TIAA Traditional: My Best "Bond" Fund?

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Tdubs
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TIAA Traditional: My Best "Bond" Fund?

Post by Tdubs » Sun Mar 08, 2020 10:50 am

During this market correction, I've managed to restrain myself from doing anything with my equity and bond funds. But on Friday, February 28, I made a decision. My TIAA traditional offered a 3.5% lifetime rate (and would reset to the lower March rate on Monday). I do not expect to see that guaranteed return for several years, at best. I have the illiquid kind of TIAA traditional--withdrawl options are RMD, convert to an annuity, or take ten even withdrawals over 9 years. I will retire in about six years at about 67-68 years. I've read with interest the threads last year concluding that TIAA traditional is not a better investment compared to typical broad market bond funds over long time horizons, but my horizon is about 6-10 years.

So I moved all of my TIAA real estate (TREA) to traditional. I expect TREA is going to have performance issues given its exposure to retail malls. Traditional is now about 28% of my portfolio paying me about 3.8% across all vintages.

My question is what to do with new contributions going forward. As long as TIAA continues to guarantee a 3% minimum return, this seems like an attractive alternative to adding new money to my bond funds. Bonds make up about 20% of my portfolio. About 6% is cash, 45% equities.

Thoughts?

aristotelian
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Re: TIAA Traditional: My Best "Bond" Fund?

Post by aristotelian » Sun Mar 08, 2020 11:01 am

I am keeping an eye on what they do with new vintages as well as "additional amount" component in what appears to be an era of unprecedented low interest rates. Hopefully TIAA's stockpile of 30Y Treasuries will smooth things out and keep Traditional sustainable. So far so good. About half of our bond allocation is in TIAA Traditional. Unfortunately my version is only getting 1.0% or 1.7% guaranteed depending on vintage, but overall crediting rate is 4.16%. I just wonder how long they can sustain that yield. Even 1.0% compares favorably to the 10Y Treasury right now!

ExitStageLeft
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Re: TIAA Traditional: My Best "Bond" Fund?

Post by ExitStageLeft » Sun Mar 08, 2020 11:16 am

Tdubs wrote:
Sun Mar 08, 2020 10:50 am
...
Thoughts?
I have some friends that retired from careers as teachers and they love their TIAA traditional. My only thought is to make sure you have some asset you can readily liquidate if needed.

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Tdubs
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Re: TIAA Traditional: My Best "Bond" Fund?

Post by Tdubs » Sun Mar 08, 2020 12:03 pm

ExitStageLeft wrote:
Sun Mar 08, 2020 11:16 am
Tdubs wrote:
Sun Mar 08, 2020 10:50 am
...
Thoughts?
I have some friends that retired from careers as teachers and they love their TIAA traditional. My only thought is to make sure you have some asset you can readily liquidate if needed.
Yes, I will have liquidity elsewhere in my portfolio, and if need be, I could get a 1/10 of this account right away.

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Tdubs
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Re: TIAA Traditional: My Best "Bond" Fund?

Post by Tdubs » Sun Mar 08, 2020 12:08 pm

aristotelian wrote:
Sun Mar 08, 2020 11:01 am
I am keeping an eye on what they do with new vintages as well as "additional amount" component in what appears to be an era of unprecedented low interest rates. Hopefully TIAA's stockpile of 30Y Treasuries will smooth things out and keep Traditional sustainable. So far so good. About half of our bond allocation is in TIAA Traditional. Unfortunately my version is only getting 1.0% or 1.7% guaranteed depending on vintage, but overall crediting rate is 4.16%. I just wonder how long they can sustain that yield. Even 1.0% compares favorably to the 10Y Treasury right now!
I wonder too. That is what is striking about this moment in time. TIAA is offering a return far above the bond market from a fund that is usually considered as safe a bet as there is outside Treasurys. How long does that last? They may have to abandon their 3% guarantee for new money at some point.

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Re: TIAA Traditional: My Best "Bond" Fund?

