TIAA traditional vs. Vanguard Total Market Bond index

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boglethat
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TIAA traditional vs. Vanguard Total Market Bond index

Post by boglethat » Mon May 18, 2020 3:10 pm

Hi,

I want to move some money out of TIAA real estate and into either TIAA Traditional or the Vanguard Total Market Bond Index Fund which I can get under my TIAA account. The 10 year return on the Vanguard bond index has been 3.86% and has a 0.04% expense ratio. I could get 3% on the TIAA Traditional and I could only take it out over 10 years but that is not an issue since I would not put so much in and when I die my kids could get it out in a lump sum. The Vanguard Fund holds a lot of treasuries. Can anyone enlighten me what might happen with the fund and suggest which I do? The money I am looking to move is about 10% of what I have invested with TIAA Cref and about 5% of my total holdings.

livesoft
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Re: TIAA traditional vs. Vanguard Total Market Bond index

Post by livesoft » Mon May 18, 2020 3:16 pm

Both are good choices. I talked to TIAA today on the phone about doing something similar. What is the current guaranteed rate on the TIAA? For me it was 3%. What is your rate? (Oh, you wrote that it is 3%.) Back in March, I switched some and my newly acquired bond fund shares are up more than 5% while the TIAA TA is up about 0.3%. Let's just say that I enjoy 5% more than I enjoy 0.3%.

Today I actually switched to the bond fund and not TIAA Traditional Annuity because I did not want to do a TPA again and bonds are fine. Also I already have some TIAA paying 3% with full liquidity and no TPA needed to withdraw.

As for what is fine for you, you ask a question that NO ONE can legitimately answer for you. I can state that over the long-term past, TIAA Traditional Annuity and Total US Bond Index have performed about the same. Sometimes TIAA does better and sometimes the bond fund does better, but over the long term they come out about the same.
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macher
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Re: TIAA traditional vs. Vanguard Total Market Bond index

Post by macher » Mon May 18, 2020 4:31 pm

livesoft wrote:
Mon May 18, 2020 3:16 pm
Both are good choices. I talked to TIAA today on the phone about doing something similar. What is the current guaranteed rate on the TIAA? For me it was 3%. What is your rate? (Oh, you wrote that it is 3%.) Back in March, I switched some and my newly acquired bond fund shares are up more than 5% while the TIAA TA is up about 0.3%. Let's just say that I enjoy 5% more than I enjoy 0.3%.

Today I actually switched to the bond fund and not TIAA Traditional Annuity because I did not want to do a TPA again and bonds are fine. Also I already have some TIAA paying 3% with full liquidity and no TPA needed to withdraw.

As for what is fine for you, you ask a question that NO ONE can legitimately answer for you. I can state that over the long-term past, TIAA Traditional Annuity and Total US Bond Index have performed about the same. Sometimes TIAA does better and sometimes the bond fund does better, but over the long term they come out about the same.
I have old TIAA Traditional churning at 4.25%. New money is 3%.

TIAA Traditional is less volatile than a bond index.

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Re: TIAA traditional vs. Vanguard Total Market Bond index

Post by livesoft » Mon May 18, 2020 4:35 pm

macher wrote:
Mon May 18, 2020 4:31 pm
TIAA Traditional is less volatile than a bond index.
So what? If one isn't looking at their investments, then they wouldn't even know that.

Also a big negative for TIAA TA is that it really cannot be used for rebalancing which is a big deal in the World of Bogleheads.
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Re: TIAA traditional vs. Vanguard Total Market Bond index

Post by galawdawg » Mon May 18, 2020 4:51 pm

Even though the TIAA traditional pays a good rate, we started moving my wife's TIAA traditional into VBTLX two years ago via TPA since her only options for accessing those funds was via the ten year TPA or through an annuity. Since we weren't interested in their annuity, we started the TPA process. We believed that the limitations on easy access to those funds (making them an illiquid asset) outweighed the guaranteed returns.

And while we don't know what the future performance of VBTLX will be, it has posted an average annual return of 10.86% over the past year, 5.15% over the past three years, 3.75% over the past five years and 3.90% over the past ten years. Year to date, the return is 5.03%.

bikechuck
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Re: TIAA traditional vs. Vanguard Total Market Bond index

Post by bikechuck » Mon May 18, 2020 4:51 pm

livesoft wrote:
Mon May 18, 2020 4:35 pm
macher wrote:
Mon May 18, 2020 4:31 pm
TIAA Traditional is less volatile than a bond index.
So what? If one isn't looking at their investments, then they wouldn't even know that.

Also a big negative for TIAA TA is that it really cannot be used for rebalancing which is a big deal in the World of Bogleheads.
I don't care that I cannot use TIAA Traditional for rebalancing as it only makes up a portion of my bond space. I can use my other bond funds for rebalancing. In today's market I wish that I had the ability to add more dollars to traditional at a guaranteed 3.0% yield or better still at the 4.0% that my vintages have been yielding for many years but alas and alak that ship has sailed.

livesoft
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Re: TIAA traditional vs. Vanguard Total Market Bond index

Post by livesoft » Mon May 18, 2020 4:54 pm

bikechuck wrote:
Mon May 18, 2020 4:51 pm
I don't care that I cannot use TIAA Traditional for rebalancing as it only makes up a portion of my bond space. I can use my other bond funds for rebalancing. In today's market I wish that I had the ability to add more dollars to traditional at a guaranteed 3.0% yield or better still at the 4.0% that my vintages have been yielding for many years but alas and alak that ship has sailed.
I am not you and made a different decision. We have different TIAA Traditional options available to us. I could put more in the 3% guaranteed any time I want to, but I choose not to at this time.
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boglethat
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Re: TIAA traditional vs. Vanguard Total Market Bond index

Post by boglethat » Mon May 18, 2020 5:38 pm

bikechuck wrote:
Mon May 18, 2020 4:51 pm
livesoft wrote:
Mon May 18, 2020 4:35 pm
macher wrote:
Mon May 18, 2020 4:31 pm
TIAA Traditional is less volatile than a bond index.
So what? If one isn't looking at their investments, then they wouldn't even know that.

