage Window


Investment Options for Other Workplace Accounts
Here are the lower cost index funds available for our other workplace accounts. Current holdings marked with **

Her 403b and Her 401a Match at Fidelity
**FID Total Market Index (FSKAX) (.015%)
FID 500 Index (FXAIX) (.015%)
FID Large Cap Growth Index (FSPGX) (.035%)
FID Large Cap Value Index (FLCOX) (.035%)
FID Extended Market Index (FSMAX) (.045%)
FID Mid Cap Index (FSMDX) (.025%)
FID Small Cap Index (FSSNX) (.025%)
FID Emerging Markets Index (FPADX) (.075%)
FID Global Ex-US Index (FSGGX) (.055%)
**FID International Index (FSPSX) (.035%)
FID Total International Index (FTIHX) (.06%)
FID Real Estate Index (FSRNX) (.07%)
**FID US Bond (FSNAX) (.025%)
FID Inflation-Protected Bond Index (FIPDX) (.05%)
FID Intermediate Treasury Bond Index (FUAMX) (.03%)
FID Long-Term Treasury Bond Index (FNBGX) (.03%)
FID Short-Term Bond Index (FNSOX) (.03%)
FID Short-Term Treasury Bond Index (FUMBX) (.03%)

His 403b at Lincoln Financial
**VG 500 Index (VFIAX) (.04%)
VG Inflation Protected Secs (VAIPX) (.10%)
VG Mid Cap Index(VIMAX) (.05%)
**VG Total Bond Market Index (VBTLX) (.05%)
Lincoln Stable Value Account


Thank you for looking at my details and providing any thoughts!
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Duckie
Posts: 9777
Joined: Thu Mar 08, 2007 1:55 pm

Re: Workplace plan changing from Fidelity to TIAA or DCP (ICMA-RC) (Virginia)

Post by Duckie »

Rain wrote:TIAA
Annual Record-Keeping Fee: $66
The best options are:
  • BlackRock Equity Index Fund J (.01%) -- Large caps, 80% of US stocks
  • BlackRock Russell 2500 Index Fund M (.04%) -- Mid/small caps, 20% of US stocks
  • BlackRock MSCI ACWI ex-U.S. IMI Index (.11%) -- Complete international stocks
  • BlackRock U.S. Debt Index Fund M (.03%) -- US bonds
DCP (ICMA-RC)
Annual Record-Keeping Fee: $30.50
The best options are:
  • Stock Fund (.02%) -- Large caps, 80% of US stocks
  • Small/Mid-Cap Stock Fund (.03%) -- Mid/small caps, 20% of US stocks
  • International Stock Fund (.07%) -- Complete international stocks
  • Bond Fund (.04%) -- US bonds
Fidelity
Annual Record-Keeping Fee: $60
You have much better options at both TIAA and DCP. Moving to either provider will be fine.
Her 403b and Her 401a Match at Fidelity
Consider using FTIHX instead of FSPSX. FSPSX contains only developed markets which are about 75% of international stocks. FTIHX contains complete international stocks.
His 403b at Lincoln Financial
You've picked the two best options. At only 8% of the portfolio you could use just one fund here.
sawhorse
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Joined: Sun Mar 01, 2015 6:05 pm

Re: Workplace plan changing from Fidelity to TIAA or DCP (ICMA-RC) (Virginia)

Post by sawhorse »

You have a great list of fund choices. You're knowledgeable about basic index funds, so I won't discuss that.

Two unique TIAA options are their real estate fund and their Traditional fund. The real estate fund is not a REIT. It's a direct stake in real estate properties. Very unique fund.

As you're close to retirement, am I right to assume you want a large bond allocation? TIAA Traditional is currently yielding more than bond index funds, so I recommend considering that for your bond allocation. As you said, the withdrawal rules are onerous, but I still think it's a good option.