Post by aristotelian » Tue May 05, 2020 3:47 pm

Tdubs wrote:
Sun Mar 08, 2020 12:08 pm
aristotelian wrote:
Sun Mar 08, 2020 11:01 am
I am keeping an eye on what they do with new vintages as well as "additional amount" component in what appears to be an era of unprecedented low interest rates. Hopefully TIAA's stockpile of 30Y Treasuries will smooth things out and keep Traditional sustainable. So far so good. About half of our bond allocation is in TIAA Traditional. Unfortunately my version is only getting 1.0% or 1.7% guaranteed depending on vintage, but overall crediting rate is 4.16%. I just wonder how long they can sustain that yield. Even 1.0% compares favorably to the 10Y Treasury right now!
I wonder too. That is what is striking about this moment in time. TIAA is offering a return far above the bond market from a fund that is usually considered as safe a bet as there is outside Treasurys. How long does that last? They may have to abandon their 3% guarantee for new money at some point.
I see the crediting rate for my version is now flat 3% (1% guaranteed) vs 3.5% for April. The 3% rate is good through May 31. I would not be surprised to see new vintages drop below 3% in June. I was already thinking of buying some EE bonds while buying stocks in my TIAA plan, and this affirms my thinking. Overall TIAA is still paying me 4.16% so I can't complain.

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Re: TIAA Traditional: My Best "Bond" Fund?

Post by JohnDoh » Tue May 05, 2020 4:15 pm

Tdubs wrote:
Sun Mar 08, 2020 10:50 am
During this market correction, I've managed to restrain myself from doing anything with my equity and bond funds. But on Friday, February 28, I made a decision. My TIAA traditional offered a 3.5% lifetime rate (and would reset to the lower March rate on Monday). I do not expect to see that guaranteed return for several years, at best. I have the illiquid kind of TIAA traditional--withdrawl options are RMD, convert to an annuity, or take ten even withdrawals over 9 years. I will retire in about six years at about 67-68 years. I've read with interest the threads last year concluding that TIAA traditional is not a better investment compared to typical broad market bond funds over long time horizons, but my horizon is about 6-10 years.

So I moved all of my TIAA real estate (TREA) to traditional. I expect TREA is going to have performance issues given its exposure to retail malls. Traditional is now about 28% of my portfolio paying me about 3.8% across all vintages.

My question is what to do with new contributions going forward. As long as TIAA continues to guarantee a 3% minimum return, this seems like an attractive alternative to adding new money to my bond funds. Bonds make up about 20% of my portfolio. About 6% is cash, 45% equities.

Thoughts?
1) May I ask why you say "lifetime" rate?

My understanding of the TIAA TRAD vintage system is that the vintage crediting rates are explicitly NOT guaranteed to persist beyond the current crediting year (which I believe ends at the end of February). Moreover, older vintages are sometimes (often?) consolidated at a crediting rate initially determined at the time of consolidation. As far as I know, the only "guarantee" is that the crediting rate will never go below the "guaranteed rate" ... "subject to the claims paying ability of TIAA".

Thus, for example, I have vintages from 2008, 2012, etc. that originally had very high crediting rates (e.g. 4.25%) that are now paying much less (but still comparatively excellent rates; e.g. 3.3%).

2) Nonetheless, I am about your age and life stage and did something similar in March. I moved my 403b TREA into RC (illiquid) TRAD at 3.5% and my ROTH IRA TRAD into equities (mostly). Based on my past experience I am hoping/expecting that the 3.5% crediting rate will persist for several years and then gradually decline. But no guarantee about that. In any case, I expect to beginning tapping this in about 10 years, so I think it is the best nearly-risk-free thing I could do at this point.

3) As to the future, I am mentally earmarking my new contributions to be put into TREA after it bottoms-out at some unknown point in the future. I may never be able to get back to my previous TREA allocation but I'd like to get as close as I can. After all, it's a great (and unique!) investment. So I'm putting a tiny amount each month into TREA just to keep a position and practice going and parking the rest in money market and liquid TRAD.

4) If things work to plan, someday I'll be moving my accumulated 403b contributions into TREA and rebalancing out of equities into TREA in my ROTH IRA.

5) There have been some threads at the Morningstar TIAA forum and also here on the "strength" / "solvency" of the TIAA General Account in light of the 3% guarantee (G)(S)RA TRAD. FWIW, my take is that TIAA is going to be sound for my lifetime and that if/when it does "fail" it will be a "soft" failure (in the sense that perhaps TIAA's "claims-paying ability" will not sustain 3% and folks will get 2.5% or something. i.e. a haircut not a decapitation. I can live with a possible haircut. A decapitation, however, might be fatal. :shock:

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Re: TIAA Traditional: My Best "Bond" Fund?