Also a big negative for TIAA TA is that it really cannot be used for rebalancing which is a big deal in the World of Bogleheads.
I don't care that I cannot use TIAA Traditional for rebalancing as it only makes up a portion of my bond space. I can use my other bond funds for rebalancing. In today's market I wish that I had the ability to add more dollars to traditional at a guaranteed 3.0% yield or better still at the 4.0% that my vintages have been yielding for many years but alas and alak that ship has sailed.
Why do you wish you could add more? I understand today's equities markets are very volatile. I haven't paid much attention to the bond markets; have they been so volatile as well? Do you mean you expect that bond fund not to continue provide returns similar to the past?

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Re: TIAA traditional vs. Vanguard Total Market Bond index

Post by bikechuck » Mon May 18, 2020 5:52 pm

livesoft wrote:
Mon May 18, 2020 4:54 pm
bikechuck wrote:
Mon May 18, 2020 4:51 pm
I don't care that I cannot use TIAA Traditional for rebalancing as it only makes up a portion of my bond space. I can use my other bond funds for rebalancing. In today's market I wish that I had the ability to add more dollars to traditional at a guaranteed 3.0% yield or better still at the 4.0% that my vintages have been yielding for many years but alas and alak that ship has sailed.
I am not you and made a different decision. We have different TIAA Traditional options available to us. I could put more in the 3% guaranteed any time I want to, but I choose not to at this time.
I wish you nothing but the best with your investment strategy.

bikechuck
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Re: TIAA traditional vs. Vanguard Total Market Bond index

Post by bikechuck » Mon May 18, 2020 5:57 pm

boglethat wrote:
Mon May 18, 2020 5:38 pm
bikechuck wrote:
Mon May 18, 2020 4:51 pm
livesoft wrote:
Mon May 18, 2020 4:35 pm
macher wrote:
Mon May 18, 2020 4:31 pm
TIAA Traditional is less volatile than a bond index.
So what? If one isn't looking at their investments, then they wouldn't even know that.

Also a big negative for TIAA TA is that it really cannot be used for rebalancing which is a big deal in the World of Bogleheads.
I don't care that I cannot use TIAA Traditional for rebalancing as it only makes up a portion of my bond space. I can use my other bond funds for rebalancing. In today's market I wish that I had the ability to add more dollars to traditional at a guaranteed 3.0% yield or better still at the 4.0% that my vintages have been yielding for many years but alas and alak that ship has sailed.
Why do you wish you could add more? I understand today's equities markets are very volatile. I haven't paid much attention to the bond markets; have they been so volatile as well? Do you mean you expect that bond fund not to continue provide returns similar to the past?
I think that we will have low if not negative interest rates for an extended period of time so a 3.0% guaranteed yield looks pretty sweet to me at the current time. If conditions change half of my TIAA Traditional is in an SRA which is fully liquid and half in an RA which would need to be withdrawn over ten years.

Next year at the age of 67.5 I intend to begin interest only payments from traditional to help fund my living expenses. I am quite pleased with a 3.0% withdrawal rate.

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Re: TIAA traditional vs. Vanguard Total Market Bond index

Post by crefwatch » Mon May 18, 2020 6:14 pm

livesoft wrote:
Mon May 18, 2020 4:35 pm
macher wrote:
Mon May 18, 2020 4:31 pm
TIAA Traditional is less volatile than a bond index.
So what? If one isn't looking at their investments, then they wouldn't even know that.

Also a big negative for TIAA TA is that it really cannot be used for rebalancing which is a big deal in the World of Bogleheads.
Since interest rates are at historic lows, it's not an incidental benefit that Vanguard Total Bond Index will lose principal when rates, finally, rise, while TIAA Traditional will not lose principal under rising rates. Volatility is not the right word for the opposite of "guaranteed". (Not Federally, of course.)

While those who have the less liquid (and until recently, higher-yielding) version of TIAA Traditional may have limitations on their "rebalancing" from it, I'll observe that many, many investors increase their fixed-income allocation as they age. For all practical purposes, I've never "sold" any TIAA Traditional. But I'm not "overweight" in it.

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oldzey
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Re: TIAA traditional vs. Vanguard Total Market Bond index

Post by oldzey » Mon May 18, 2020 6:24 pm

OP, here's a link to an interesting comparison, FYI:

Is TIAA Traditional a Good Deal? - The Accumulation Phase

Image
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Topic Author
boglethat
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Re: TIAA traditional vs. Vanguard Total Market Bond index

Post by boglethat » Mon May 18, 2020 7:02 pm

bikechuck wrote:
Mon May 18, 2020 5:57 pm
boglethat wrote:
Mon May 18, 2020 5:38 pm
bikechuck wrote:
Mon May 18, 2020 4:51 pm
livesoft wrote:
Mon May 18, 2020 4:35 pm
macher wrote:
Mon May 18, 2020 4:31 pm
TIAA Traditional is less volatile than a bond index.
So what? If one isn't looking at their investments, then they wouldn't even know that.

Also a big negative for TIAA TA is that it really cannot be used for rebalancing which is a big deal in the World of Bogleheads.
I don't care that I cannot use TIAA Traditional for rebalancing as it only makes up a portion of my bond space. I can use my other bond funds for rebalancing. In today's market I wish that I had the ability to add more dollars to traditional at a guaranteed 3.0% yield or better still at the 4.0% that my vintages have been yielding for many years but alas and alak that ship has sailed.
Why do you wish you could add more? I understand today's equities markets are very volatile. I haven't paid much attention to the bond markets; have they been so volatile as well? Do you mean you expect that bond fund not to continue provide returns similar to the past?
I think that we will have low if not negative interest rates for an extended period of time so a 3.0% guaranteed yield looks pretty sweet to me at the current time. If conditions change half of my TIAA Traditional is in an SRA which is fully liquid and half in an RA which would need to be withdrawn over ten years.

Next year at the age of 67.5 I intend to begin interest only payments from traditional to help fund my living expenses. I am quite pleased with a 3.0% withdrawal rate.
Thanks for clarifying that. Any idea how long the 3% for TIAA Traditional will be available?

bikechuck
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Re: TIAA traditional vs. Vanguard Total Market Bond index

Post by bikechuck » Mon May 18, 2020 8:39 pm

boglethat wrote:
Mon May 18, 2020 7:02 pm
bikechuck wrote:
Mon May 18, 2020 5:57 pm
boglethat wrote:
Mon May 18, 2020 5:38 pm
bikechuck wrote:
Mon May 18, 2020 4:51 pm
livesoft wrote:
Mon May 18, 2020 4:35 pm

So what? If one isn't looking at their investments, then they wouldn't even know that.