Not investing related, but I recommend boosting your emergency fund beyond 3 months. Or move your Roth money to something pretty safe so that you can use your Roth contributions as your emergency fund.
Topic Author
Rain
Posts: 37
Joined: Sun Aug 12, 2018 6:24 am

Re: Workplace plan changing from Fidelity to TIAA or DCP (ICMA-RC) (Virginia)

Post by Rain »

Thank you Duckie and sawhorse for reviewing and your comments. I appreciate you looking beyond my questions to offer additional suggestions.
Topic Author
Rain
Posts: 37
Joined: Sun Aug 12, 2018 6:24 am

Re: Workplace plan changing from Fidelity to TIAA or DCP (ICMA-RC) (Virginia)

Post by Rain »

Here's what I'm thinking now based on comments from Duckie and sawhorse:
Duckie wrote:Consider using FTIHX instead of FSPSX. FSPSX contains only developed markets which are about 75% of international stocks. FTIHX contains complete international stocks.
Her 403b at Fidelity (51% of portfolio)****swapping out international funds; also moving bond holdings to His 403b
33% FID Total Market Index (FSKAX) (.015%)
18% FID Total International Index (FTIHX) (.06%)
Duckie wrote:The best options are:
BlackRock Equity Index Fund J (.01%) -- Large caps, 80% of US stocks
BlackRock Russell 2500 Index Fund M (.04%) -- Mid/small caps, 20% of US stocks
BlackRock MSCI ACWI ex-U.S. IMI Index (.11%) -- Complete international stocks
BlackRock U.S. Debt Index Fund M (.03%) -- US bonds
Her 401a at TIAA (35% of portfolio)
28% BlackRock U.S. Debt Index Fund M (.03%) [edited to correct %]
7% BlackRock Equity Index Fund J (.01%)
Employer contributes 10.4% of salary.

Her 401a Match at Fidelity (2% of portfolio)
2% FID Total Market Index (FSKAX) (.015%)
Employer match of contributions to her 403b up to $500/year.
sawhorse wrote:Not investing related, but I recommend boosting your emergency fund beyond 3 months. Or move your Roth money to something pretty safe so that you can use your Roth contributions as your emergency fund.
Her Roth IRA at Fidelity (1% of portfolio)****temporary second tier emergency fund; will gradually move back to stocks
1% MMF/Cash
0% FID Total Market Index (FSKAX) (.015%)
Duckie wrote:You've picked the two best options. At only 8% of the portfolio you could use just one fund here.
His 403b at Lincoln Financial (8% of portfolio)
8% VG Total Bond Market Index (VBTLX) (.05%)

His HSA at Lively/TD Ameritrade (1% of portfolio)
1% SPDR Portfolio Total Market (SPTM) (.03%)

His Roth IRA at Fidelity (2% of portfolio)
2% FID Total Market Index (FSKAX) (.015%)
sawhorse wrote:As you're close to retirement, am I right to assume you want a large bond allocation? TIAA Traditional is currently yielding more than bond index funds, so I recommend considering that for your bond allocation. As you said, the withdrawal rules are onerous, but I still think it's a good option.
Thanks for suggesting that I keep looking at TIAA Traditional. As I read more, I think I'm starting to understand the distribution options more. I think going this way or not will hinge on our ability to spread payout over 7 years and/or if we want the option to lock in some additional guaranteed income. I'll keep playing with our projections and reading up on it. Our plan as of right now is to keep the bond allocation at 40% as we approach retirement (and staying there for the long term).

Also, thanks for the nudge on the emergency fund. Our jobs are relatively secure (both are tenured) and we could shift some of our monthly retirement contributions toward a particularly expensive emergency. That said, we've been gradually building our fund back up to 4-5 months after a few expensive surprises earlier this year.