Post by crefwatch » Wed May 06, 2020 2:20 pm

I agree that the term "lifetime rate" in the OP is not correct. My TIAA Traditional in an "RA" account is now paying 3.0% on "new money", while my oldest vintages are slightly above 4% total. While it is perfectly true that the rate-setting process is completely opaque to us (except of course for the new, announced rates ... ), TIAA has suggested that TIAA Traditional rates tend to be near the 10-year Treasury rate, with the appropriate "floor" for each type of account.

Because the OP says his horizon is 6-10 years, I think it is important to consider that interest rates can only go up, if and when they change. That means a "real" bond fund will go down. That can't happen in TIAA Traditional - the principal amount is guaranteed by TIAA, a NY State chartered insurance company with an A.M. Best rating of A++.

Certainly the TIAA General Account is not guaranteed by the US Government. But it's a bit lurid to talk about (hard or soft) failure of TIAA. They had a guaranteed rate they couldn't sustain in the first half of the twentieth century, and they kept their promises to existing product holders, while changing the guarantee to 3%. For several years now, they have been avoiding writing new business with a 3% guarantee, yet often paying that much. (I mean in RC and RCP plans.)

It is true that I can still use TIAA Traditional at 3% in my 1974-1979 employer's plan, an RA account. But my (old, i.e. originally 3%) TIAA IRA no longer offers 3% for new investments in TIAA Traditional. My "old money" in the IRA still earns 3%, however. That is referred to as "frozen", but that really means, "withdrawal only."

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Re: TIAA Traditional: My Best "Bond" Fund?

Post by nisiprius » Wed May 06, 2020 3:19 pm

I'm still not clear on this, but my TIAA Traditional--and it was a big chunk of my total portfolio--could not be liquidated quickly. There were restrictions on it; if you didn't want to annuitize it as a lifetime contract, the only way you could get your money out was via a "transfer payout annuity" which paid it out as ten roughly equal annual payments.

I set up my spreadsheet so that I could count things in more than one way. For many purposes I counted TIAA Traditional as "bonds," but since it wasn't really liquid, for some purposes I don't think it is really quite the same thing.

I've heard since in this forum that there is apparently more than one kind or flavor of TIAA Traditional and some do not have that restriction? What is the case with yours?
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Re: TIAA Traditional: My Best "Bond" Fund?

Post by ResearchMed » Wed May 06, 2020 3:37 pm

nisiprius wrote:
Wed May 06, 2020 3:19 pm
I'm still not clear on this, but my TIAA Traditional--and it was a big chunk of my total portfolio--could not be liquidated quickly. There were restrictions on it; if you didn't want to annuitize it as a lifetime contract, the only way you could get your money out was via a "transfer payout annuity" which paid it out as ten roughly equal annual payments.

I set up my spreadsheet so that I could count things in more than one way. For many purposes I counted TIAA Traditional as "bonds," but since it wasn't really liquid, for some purposes I don't think it is really quite the same thing.

I've heard since in this forum that there is apparently more than one kind or flavor of TIAA Traditional and some do not have that restriction? What is the case with yours?
We've got the 3% guaranteed minimum TIAA Traditional in our 403b accounts, with that same "10 approx equal annual payments" for the TPA (transfer payout annuity). That is for money contributed by EmployER.
And once that TPA has been initiated, with whatever amount is chosen, that is irrevocable. It also comes with (or used to?) a 2.5% guaranteed min, not the 3% min.

However, for money contributed by the EmployEE, we've now got the 3% guaranteed minimum in the fully liquid version.
The only delay would be due to some paperwork, including getting a form notarized, but that can be done online nowadays, at least for TIAA for someone in our state. There are no restrictions on how frequently money can be moved out.
There was a notation that if money is removed and put back within (was it 120 day?) it will get the same interest rate as if it had not been removed in the first place.

There are also yet other flavors of Trad Ann.

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Re: TIAA Traditional: My Best "Bond" Fund?

Post by anonenigma » Wed May 06, 2020 4:02 pm

TIAA Traditional is a great mystery. I was on a retirement oversight committee, and about five years ago, when TIAA was our plan provider, one of its experts called in to our meeting and went through a PowerPoint with us. I understood the Traditional less after the presentation.