Also a big negative for TIAA TA is that it really cannot be used for rebalancing which is a big deal in the World of Bogleheads.
I don't care that I cannot use TIAA Traditional for rebalancing as it only makes up a portion of my bond space. I can use my other bond funds for rebalancing. In today's market I wish that I had the ability to add more dollars to traditional at a guaranteed 3.0% yield or better still at the 4.0% that my vintages have been yielding for many years but alas and alak that ship has sailed.
Why do you wish you could add more? I understand today's equities markets are very volatile. I haven't paid much attention to the bond markets; have they been so volatile as well? Do you mean you expect that bond fund not to continue provide returns similar to the past?
I think that we will have low if not negative interest rates for an extended period of time so a 3.0% guaranteed yield looks pretty sweet to me at the current time. If conditions change half of my TIAA Traditional is in an SRA which is fully liquid and half in an RA which would need to be withdrawn over ten years.

Next year at the age of 67.5 I intend to begin interest only payments from traditional to help fund my living expenses. I am quite pleased with a 3.0% withdrawal rate.
Thanks for clarifying that. Any idea how long the 3% for TIAA Traditional will be available?
Nope

drzzzzz
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Re: TIAA traditional vs. Vanguard Total Market Bond index

Post by drzzzzz » Mon May 18, 2020 9:01 pm

Similar situation here, I have a 403B at TIAA and have no TIAA at this time, however my rep tells me tha in one of my contract plans I am able to purchase the non-liquid (ie future redemptions over 9 years and 1 day TIAA traditional), guaranteed to pay 3% a year which when compared to the current yield and interest rate risk of VBLTX or 10 year treasuries might be a win situation. I guess it all depends on what happens to rates in the future and the assumptions that you make. And while VBLTX has done well for me, there is likely less movement for bond fund appreciation since bonds have dropped so low already.

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Re: TIAA traditional vs. Vanguard Total Market Bond index

Post by tibbitts » Tue May 19, 2020 9:06 am

boglethat wrote:
Mon May 18, 2020 7:02 pm
bikechuck wrote:
Mon May 18, 2020 5:57 pm
boglethat wrote:
Mon May 18, 2020 5:38 pm
bikechuck wrote:
Mon May 18, 2020 4:51 pm
livesoft wrote:
Mon May 18, 2020 4:35 pm

So what? If one isn't looking at their investments, then they wouldn't even know that.

Also a big negative for TIAA TA is that it really cannot be used for rebalancing which is a big deal in the World of Bogleheads.
I don't care that I cannot use TIAA Traditional for rebalancing as it only makes up a portion of my bond space. I can use my other bond funds for rebalancing. In today's market I wish that I had the ability to add more dollars to traditional at a guaranteed 3.0% yield or better still at the 4.0% that my vintages have been yielding for many years but alas and alak that ship has sailed.
Why do you wish you could add more? I understand today's equities markets are very volatile. I haven't paid much attention to the bond markets; have they been so volatile as well? Do you mean you expect that bond fund not to continue provide returns similar to the past?
I think that we will have low if not negative interest rates for an extended period of time so a 3.0% guaranteed yield looks pretty sweet to me at the current time. If conditions change half of my TIAA Traditional is in an SRA which is fully liquid and half in an RA which would need to be withdrawn over ten years.

Next year at the age of 67.5 I intend to begin interest only payments from traditional to help fund my living expenses. I am quite pleased with a 3.0% withdrawal rate.
Thanks for clarifying that. Any idea how long the 3% for TIAA Traditional will be available?
It already isn't available for many people. You have to realized that every employer-related TIAA contract is different. Individual TIAA contracts (IRAs for example) already don't have 3% rates for new contributions, or even existing funds transferred into Traditional.

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boglethat
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Re: TIAA traditional vs. Vanguard Total Market Bond index

Post by boglethat » Tue May 19, 2020 9:38 am

tibbitts wrote:
Tue May 19, 2020 9:06 am
boglethat wrote:
Mon May 18, 2020 7:02 pm
bikechuck wrote:
Mon May 18, 2020 5:57 pm
boglethat wrote:
Mon May 18, 2020 5:38 pm
bikechuck wrote:
Mon May 18, 2020 4:51 pm


I don't care that I cannot use TIAA Traditional for rebalancing as it only makes up a portion of my bond space. I can use my other bond funds for rebalancing. In today's market I wish that I had the ability to add more dollars to traditional at a guaranteed 3.0% yield or better still at the 4.0% that my vintages have been yielding for many years but alas and alak that ship has sailed.
Why do you wish you could add more? I understand today's equities markets are very volatile. I haven't paid much attention to the bond markets; have they been so volatile as well? Do you mean you expect that bond fund not to continue provide returns similar to the past?
I think that we will have low if not negative interest rates for an extended period of time so a 3.0% guaranteed yield looks pretty sweet to me at the current time. If conditions change half of my TIAA Traditional is in an SRA which is fully liquid and half in an RA which would need to be withdrawn over ten years.

Next year at the age of 67.5 I intend to begin interest only payments from traditional to help fund my living expenses. I am quite pleased with a 3.0% withdrawal rate.
Thanks for clarifying that. Any idea how long the 3% for TIAA Traditional will be available?
It already isn't available for many people. You have to realized that every employer-related TIAA contract is different. Individual TIAA contracts (IRAs for example) already don't have 3% rates for new contributions, or even existing funds transferred into Traditional.
OK. Well I guess I should be happy I could get the 3 %.

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Re: TIAA traditional vs. Vanguard Total Market Bond index

Post by aristotelian » Tue May 19, 2020 10:34 am

drzzzzz wrote:
Mon May 18, 2020 9:01 pm
Similar situation here, I have a 403B at TIAA and have no TIAA at this time, however my rep tells me tha in one of my contract plans I am able to purchase the non-liquid (ie future redemptions over 9 years and 1 day TIAA traditional), guaranteed to pay 3% a year which when compared to the current yield and interest rate risk of VBLTX or 10 year treasuries might be a win situation. I guess it all depends on what happens to rates in the future and the assumptions that you make. And while VBLTX has done well for me, there is likely less movement for bond fund appreciation since bonds have dropped so low already.
Even if yields go to 3% in the future, TIAA Traditional is a win vs Treasuries purchased *now*. Treasuries or Total Bond purchased today would only outperform if interest rates *fall*.

