The fate of the 50/50 TIAA-CREF portfolio?

Discuss all general (i.e. non-personal) investing questions and issues, investing news, and theory.
Post Reply
Topic Author
Browser
Posts: 4857
Joined: Wed Sep 05, 2012 4:54 pm

The fate of the 50/50 TIAA-CREF portfolio?

Post by Browser » Tue Aug 06, 2013 7:33 pm

Many years ago, when I was young and stupid (as opposed to being old and stupid now), I started teachin' at a university. The U put a certain amount (don't remember what it was) into TIAA fixed and/or CREF stock. I think those were the only choices back then. Not knowing what to do, I followed somebody's advice to just divide my contributions 50/50 between the two choices. Later on, when CREF began offering index funds, I might have redirected the stock contributions to the Equity Index fund instead of CREF stock (which was actively managed). However, I strayed from the academic fold never to return. Recently, I found myself wondering how things would have turned out if I'd continued to work in academe and followed this 50/50 formula (never rebalancing) for the 35 years of so of my working career. If anybody has a handle on this, I'd be interested to hear. I suspect things would have turned out pretty nicely if I'd followed this laziest of laziest portfolio allocations and never bothered to look at my statements until the day I retired. Maybe we just overanalyze things, eh?
We don't know where we are, or where we're going -- but we're making good time.

User avatar
cheese_breath
Posts: 9575
Joined: Wed Sep 14, 2011 7:08 pm

Re: The fate of the 50/50 TIAA-CREF portfolio?

Post by cheese_breath » Tue Aug 06, 2013 7:55 pm

A lot would depend on when you contributed and retired. I contributed 25% TIAA, 75% CREF Stock from 1968-1976, left the U in '76 and never looked back until I retired in '97. I was waaay overweight in stocks. But if I had waited a few more years to retire it would have been a different picture indeed.
The surest way to know the future is when it becomes the past.

DickBenson
Posts: 809
Joined: Sun Apr 08, 2007 7:27 pm

Re: The fate of the 50/50 TIAA-CREF portfolio?

Post by DickBenson » Wed Aug 07, 2013 2:33 am

Browser wrote:Recently, I found myself wondering how things would have turned out if I'd continued to work in academe and followed this 50/50 formula (never rebalancing) for the 35 years of so of my working career. If anybody has a handle on this, I'd be interested to hear. I suspect things would have turned out pretty nicely if I'd followed this laziest of laziest portfolio allocations and never bothered to look at my statements until the day I retired. Maybe we just overanalyze things, eh?
It turned out quite nicely for many who simply allocated their funds between CREF Stock and Traditional over their academic careers. Most simply looked over their statements mailed to them each quarter (which contained a projected retirement income), may have made a couple of adjustments in the allocation between the two investment options as they approached retirement, and at some time went to a seminar or two to help in the selection of a (then required) retirement annuity. It was an excellent pension plan.

However, under pressure from some academics to "search for the perfect plan", TIAA was forced to abandon KISS, and now .......

Dick

Valuethinker
Posts: 40280
Joined: Fri May 11, 2007 11:07 am

Re: The fate of the 50/50 TIAA-CREF portfolio?

Post by Valuethinker » Wed Aug 07, 2013 4:04 am

DickBenson wrote: However, under pressure from some academics to "search for the perfect plan", TIAA was forced to abandon KISS, and now .......

Dick
As I recall there were hearings in Congress about the tax status of TIAA CREF. The outcome was it became more of a conventional fund manager.

I am sure the M* TIAA Forum would have the picture, but I don't think it was 'pressure from academics to search for the perfect plan'-- at least not wholly.

User avatar
alec
Posts: 3064
Joined: Fri Mar 02, 2007 2:15 pm

Re: The fate of the 50/50 TIAA-CREF portfolio?

Post by alec » Wed Aug 07, 2013 6:33 am

Browser,

After graduating from med school in 1970, my dad became a research endocrinologist at a mid-atlantic hospital, and also an [associate or assistant] professor at the adjoining/connecting university until he semi retired in 2012. He was 50/50 CREF Stock/TIAA until 2004, when, after losing a lot in 2000-2002, he went 20/80 CREF Stock/TIAA. After 42 years, I think he has somewhere around $2.1 or $2.2 million.

From what I remember, he didn't make all that much for a doctor until the later 1990s/early 2000s. I also don't know how much he contributed along the way, but I imagine after 3 kids got out of college ~ 2000, he maxed it out until 2012.

That help any?

Oops forgot to mention, that there were a couple years of fellowship and residency, so he probably didn't really contribute until around the late 70's.
"It is difficult to get a man to understand something, when his salary depends upon his not understanding it!" - Upton Sinclair

MN Finance
Posts: 1832
Joined: Sat Dec 22, 2012 10:46 am

Re: The fate of the 50/50 TIAA-CREF portfolio?