There are several types of TIAA Traditional. At one point, I held it in my 403(b), my 457(b) and my Roth IRA. All had a 3% minimum guarantee and were fully liquid. Then things changed. TIAA changed the Roth IRA so that new contributions/transfers had only a 1% guarantee. I kept my money there earning 3% (never more) and directed new contributions to Vanguard. Things also changed with my school district's 457(b) - a long story - and the guarantee went from 3% to 1%, though I don't believe it ever paid less than 3%. It remained fully liquid for participants, but there was a catch when TIAA didn't bid on contract renewal and the district switched to a new plan provider. It wasn't liquid for the district if the funds (substantial) invested in TIAA Traditional were mapped to a stable value fund with the new vendor. There were penalties for the district if the funds were moved over less than ten years. So the district allowed plan participants to keep old money at TIAA with any new stable value contributions directed to the new plan provider. A bit messy from a compliance perspective

After I retired, I moved the TIAA Traditional funds in my 457(b) to TIAA Traditional in my 403(b), which was an old contract with the district. At that time, for reasons that aren't clear, the Trad was paying an extra 0.25% in the 403(b), and I also saved the 457(b)'s 0.22% plan charge - a gain of almost half a percent for me.

I love the TIAA Traditional, but I've given up trying to understand it.

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Re: TIAA Traditional: My Best "Bond" Fund?

Post by talzara » Wed May 06, 2020 6:18 pm

nisiprius wrote:
Wed May 06, 2020 3:19 pm
I'm still not clear on this, but my TIAA Traditional--and it was a big chunk of my total portfolio--could not be liquidated quickly. There were restrictions on it; if you didn't want to annuitize it as a lifetime contract, the only way you could get your money out was via a "transfer payout annuity" which paid it out as ten roughly equal annual payments. ... I've heard since in this forum that there is apparently more than one kind or flavor of TIAA Traditional and some do not have that restriction?
There are five types of TIAA annuity contracts. The withdrawal restrictions are described on page 3 of the TIAA contract comparison document: https://www.tiaa.org/public/pdf/RC_Comp ... _8_fin.pdf

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Re: TIAA Traditional: My Best "Bond" Fund?

Post by crefwatch » Wed May 06, 2020 8:01 pm

It is less evident TODAY, but for decades, the less-liquid versions of TIAA Traditional paid from 0.25% to 0.75% or 1% larger interest rates than the less liquid versions. Obviously, when both types are at their interest floor, 3% = 3%. The difference was related to TIAA's opportunity to buy longer-term assets to fund the additional interest.

Since these are my retirement funds, I have never hated the nine-years-and-a-day lockup. Indeed, when I joined the plan in 1975, there was no way to get money out of TIAA without a lifetime annuity. That was clearly disclosed at the time. I consider the several ways available now to be quite "lax", in comparison.

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Re: TIAA Traditional: My Best "Bond" Fund?

Post by grabiner » Wed May 06, 2020 9:19 pm

crefwatch wrote:
Wed May 06, 2020 8:01 pm
It is less evident TODAY, but for decades, the less-liquid versions of TIAA Traditional paid from 0.25% to 0.75% or 1% larger interest rates than the less liquid versions. Obviously, when both types are at their interest floor, 3% = 3%. The difference was related to TIAA's opportunity to buy longer-term assets to fund the additional interest.
The reason is that the less-liquid version has a duration of 4.5 years, while the liquid version has zero duration. If rates rise, TIAA Traditional yields may not rise as fast on existing assets, and if you want to get rid of the lower-yielding holdings, you can only do it over a nine-year period.
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Re: TIAA Traditional: My Best "Bond" Fund?

Post by Tdubs » Thu May 07, 2020 8:12 pm

JohnDoh wrote:
Tue May 05, 2020 4:15 pm
Tdubs wrote:
Sun Mar 08, 2020 10:50 am
During this market correction, I've managed to restrain myself from doing anything with my equity and bond funds. But on Friday, February 28, I made a decision. My TIAA traditional offered a 3.5% lifetime rate (and would reset to the lower March rate on Monday). I do not expect to see that guaranteed return for several years, at best. I have the illiquid kind of TIAA traditional--withdrawl options are RMD, convert to an annuity, or take ten even withdrawals over 9 years. I will retire in about six years at about 67-68 years. I've read with interest the threads last year concluding that TIAA traditional is not a better investment compared to typical broad market bond funds over long time horizons, but my horizon is about 6-10 years.