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oldzey
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Re: TIAA traditional vs. Vanguard Total Market Bond index

Post by oldzey » Tue May 19, 2020 10:50 am

A side note - it is worth noting that The TIAA General Account supports TIAA's guaranteed annuity products, including TIAA Traditional.
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Re: TIAA traditional vs. Vanguard Total Market Bond index

Post by grabiner » Tue May 19, 2020 12:42 pm

oldzey wrote:
Mon May 18, 2020 6:24 pm
OP, here's a link to an interesting comparison, FYI:

Is TIAA Traditional a Good Deal? - The Accumulation Phase

Image
And this graph is biased in favor of the mutual funds. In a period of declining rates, bond funds will outperform stable-value funds with the same yield, because bond prices rise. The graph here shows that TIAA Traditional matched the performance of the bond index, even with the declining rates.
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boglethat
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Re: TIAA traditional vs. Vanguard Total Market Bond index

Post by boglethat » Tue May 19, 2020 3:55 pm

oldzey wrote:
Mon May 18, 2020 6:24 pm
OP, here's a link to an interesting comparison, FYI:

Is TIAA Traditional a Good Deal? - The Accumulation Phase

Image
They all look very similar to me. But I read somewhere something like "Past performance is no indicator..." Sure wish I had a crystal ball.

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boglethat
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Re: TIAA traditional vs. Vanguard Total Market Bond index

Post by boglethat » Tue May 19, 2020 4:02 pm

I am going to initially transfer to the bond fund because transferring to TIAA is irrevocable. Then I will think about it and hope the TIAA rates don't go down while I'm doing that but they probably will. Thanks for the input.

livesoft
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Re: TIAA traditional vs. Vanguard Total Market Bond index

Post by livesoft » Tue May 19, 2020 4:05 pm

boglethat wrote:
Tue May 19, 2020 4:02 pm
I am going to initially transfer to the bond fund because transferring to TIAA is irrevocable. Then I will think about it and hope the TIAA rates don't go down while I'm doing that but they probably will. Thanks for the input.
I don't think it is true that it is irrevocable in the sense that you can actually start a Transfer Payout Annuity right away and move the annual payout money into a bond fund. That is, if you want to do that.
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boglethat
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Re: TIAA traditional vs. Vanguard Total Market Bond index

Post by boglethat » Tue May 19, 2020 4:13 pm

livesoft wrote:
Tue May 19, 2020 4:05 pm
boglethat wrote:
Tue May 19, 2020 4:02 pm
I am going to initially transfer to the bond fund because transferring to TIAA is irrevocable. Then I will think about it and hope the TIAA rates don't go down while I'm doing that but they probably will. Thanks for the input.
I don't think it is true that it is irrevocable in the sense that you can actually start a Transfer Payout Annuity right away and move the annual payout money into a bond fund. That is, if you want to do that.
I am not getting something. If I want to put the money from the real estate fund into the bond fund why not just do it directly? Why bother with TIAA then at all? And doesn't the transfer take nine or 10 years?

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Re: TIAA traditional vs. Vanguard Total Market Bond index

Post by livesoft » Tue May 19, 2020 4:20 pm

If you want to put money in the bond fund, then yes, do it directly. If you want to put money into TIAA Traditional, then do that because it is not irrevocable in that can transfer 10% a year over the next 9 years and 1 day to another fund. That "another fund" could be a bond fund or even TIAA Real Estate Account or something else offered by your plan.

My main point was about your use of the word "irrevocable."
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boglethat
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Re: TIAA traditional vs. Vanguard Total Market Bond index

Post by boglethat » Tue May 19, 2020 4:25 pm

livesoft wrote:
Tue May 19, 2020 4:20 pm
If you want to put money in the bond fund, then yes, do it directly. If you want to put money into TIAA Traditional, then do that because it is not irrevocable in that can transfer 10% a year over the next 9 years and 1 day to another fund. That "another fund" could be a bond fund or even TIAA Real Estate Account or something else offered by your plan.

My main point was about your use of the word "irrevocable."
Oh, o.k. I get your point. It is not irrevocable, just would take some years to move it someplace else.

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Re: TIAA traditional vs. Vanguard Total Market Bond index

Post by tibbitts » Tue May 19, 2020 4:52 pm

boglethat wrote:
Tue May 19, 2020 4:13 pm
livesoft wrote:
Tue May 19, 2020 4:05 pm
boglethat wrote:
Tue May 19, 2020 4:02 pm
I am going to initially transfer to the bond fund because transferring to TIAA is irrevocable. Then I will think about it and hope the TIAA rates don't go down while I'm doing that but they probably will. Thanks for the input.
I don't think it is true that it is irrevocable in the sense that you can actually start a Transfer Payout Annuity right away and move the annual payout money into a bond fund. That is, if you want to do that.
I am not getting something. If I want to put the money from the real estate fund into the bond fund why not just do it directly? Why bother with TIAA then at all? And doesn't the transfer take nine or 10 years?
The advantage of the TPA approach is that you earn Traditional rates on the money while it's being moved into the bond fund over time. During that time bond fund rates might rise.

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Horton
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Re: TIAA traditional vs. Vanguard Total Market Bond index

Post by Horton » Tue May 19, 2020 9:36 pm

The current 30 day yield on Total Bond is around 1.50% vs 3% TIAA Traditional...seems pretty clear which will win over the next 6-8 years*. The 9 year + 1 day conversion adds a wrinkle though. If my sole focus was to maximize return, I would be inclined to go with TIAA Traditional or, as suggested up thread, put it in TIAA Traditional and then initiate the conversion process in the bond fund. If my sole focus was simplicity, then I might do whatever is easiest long term.

* I’m assuming TIAA pays a guaranteed rate of 3%. If it is variable, then disregard everything I write. :mrgreen:

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Re: TIAA traditional vs. Vanguard Total Market Bond index

Post by macher » Wed May 20, 2020 5:51 am

Horton wrote:
Tue May 19, 2020 9:36 pm
The current 30 day yield on Total Bond is around 1.50% vs 3% TIAA Traditional...seems pretty clear which will win over the next 6-8 years*. The 9 year + 1 day conversion adds a wrinkle though. If my sole focus was to maximize return, I would be inclined to go with TIAA Traditional or, as suggested up thread, put it in TIAA Traditional and then initiate the conversion process in the bond fund. If my sole focus was simplicity, then I might do whatever is easiest long term.