Thanks again to you both.
Last edited by Rain on Mon Sep 30, 2019 7:53 am, edited 1 time in total.
User avatar
Duckie
Posts: 9777
Joined: Thu Mar 08, 2007 1:55 pm

Re: Workplace plan changing from Fidelity to TIAA or DCP (ICMA-RC) (Virginia)

Post by Duckie »

Rain wrote:Her 401a at TIAA (35% of portfolio)
8% BlackRock U.S. Debt Index Fund M (.03%)
7% BlackRock Equity Index Fund J (.01%)
8 + 7 = 15%. Where is the other 20%?
crefwatch
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Location: New Jersey, USA
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Re: Workplace plan changing from Fidelity to TIAA or DCP (ICMA-RC) (Virginia)

Post by crefwatch »

As a TIAA Participant since 1975, I want to make a different suggestion. I once was a big booster, but it's not the same company it was in 1975. Maybe you want to focus instead of your (close - in) retirement years a little more. Will you be consolidating those many accounts a bit? Do you want to simplify your life? Compare both spouses' ages and consider whether the survivor wants to become an investment expert. It sounds like you have already thought about what income streams you want to have in retirement.

Even though TIAA has some swell accounts (and it would be stupid of me to suggest that retirees don't need good investment options ... ), just how important is it for you to learn about a new set of options for only four more years of accumulation, and then it's all decumulation?

To be more specific, TIAA lost my loyalty when they multiclasses the CREF Accounts. What does that mean? It means they doubled my expense ratios because I worked exclusively for Not For Profits with fewer than 250 employees. I understand TIAA Traditional because I've been in it for so long. But if you look over at the busy Morningstar TIAA board, you'll find endless confusion, and even (misplaced, in my opinion) fear and loathing of it.

https://community.morningstar.com/t5/TI ... /bd-p/TIAA

Unfortunately, each contract with each institution for TIAA is separate. This doesn't just mean investment options, but also rules for withdrawing funds before departure or before retirement. It's a maze, and much of it is hidden from you (if not from your institution's Investment Committee.)

It's hard to research, but you might want to try to find out how easy the companies you named are in allowing/encouraging/facilitating departing customers. To read on the Morningstar newsboard, and from my personal experience, TIAA doesn't make it easy. They are notorious for requiring "Proof of Separation from Service."

You don't "need" TIAA Traditional or TIAA Real Estate to have a good retirement. You seem to know Fidelity very well. I'd stay, stick with it as much as you can, and as soon as you stop working, roll everything from the last 4 years over to Fidelity. (I know, there are considerations about the difference between 403/457 plans and IRAs.)
Topic Author
Rain
Posts: 37
Joined: Sun Aug 12, 2018 6:24 am

Re: Workplace plan changing from Fidelity to TIAA or DCP (ICMA-RC) (Virginia)

Post by Rain »

Duckie wrote: Sun Sep 29, 2019 6:04 pm
Rain wrote:Her 401a at TIAA (35% of portfolio)
8% BlackRock U.S. Debt Index Fund M (.03%)
7% BlackRock Equity Index Fund J (.01%)
8 + 7 = 15%. Where is the other 20%?
Thanks for the catch. That should have been:
Her 401a at TIAA (35% of portfolio)
28% BlackRock U.S. Debt Index Fund M (.03%)
7% BlackRock Equity Index Fund J (.01%)[/quote]

I'll fix it in my earlier post, too.
Topic Author
Rain
Posts: 37
Joined: Sun Aug 12, 2018 6:24 am

Re: Workplace plan changing from Fidelity to TIAA or DCP (ICMA-RC) (Virginia)

Post by Rain »

crefwatch wrote: Sun Sep 29, 2019 6:09 pm As a TIAA Participant since 1975, I want to make a different suggestion.
I appreciate you sharing your first-hand experience and calling attention to the value of simplifying. TIAA Traditional would add complexity--and perhaps for not much benefit for only 4 years. It sounds like even if I go with mutual funds through TIAA, I should review the plan's "proof of separation of service" rules. Thank you!
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