So I moved all of my TIAA real estate (TREA) to traditional. I expect TREA is going to have performance issues given its exposure to retail malls. Traditional is now about 28% of my portfolio paying me about 3.8% across all vintages.

My question is what to do with new contributions going forward. As long as TIAA continues to guarantee a 3% minimum return, this seems like an attractive alternative to adding new money to my bond funds. Bonds make up about 20% of my portfolio. About 6% is cash, 45% equities.

Thoughts?
1) May I ask why you say "lifetime" rate?

My understanding of the TIAA TRAD vintage system is that the vintage crediting rates are explicitly NOT guaranteed to persist beyond the current crediting year (which I believe ends at the end of February). Moreover, older vintages are sometimes (often?) consolidated at a crediting rate initially determined at the time of consolidation. As far as I know, the only "guarantee" is that the crediting rate will never go below the "guaranteed rate" ... "subject to the claims paying ability of TIAA".

Thus, for example, I have vintages from 2008, 2012, etc. that originally had very high crediting rates (e.g. 4.25%) that are now paying much less (but still comparatively excellent rates; e.g. 3.3%).

2) Nonetheless, I am about your age and life stage and did something similar in March. I moved my 403b TREA into RC (illiquid) TRAD at 3.5% and my ROTH IRA TRAD into equities (mostly). Based on my past experience I am hoping/expecting that the 3.5% crediting rate will persist for several years and then gradually decline. But no guarantee about that. In any case, I expect to beginning tapping this in about 10 years, so I think it is the best nearly-risk-free thing I could do at this point.

3) As to the future, I am mentally earmarking my new contributions to be put into TREA after it bottoms-out at some unknown point in the future. I may never be able to get back to my previous TREA allocation but I'd like to get as close as I can. After all, it's a great (and unique!) investment. So I'm putting a tiny amount each month into TREA just to keep a position and practice going and parking the rest in money market and liquid TRAD.

4) If things work to plan, someday I'll be moving my accumulated 403b contributions into TREA and rebalancing out of equities into TREA in my ROTH IRA.

5) There have been some threads at the Morningstar TIAA forum and also here on the "strength" / "solvency" of the TIAA General Account in light of the 3% guarantee (G)(S)RA TRAD. FWIW, my take is that TIAA is going to be sound for my lifetime and that if/when it does "fail" it will be a "soft" failure (in the sense that perhaps TIAA's "claims-paying ability" will not sustain 3% and folks will get 2.5% or something. i.e. a haircut not a decapitation. I can live with a possible haircut. A decapitation, however, might be fatal. :shock:
Can't say what I was thinking when I wrote "lifetime" two months ago since I well know my older vintages have reset periodically and are not guaranteed past this year. :oops:

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Re: TIAA Traditional: My Best "Bond" Fund?

Post by crefwatch » Fri May 08, 2020 6:54 am

grabiner, there is no imperative to “get rid of the lower yielding holdings.” TIAA Traditional interest rises quickly (if opaquely) when rates rise.

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Re: TIAA Traditional: My Best "Bond" Fund?

Post by GMT-8 » Fri May 08, 2020 7:23 am

We are 7 years into the withdrawals phase, transferring money out of TIAA Trad contracts from the late 70s to late 80s into an IRA at Vanguard.

Neither my wife nor I ever understood how it worked; indeed it was from an era where the institution virtually said “don’t try to understand it! You’re a professor; worry about your area of expertise and just trust us, we’ll take care of you when you are old.”

It makes me mad every time I think about it the only comparable financial blunder I’ve made was buying life insurance from Fireman’s Fund but that we escaped quickly. Over 3 1/2 decades with TIAA I’ve always felt we under-earned, but I can’t prove anything except that it’s an insurance product, not an investment.

Having said that, many love it.

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Re: TIAA Traditional: My Best "Bond" Fund?

Post by crefwatch » Fri May 08, 2020 8:44 am

GMT-8, you are certainly "correct" in that the adage, "Don't own an investment you don't understand" is a good one. I appreciate that you added, "... can't prove anything." Have you not noticed how well TIAA Traditional did for owners in the last three years? Back when interest rates climbed in 1980's, people must have lost a lot of money in Bond mutual funds. But TIAA Traditional lost zero principal, and paid double-digit interest.