* I’m assuming TIAA pays a guaranteed rate of 3%. If it is variable, then disregard everything I write. :mrgreen:
Currently my new money going into TIAA Traditional is getting guaranteed 3%. My old money is getting 3.75 - 4.25%.

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Re: TIAA traditional vs. Vanguard Total Market Bond index

Post by boglethat » Wed May 20, 2020 10:47 am

tibbitts wrote:
Tue May 19, 2020 4:52 pm
boglethat wrote:
Tue May 19, 2020 4:13 pm
livesoft wrote:
Tue May 19, 2020 4:05 pm
boglethat wrote:
Tue May 19, 2020 4:02 pm
I am going to initially transfer to the bond fund because transferring to TIAA is irrevocable. Then I will think about it and hope the TIAA rates don't go down while I'm doing that but they probably will. Thanks for the input.
I don't think it is true that it is irrevocable in the sense that you can actually start a Transfer Payout Annuity right away and move the annual payout money into a bond fund. That is, if you want to do that.
I am not getting something. If I want to put the money from the real estate fund into the bond fund why not just do it directly? Why bother with TIAA then at all? And doesn't the transfer take nine or 10 years?
The advantage of the TPA approach is that you earn Traditional rates on the money while it's being moved into the bond fund over time. During that time bond fund rates might rise.
Right. I should have thought of that.

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Re: TIAA traditional vs. Vanguard Total Market Bond index

Post by boglethat » Wed May 20, 2020 10:48 am

Horton wrote:
Tue May 19, 2020 9:36 pm
The current 30 day yield on Total Bond is around 1.50% vs 3% TIAA Traditional...seems pretty clear which will win over the next 6-8 years*. The 9 year + 1 day conversion adds a wrinkle though. If my sole focus was to maximize return, I would be inclined to go with TIAA Traditional or, as suggested up thread, put it in TIAA Traditional and then initiate the conversion process in the bond fund. If my sole focus was simplicity, then I might do whatever is easiest long term.

* I’m assuming TIAA pays a guaranteed rate of 3%. If it is variable, then disregard everything I write. :mrgreen:
I believe it will be 3% guaranteed if I buy it now.

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Re: TIAA traditional vs. Vanguard Total Market Bond index

Post by livesoft » Wed May 20, 2020 10:52 am

Horton wrote:
Tue May 19, 2020 9:36 pm
The current 30 day yield on Total Bond is around 1.50% vs 3% TIAA Traditional...seems pretty clear which will win over the next 6-8 years*.
Hasn't the yield been this low before? Can anybody post a link to a chart or data for the 30-day yields of any bond index funds over time such as the last 30 years? Thanks!
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Re: TIAA traditional vs. Vanguard Total Market Bond index

Post by grabiner » Wed May 20, 2020 12:53 pm

livesoft wrote:
Wed May 20, 2020 10:52 am
Horton wrote:
Tue May 19, 2020 9:36 pm
The current 30 day yield on Total Bond is around 1.50% vs 3% TIAA Traditional...seems pretty clear which will win over the next 6-8 years*.
Hasn't the yield been this low before? Can anybody post a link to a chart or data for the 30-day yields of any bond index funds over time such as the last 30 years? Thanks!
I don't have a full yield history, but the share price gives a good idea of the inverse relation between price and yield. (It is distorted somewhat by capital gains; if the fund distributes 2% of its value as a capital gain, that is equivalent to bond prices rising 2%). The highest share price for Total Bond Market Admiral was $11.63 on 3/20/20, which implies that rates were 0.2% lower than (six-year duration means a 1.2% price difference).

For historical Treasury data, Daily Treasury Yield Curve Rates shows the record. The lowest yield ever on the 10-year bond was 0.54% on 3/9/20 (it's 0.70% today and has been close to that for two months), and the lowest yield ever on shorter bonds was on 3/27/20.

(edited to fix link)
Last edited by grabiner on Wed May 20, 2020 6:58 pm, edited 1 time in total.
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Re: TIAA traditional vs. Vanguard Total Market Bond index

Post by Horton » Wed May 20, 2020 6:55 pm

livesoft wrote:
Wed May 20, 2020 10:52 am
Horton wrote:
Tue May 19, 2020 9:36 pm
The current 30 day yield on Total Bond is around 1.50% vs 3% TIAA Traditional...seems pretty clear which will win over the next 6-8 years*.
Hasn't the yield been this low before? Can anybody post a link to a chart or data for the 30-day yields of any bond index funds over time such as the last 30 years? Thanks!
You can look up the historical yields here:

https://personal.vanguard.com/us/funds/ ... torysearch

The yield on 5/3/2010 was 3.27%. The 10 year return for Vanguard Total Bond (VBTLX) as of 4/30/2020 was 3.90%. Presumably the 63 basis point difference was due to falling interest rates and the roll yield.

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Re: TIAA traditional vs. Vanguard Total Market Bond index

Post by livesoft » Wed May 20, 2020 7:10 pm

Horton wrote:
Wed May 20, 2020 6:55 pm
You can look up the historical yields here:

https://personal.vanguard.com/us/funds/ ... torysearch
Thanks, but not in a useful way to create a 35 year chart.
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Re: TIAA traditional vs. Vanguard Total Market Bond index

Post by Horton » Wed May 20, 2020 7:21 pm

livesoft wrote:
Wed May 20, 2020 7:10 pm
Horton wrote:
Wed May 20, 2020 6:55 pm
You can look up the historical yields here:

https://personal.vanguard.com/us/funds/ ... torysearch
Thanks, but not in a useful way to create a 35 year chart.
Just copy and paste into Excel? You would have to do it one year at a time, which is annoying, but probably wouldn’t take more than 10 minutes.

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Re: TIAA traditional vs. Vanguard Total Market Bond index

Post by Oregano » Fri May 22, 2020 3:10 pm

livesoft wrote:
Mon May 18, 2020 3:16 pm
Back in March, I switched some and my newly acquired bond fund shares are up more than 5% while the TIAA TA is up about 0.3%. Let's just say that I enjoy 5% more than I enjoy 0.3%.
Wow, that is just about the worst analysis imaginable from a long-time poster. You could have bought stocks in mid-March and they'd be up more than 5%. So why didn't you buy stocks instead of Total Bond Market the second time?

If someone has access to TIAA Traditional with a 3% guarantee, a long-term holding period, and is comfortable with the lack of liquidity, it is almost certain that TIAA Traditional will outperform TBM over long time horizons. Just a quick and dirty estimate, with TBM having an SEC yield of 1.38% and 6.21 duration, in order for TBM to net 3.0% per year (1.38% + 1.62% capital gain), interest rates need to fall another 0.26% EVERY YEAR. Is that possible in the near term? Sure, but it can't go on indefinitely. And the longer it goes on, the greater the gap in future returns will be.

So as long as you're investing for decades, not 1-month, TIAA Traditional is the obvious choice.

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Re: TIAA traditional vs. Vanguard Total Market Bond index

Post by student » Fri May 22, 2020 3:22 pm

Oregano wrote:
Fri May 22, 2020 3:10 pm
livesoft wrote:
Mon May 18, 2020 3:16 pm
Back in March, I switched some and my newly acquired bond fund shares are up more than 5% while the TIAA TA is up about 0.3%. Let's just say that I enjoy 5% more than I enjoy 0.3%.
Wow, that is just about the worst analysis imaginable from a long-time poster. You could have bought stocks in mid-March and they'd be up more than 5%. So why didn't you buy stocks instead of Total Bond Market the second time?

If someone has access to TIAA Traditional with a 3% guarantee, a long-term holding period, and is comfortable with the lack of liquidity, it is almost certain that TIAA Traditional will outperform TBM over long time horizons. Just a quick and dirty estimate, with TBM having an SEC yield of 1.38% and 6.21 duration, in order for TBM to net 3.0% per year (1.38% + 1.62% capital gain), interest rates need to fall another 0.26% EVERY YEAR. Is that possible in the near term? Sure, but it can't go on indefinitely. And the longer it goes on, the greater the gap in future returns will be.

So as long as you're investing for decades, not 1-month, TIAA Traditional is the obvious choice.
I think you quoted this out of context. I read it as it was just a lucky move. The final conclusion in the post was "As for what is fine for you, you ask a question that NO ONE can legitimately answer for you. I can state that over the long-term past, TIAA Traditional Annuity and Total US Bond Index have performed about the same. Sometimes TIAA does better and sometimes the bond fund does better, but over the long term they come out about the same."

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Re: TIAA traditional vs. Vanguard Total Market Bond index

Post by Oregano » Fri May 22, 2020 3:25 pm

Well, there's the middle section that neither of us quoted where, right after he talked about the better one month return, said he chose to buy TBM instead of TIAA on the next round.

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Re: TIAA traditional vs. Vanguard Total Market Bond index

Post by livesoft » Fri May 22, 2020 3:44 pm

Oregano wrote:
Fri May 22, 2020 3:10 pm
livesoft wrote:
Mon May 18, 2020 3:16 pm
Back in March, I switched some and my newly acquired bond fund shares are up more than 5% while the TIAA TA is up about 0.3%. Let's just say that I enjoy 5% more than I enjoy 0.3%.
Wow, that is just about the worst analysis imaginable from a long-time poster. You could have bought stocks in mid-March and they'd be up more than 5%. So why didn't you buy stocks instead of Total Bond Market the second time?
I did buy stocks in March as I related elsewhere. Woo-hoo!

Almost all of these analyses are bunk anyways.

But we will know the outcomes of all these decisions in a few years, won't we? :twisted:
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Re: TIAA traditional vs. Vanguard Total Market Bond index

Post by Katietsu » Fri May 22, 2020 3:58 pm

boglethat wrote:
Wed May 20, 2020 10:48 am
Horton wrote:
Tue May 19, 2020 9:36 pm
The current 30 day yield on Total Bond is around 1.50% vs 3% TIAA Traditional...seems pretty clear which will win over the next 6-8 years*. The 9 year + 1 day conversion adds a wrinkle though. If my sole focus was to maximize return, I would be inclined to go with TIAA Traditional or, as suggested up thread, put it in TIAA Traditional and then initiate the conversion process in the bond fund. If my sole focus was simplicity, then I might do whatever is easiest long term.

* I’m assuming TIAA pays a guaranteed rate of 3%. If it is variable, then disregard everything I write. :mrgreen:
I believe it will be 3% guaranteed if I buy it now.
The 3% guarantee is fixed by contract to last forever as long as you and/or your employer is still in that version of TIAA. Based on what has happened at other institutions, at some point, the employer plan will change. You will probably be offered a version that has only a 1% guarantee. You will be given advanced notice of this change. Any money in the “old” 3% version at the time of the transition can stay there. So, you are guaranteed access to the 3% version with any money currently in the retirement plan. You just need to stay abreast of changes. If/when access to the 3% will be ending, you need to find out the rules and decide what you want to do before the choice is potentially irrevocable.

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Re: TIAA traditional vs. Vanguard Total Market Bond index

Post by Horton » Sat May 23, 2020 4:00 pm

livesoft wrote:
Wed May 20, 2020 10:52 am
Horton wrote:
Tue May 19, 2020 9:36 pm
The current 30 day yield on Total Bond is around 1.50% vs 3% TIAA Traditional...seems pretty clear which will win over the next 6-8 years*.
Hasn't the yield been this low before? Can anybody post a link to a chart or data for the 30-day yields of any bond index funds over time such as the last 30 years? Thanks!
The chart below shows the yield, six year forward looking return, and rolldown return (return - yield) for the past 25 years. It illustrates why most people anchor to the yield when estimating bond returns - the rolldown return averages about 0.20%.

Image

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Re: TIAA traditional vs. Vanguard Total Market Bond index

Post by grabiner » Sat May 23, 2020 4:48 pm

Horton wrote:
Sat May 23, 2020 4:00 pm
livesoft wrote:
Wed May 20, 2020 10:52 am
Horton wrote:
Tue May 19, 2020 9:36 pm
The current 30 day yield on Total Bond is around 1.50% vs 3% TIAA Traditional...seems pretty clear which will win over the next 6-8 years*.
Hasn't the yield been this low before? Can anybody post a link to a chart or data for the 30-day yields of any bond index funds over time such as the last 30 years? Thanks!
The chart below shows the yield, six year forward looking return, and rolldown return (return - yield) for the past 25 years. It illustrates why most people anchor to the yield when estimating bond returns - the rolldown return averages about 0.20%.