I'll add that your withdrawal process from TIAA Traditional is without surrender fees. Isn't that a hint that it's not a predatory product? There are good fixed annuities and evil fixed annuities.

As far as your old school's promise goes, I remember when I was a graduate student in the 1970's, every faculty member I worked with who retired reported that his (TIAA-CREF) payments exceeded his retirement-year salary. It seems like their promise was truthful. (And inflation hasn't been punishingly high, since the 80's ended.)

I don't dispute that TIAA Traditional is not right for you. And I no longer recommend that people who have a choice select TIAA over other companies (Fidelity, Vanguard) with access to reasonable-fee investment options. But the fact is that TIAA-CREF served generations of faculty and researchers very well. It's not as virtuous a company today. But "old" TIAA Traditional accounts have not changed. They are contracts and they can't be changed.

Since so many Bogleheads loooove bank CDs with withdrawal restrictions, I am always puzzled by posters who rail at TIAA Traditional's (in some types of account) withdrawal rules. Why does it bother you so much? Is it factually correct that you won't have sufficient retirement income if you don't grab your money and get out now?

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Re: TIAA Traditional: My Best "Bond" Fund?

Post by leviathan » Fri May 08, 2020 8:47 am

I have some money at TIAA 403b account from my previous job.
I don't quite understand how TIAA Traditional works.
It seems to give an incentive of a guaranteed minimum 3% interest to keep the money in the "fund". At the retirement, I will have an option to use the money in TIAA traditional to receive an annuity. But I am hesitant to put any money there because I am not sure about the withdrawal options for the money in TIAA Traditional. I couldn't find any documentation about specific withdrawal options for my account.
Is my understanding correct? Any suggestions to find out about withdrawal options?

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Re: TIAA Traditional: My Best "Bond" Fund?

Post by crefwatch » Fri May 08, 2020 12:07 pm

leviathan, I'm sorry to respond to your question with a link to a 12-page document! But we all agree that TIAA Traditional is hard to understand.

https://www.tiaa.org/public/pdf/TT_FAQ.pdf

Here is a less easy-to-read 12-page document, to download for possible future reading:

https://www.tiaa.org/public/pdf/complia ... -paper.pdf

Don't take this personally, but I'm always astounded when people say that they don't even know "what kind" of TIAA Traditional they have. I agree with the earlier post that (long ago), employers said, "keep quiet and trust us!" But today Bogleheads fuss over 0.06% ERs versus 0.10% ERs! If you get quarterly statements from TIAA, please turn to the page with the details for your TIAA Trad holdings. Does it say something like "Retirement Annuity" [RA] or "Retirement Choice Plus Annuity" [RCP}?

I never ask people to name their employer, but, maybe because I'm retired, I have no hesitation about saying that my TIAA plans include Amherst College, Lincoln Center for the Performing Arts, and New York City Center Theater. I also have an IRA and a Roth IRA, both with brokerage platforms added. (Note that I previously posted that I no longer "recommend" TIAA (TIAA-CREF) for people who have another choice. I'm responding to your question, not making recommendations for a random poster.)

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Re: TIAA Traditional: My Best "Bond" Fund?

Post by tibbitts » Fri May 08, 2020 12:15 pm

leviathan wrote:
Fri May 08, 2020 8:47 am
I have some money at TIAA 403b account from my previous job.
I don't quite understand how TIAA Traditional works.
It seems to give an incentive of a guaranteed minimum 3% interest to keep the money in the "fund". At the retirement, I will have an option to use the money in TIAA traditional to receive an annuity. But I am hesitant to put any money there because I am not sure about the withdrawal options for the money in TIAA Traditional. I couldn't find any documentation about specific withdrawal options for my account.
Is my understanding correct? Any suggestions to find out about withdrawal options?
Have you asked TIAA?

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Re: TIAA Traditional: My Best "Bond" Fund?