Image
And this is the correct anchoring; Expected return of a bond fund shows that bond investors should expect the rolldown (ignoring losses to defaults and dowgrades) to be the product of the duration and the average slope of the yield curve at that duration. The average slope of the yield curve is the premium investors demand for the risk of longer-term bonds.

The actual slope of the yield curve includes both the premium and the expectation of rate changes; therefore, the expected rolldown yield should be the same regardless of the slope.
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Re: TIAA traditional vs. Vanguard Total Market Bond index

Post by macher » Sat May 23, 2020 5:13 pm

Katietsu wrote:
Fri May 22, 2020 3:58 pm
boglethat wrote:
Wed May 20, 2020 10:48 am
Horton wrote:
Tue May 19, 2020 9:36 pm
The current 30 day yield on Total Bond is around 1.50% vs 3% TIAA Traditional...seems pretty clear which will win over the next 6-8 years*. The 9 year + 1 day conversion adds a wrinkle though. If my sole focus was to maximize return, I would be inclined to go with TIAA Traditional or, as suggested up thread, put it in TIAA Traditional and then initiate the conversion process in the bond fund. If my sole focus was simplicity, then I might do whatever is easiest long term.

* I’m assuming TIAA pays a guaranteed rate of 3%. If it is variable, then disregard everything I write. :mrgreen:
I believe it will be 3% guaranteed if I buy it now.
The 3% guarantee is fixed by contract to last forever as long as you and/or your employer is still in that version of TIAA. Based on what has happened at other institutions, at some point, the employer plan will change. You will probably be offered a version that has only a 1% guarantee. You will be given advanced notice of this change. Any money in the “old” 3% version at the time of the transition can stay there. So, you are guaranteed access to the 3% version with any money currently in the retirement plan. You just need to stay abreast of changes. If/when access to the 3% will be ending, you need to find out the rules and decide what you want to do before the choice is potentially irrevocable.
I work at University of PA I believe they are a top TIAA institution and we are getting the guaranteed 3% rate.

What would cause employer plan to change?

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Re: TIAA traditional vs. Vanguard Total Market Bond index

Post by boglethat » Sat May 23, 2020 5:25 pm

Katietsu wrote:
Fri May 22, 2020 3:58 pm
boglethat wrote:
Wed May 20, 2020 10:48 am
Horton wrote:
Tue May 19, 2020 9:36 pm
The current 30 day yield on Total Bond is around 1.50% vs 3% TIAA Traditional...seems pretty clear which will win over the next 6-8 years*. The 9 year + 1 day conversion adds a wrinkle though. If my sole focus was to maximize return, I would be inclined to go with TIAA Traditional or, as suggested up thread, put it in TIAA Traditional and then initiate the conversion process in the bond fund. If my sole focus was simplicity, then I might do whatever is easiest long term.

* I’m assuming TIAA pays a guaranteed rate of 3%. If it is variable, then disregard everything I write. :mrgreen:
I believe it will be 3% guaranteed if I buy it now.
The 3% guarantee is fixed by contract to last forever as long as you and/or your employer is still in that version of TIAA. Based on what has happened at other institutions, at some point, the employer plan will change. You will probably be offered a version that has only a 1% guarantee. You will be given advanced notice of this change. Any money in the “old” 3% version at the time of the transition can stay there. So, you are guaranteed access to the 3% version with any money currently in the retirement plan. You just need to stay abreast of changes. If/when access to the 3% will be ending, you need to find out the rules and decide what you want to do before the choice is potentially irrevocable.
Thanks that is very useful to know.

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Re: TIAA traditional vs. Vanguard Total Market Bond index

Post by Katietsu » Sat May 23, 2020 6:19 pm

macher wrote:
Sat May 23, 2020 5:13 pm
Katietsu wrote:
Fri May 22, 2020 3:58 pm
boglethat wrote:
Wed May 20, 2020 10:48 am
Horton wrote:
Tue May 19, 2020 9:36 pm
The current 30 day yield on Total Bond is around 1.50% vs 3% TIAA Traditional...seems pretty clear which will win over the next 6-8 years*. The 9 year + 1 day conversion adds a wrinkle though. If my sole focus was to maximize return, I would be inclined to go with TIAA Traditional or, as suggested up thread, put it in TIAA Traditional and then initiate the conversion process in the bond fund. If my sole focus was simplicity, then I might do whatever is easiest long term.

* I’m assuming TIAA pays a guaranteed rate of 3%. If it is variable, then disregard everything I write. :mrgreen:
I believe it will be 3% guaranteed if I buy it now.
The 3% guarantee is fixed by contract to last forever as long as you and/or your employer is still in that version of TIAA. Based on what has happened at other institutions, at some point, the employer plan will change. You will probably be offered a version that has only a 1% guarantee. You will be given advanced notice of this change. Any money in the “old” 3% version at the time of the transition can stay there. So, you are guaranteed access to the 3% version with any money currently in the retirement plan. You just need to stay abreast of changes. If/when access to the 3% will be ending, you need to find out the rules and decide what you want to do before the choice is potentially irrevocable.
I work at University of PA I believe they are a top TIAA institution and we are getting the guaranteed 3% rate.

What would cause employer plan to change?
I am not sure about this. There are people on this board that have knowledge of how these agreements work. But, I think that the institution and TIAA have an agreement that is for a limited time. Over the last few years when these agreements come up, they are being moved from the traditional RA/GRA flavors to the new RC/RCP flavors. Here is the comparison:
https://www.tiaa.org/public/pdf/underst ... choice.pdf

At the time the first plan in our family switched, they were selling it because the RC plan was actually paying out higher. They said they could do this because of the extra flexibility of the RC plan. Well, as we head to basically 0 interest rates, those of us who held on to the old 3% guarantee are now getting a better deal. But it could have worked out the other way.

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Re: TIAA traditional vs. Vanguard Total Market Bond index

Post by crefwatch » Sun May 24, 2020 9:34 am

I am no longer working or contributing to my TIAA plans. But, "What would cause employer plan to change?"

In my non-professional observation, the predominant reasons for changes come from the schools (and other TIAA institutional customers.) Many recent shake-ups have been driven by changes in Federal law, which increase the duty of the employer to protect the best interests of the investor. But plenty of pressure comes from amateur (after all, this is not the subject of their PhD.'s) investment experts on the faculty. Faculties had plenty of opposition to the creation of CREF, because they thought equities weren't safe investments for retirement money. Faculties also contributed to the loss of domination of this market (around 1987), and their opposition was exploited by the financial services companies that stood to gain the most from opening up that market.

Another big factor has been the way plans pay for their administrative cost. I believe that TIAA used to "eat" most of these costs in order to get the school's business. But now that fees are more visible to participants, TIAA (and other providers) can use fees (and rebated fees) as marketing tools.

There are also individual investors at each school who pay enough attention to their plan to make suggestions to an "Investment Committee", or whatever it happens to be called at that school. This can drive changes in an option-menu, without an overall change in the plan's structure or rules.

Except to the extent that TIAA might contact a school and (for example) point out how they could reduce the Investment Committee's risk of getting sued, I think plotting by TIAA is a probably a very minor factor in "plan changes."

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Re: TIAA traditional vs. Vanguard Total Market Bond index

Post by macher » Sun May 24, 2020 10:12 am

Katietsu wrote:
Sat May 23, 2020 6:19 pm
macher wrote:
Sat May 23, 2020 5:13 pm
Katietsu wrote:
Fri May 22, 2020 3:58 pm
boglethat wrote:
Wed May 20, 2020 10:48 am
Horton wrote:
Tue May 19, 2020 9:36 pm
The current 30 day yield on Total Bond is around 1.50% vs 3% TIAA Traditional...seems pretty clear which will win over the next 6-8 years*. The 9 year + 1 day conversion adds a wrinkle though. If my sole focus was to maximize return, I would be inclined to go with TIAA Traditional or, as suggested up thread, put it in TIAA Traditional and then initiate the conversion process in the bond fund. If my sole focus was simplicity, then I might do whatever is easiest long term.

* I’m assuming TIAA pays a guaranteed rate of 3%. If it is variable, then disregard everything I write. :mrgreen:
I believe it will be 3% guaranteed if I buy it now.
The 3% guarantee is fixed by contract to last forever as long as you and/or your employer is still in that version of TIAA. Based on what has happened at other institutions, at some point, the employer plan will change. You will probably be offered a version that has only a 1% guarantee. You will be given advanced notice of this change. Any money in the “old” 3% version at the time of the transition can stay there. So, you are guaranteed access to the 3% version with any money currently in the retirement plan. You just need to stay abreast of changes. If/when access to the 3% will be ending, you need to find out the rules and decide what you want to do before the choice is potentially irrevocable.
I work at University of PA I believe they are a top TIAA institution and we are getting the guaranteed 3% rate.

What would cause employer plan to change?
I am not sure about this. There are people on this board that have knowledge of how these agreements work. But, I think that the institution and TIAA have an agreement that is for a limited time. Over the last few years when these agreements come up, they are being moved from the traditional RA/GRA flavors to the new RC/RCP flavors. Here is the comparison:
https://www.tiaa.org/public/pdf/underst ... choice.pdf

At the time the first plan in our family switched, they were selling it because the RC plan was actually paying out higher. They said they could do this because of the extra flexibility of the RC plan. Well, as we head to basically 0 interest rates, those of us who held on to the old 3% guarantee are now getting a better deal. But it could have worked out the other way.
Talked to people at the Pension Research Council at Wharton some time ago where I work(work at Penn) and they advocate the TIAA Cref ‘hybrid co-operative pension system’. I don’t see Penn changing because I don’t think there’s another provider that offers a hybrid co-operative pension model.

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Re: TIAA traditional vs. Vanguard Total Market Bond index

Post by talzara » Sun May 24, 2020 12:26 pm

macher wrote:
Sun May 24, 2020 10:12 am
Talked to people at the Pension Research Council at Wharton some time ago where I work(work at Penn) and they advocate the TIAA Cref ‘hybrid co-operative pension system’. I don’t see Penn changing because I don’t think there’s another provider that offers a hybrid co-operative pension model.
"Hybrid co-operative pension" just means that the TIAA Traditional Annuity is an annuity. Here's the definition from the Pension Research Council at Wharton:
A hybrid pension combines elements of both a defined contribution (DC) plan and a defined benefit (DB) plan. The TIAA-CREF system combines a DC structure during the accumulation phase, with workers allocating contributions to investment choices that include mutual funds and deferred fixed and variable annuities; a DB structure during retirement by providing the option to annuitize part (or all) of retirement assets; and a co-operative structure for individuals who participate in the fixed annuity component over their working and retired lives.

https://pensionresearchcouncil.wharton. ... oodman.pdf
Fidelity and Vanguard offer mutual funds instead of annuities. However, TIAA is structured as an insurance company. Other insurance companies also offer 403(b) annuities, but they charge higher fees than TIAA.

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Re: TIAA traditional vs. Vanguard Total Market Bond index

Post by macher » Sun May 24, 2020 1:26 pm

talzara wrote:
Sun May 24, 2020 12:26 pm
macher wrote:
Sun May 24, 2020 10:12 am
Talked to people at the Pension Research Council at Wharton some time ago where I work(work at Penn) and they advocate the TIAA Cref ‘hybrid co-operative pension system’. I don’t see Penn changing because I don’t think there’s another provider that offers a hybrid co-operative pension model.
"Hybrid co-operative pension" just means that the TIAA Traditional Annuity is an annuity. Here's the definition from the Pension Research Council at Wharton:
A hybrid pension combines elements of both a defined contribution (DC) plan and a defined benefit (DB) plan. The TIAA-CREF system combines a DC structure during the accumulation phase, with workers allocating contributions to investment choices that include mutual funds and deferred fixed and variable annuities; a DB structure during retirement by providing the option to annuitize part (or all) of retirement assets; and a co-operative structure for individuals who participate in the fixed annuity component over their working and retired lives.

https://pensionresearchcouncil.wharton. ... oodman.pdf
Fidelity and Vanguard offer mutual funds instead of annuities. However, TIAA is structured as an insurance company. Other insurance companies also offer 403(b) annuities, but they charge higher fees than TIAA.
Yea the purpose of the hybrid co-operative pension is not necessarily to build wealth but to provide income like a defined pension does. Most if not all people I know annuitize. Very rare that someone doesn’t.

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