Post by leviathan » Wed May 13, 2020 8:42 pm

crefwatch wrote:
Fri May 08, 2020 12:07 pm
leviathan, I'm sorry to respond to your question with a link to a 12-page document! But we all agree that TIAA Traditional is hard to understand.

https://www.tiaa.org/public/pdf/TT_FAQ.pdf

Here is a less easy-to-read 12-page document, to download for possible future reading:

https://www.tiaa.org/public/pdf/complia ... -paper.pdf

Don't take this personally, but I'm always astounded when people say that they don't even know "what kind" of TIAA Traditional they have. I agree with the earlier post that (long ago), employers said, "keep quiet and trust us!" But today Bogleheads fuss over 0.06% ERs versus 0.10% ERs! If you get quarterly statements from TIAA, please turn to the page with the details for your TIAA Trad holdings. Does it say something like "Retirement Annuity" [RA] or "Retirement Choice Plus Annuity" [RCP}?

I never ask people to name their employer, but, maybe because I'm retired, I have no hesitation about saying that my TIAA plans include Amherst College, Lincoln Center for the Performing Arts, and New York City Center Theater. I also have an IRA and a Roth IRA, both with brokerage platforms added. (Note that I previously posted that I no longer "recommend" TIAA (TIAA-CREF) for people who have another choice. I'm responding to your question, not making recommendations for a random poster.)
Thanks for the reply. My account starts with RA. I read pdf files. I think I have a better understanding now.

leviathan
Posts: 22
Joined: Tue Jul 09, 2019 3:03 pm

Re: TIAA Traditional: My Best "Bond" Fund?

Post by leviathan » Wed May 13, 2020 8:46 pm

tibbitts wrote:
Fri May 08, 2020 12:15 pm
leviathan wrote:
Fri May 08, 2020 8:47 am
I have some money at TIAA 403b account from my previous job.
I don't quite understand how TIAA Traditional works.
It seems to give an incentive of a guaranteed minimum 3% interest to keep the money in the "fund". At the retirement, I will have an option to use the money in TIAA traditional to receive an annuity. But I am hesitant to put any money there because I am not sure about the withdrawal options for the money in TIAA Traditional. I couldn't find any documentation about specific withdrawal options for my account.
Is my understanding correct? Any suggestions to find out about withdrawal options?
Have you asked TIAA?
I just asked TIAA. As I suspected, it is not liquid. Withdrawal/transfer would be for 10-year period.

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ResearchMed
Posts: 10273
Joined: Fri Dec 26, 2008 11:25 pm

Re: TIAA Traditional: My Best "Bond" Fund?

Post by ResearchMed » Wed May 13, 2020 10:39 pm

leviathan wrote:
Wed May 13, 2020 8:46 pm
tibbitts wrote:
Fri May 08, 2020 12:15 pm
leviathan wrote:
Fri May 08, 2020 8:47 am
I have some money at TIAA 403b account from my previous job.
I don't quite understand how TIAA Traditional works.
It seems to give an incentive of a guaranteed minimum 3% interest to keep the money in the "fund". At the retirement, I will have an option to use the money in TIAA traditional to receive an annuity. But I am hesitant to put any money there because I am not sure about the withdrawal options for the money in TIAA Traditional. I couldn't find any documentation about specific withdrawal options for my account.
Is my understanding correct? Any suggestions to find out about withdrawal options?
Have you asked TIAA?
I just asked TIAA. As I suspected, it is not liquid. Withdrawal/transfer would be for 10-year period.
Not that it makes a big difference, but the withdrawal period for the 10 payments is for 9 years and one day.
There is payment #1, and then another approximately equal payment at the same time for the next 9 years.

You aren't alone in not quite understanding how TIAA's Trad Ann "works".
There is that guarantee of 3% (for the flavor that you are describing). Then there is the "extra" amount in many years, and from discussions here and also on the Morningstar Forum about TIAA, no one is really sure how that "extra" amount is calculated. There is definitely a "black box" aspect to that.
In years when interest rates/inflation is higher, the extra amount, above the 3%, has been higher, too.

But many of us feel comfortable with the fund - or we would have transferred the money out.
That is often because of the possibility of annuitizing that, making it into a single or joint life annuity. (Those have several options for how it is split when there is only one survivor.)

And many of us have parents who, for many decades, received those TIAA Trad Ann payments, which works like a sort of personal pension. MIL will have her 100th birthday, we hope, in a very few months. She is still getting her TIAA Trad Ann payments like clockwork.

RM
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