Post by MN Finance » Wed Aug 07, 2013 7:04 am

Since its an academic discussion, it doesn't matter to much, but the historical returns aren't hard to come by. A 50/50 portfolio from, say the 60s would have ended up with close to 10% annualized returns. The problem is that if you never looked at it, it would have turned to 80/20 by the dotcom crash, and you'd have seen a full downturn in 08

jasg
Posts: 96
Joined: Wed May 08, 2013 7:10 pm

Re: The fate of the 50/50 TIAA-CREF portfolio?

Post by jasg » Wed Aug 07, 2013 6:13 pm

MN Finance wrote:Since its an academic discussion, it doesn't matter to much, but the historical returns aren't hard to come by. A 50/50 portfolio from, say the 60s would have ended up with close to 10% annualized returns. The problem is that if you never looked at it, it would have turned to 80/20 by the dotcom crash, and you'd have seen a full downturn in 08
Not quite the 60's, but in I had job from 1975-1980 that contributed a bit less than $2200 to a 50/50 TIAA-CREF account (I contributed nothing - stupid 20 something...)

I have done nothing with it since other than look at the annual statements and think that it will provide a nice dinner a couple of times a month when I retired. It is now 75/25 and a balance of $55K - looks like a return of about 10%. It was 29K at the end of March 2009.

I now wish I had contributed to it.

User avatar
jjustice
Posts: 516
Joined: Tue Aug 04, 2009 9:58 am

Re: The fate of the 50/50 TIAA-CREF portfolio?

Post by jjustice » Wed Aug 07, 2013 7:20 pm

Valuethinker is referring to the 1997 surprise attack on TIAA-CREF's tax status by Bill Archer the chairman of the House Ways and Means Committee. Archer was generously supported by his home-town Variable Annuity Life Insurance Company (VALIC), which wanted to compete more effectively with TIAA-CREF. So Archer, the great foe of taxes, raised TIAA-CREF's taxes.

TIAA-CREF responded by adding a mutual fund business. The loss of focus on their original annuity and insurance business seems to have been a result of both the Archer taxation and pressures from participants wanting more options, as Dick said. This was during the tech bull market, and some thought that TIAA-CREF had become stodgy. Whatever the causes, the change was unfortunate. There's a lot to be said for stodgy and KISS.

John

jasg
Posts: 96
Joined: Wed May 08, 2013 7:10 pm

Re: The fate of the 50/50 TIAA-CREF portfolio?

Post by jasg » Wed Aug 07, 2013 8:55 pm

Despite the post-1997 changes, they still seem to be a good company. Do many here use them? If you could take advantage of their funds, annuities and Vanguard funds (albeit Investor grade) would you?

Intheheadlights
Posts: 29
Joined: Mon Apr 23, 2012 6:23 pm

Re: The fate of the 50/50 TIAA-CREF portfolio?

Post by Intheheadlights » Wed Aug 07, 2013 10:35 pm

Here's a data point. In mid-career I left my research job in California to play Engineering Prof. at a Big Ten school. That was in '83-84. I lasted three semesters, then decided to return to my old job. I chose 50% TIAA Traditional and 50% CREF stock. Except for my first MRD last year, I never touched the account: no rebalancing, no withdrawals---nothing. Thirty years later:

TIAA: $39K
CREF: $86K

My contributions were $4.8K to each.

DickBenson
Posts: 809
Joined: Sun Apr 08, 2007 7:27 pm

Re: The fate of the 50/50 TIAA-CREF portfolio?

Post by DickBenson » Wed Aug 07, 2013 11:16 pm

Intheheadlights wrote:My contributions were $4.8K to each.
I suspect that the university also contributed to the account. Otherwise that would be about a 9% growth rate.

Dick

Intheheadlights
Posts: 29
Joined: Mon Apr 23, 2012 6:23 pm

Re: The fate of the 50/50 TIAA-CREF portfolio?

Post by Intheheadlights » Wed Aug 07, 2013 11:24 pm

I misspoke: those were Purdue's contributions; I contributed nothing. I too am kinda stunned by the return. I don't have the my records from back then, but those are what the TIAA/CREF website states were the contributions.

22twain
Posts: 2436
Joined: Thu May 10, 2012 5:42 pm

Re: The fate of the 50/50 TIAA-CREF portfolio?

Post by 22twain » Wed Aug 07, 2013 11:39 pm

Browser wrote:Recently, I found myself wondering how things would have turned out if I'd continued to work in academe and followed this 50/50 formula (never rebalancing) for the 35 years of so of my working career.
I've been in TIAA-CREF since 1984, have always allocated my contributions 50/50 between TIAA Traditional and CREF Stock, and have never rebalanced between them. I once posted a graph via flickr.com, but the link seems to have expired and I can't find my flickr login information so I can't fix it. :annoyed

The highlights are as follows, in terms of the % of the total balance in CREF Stock at various points in time:

1984-1995: slow increase to about 54%
1995-2000: accelerated increase to about 66% (dot-com boom)
2000-2003: decrease to about 47%
2003-2007: increase to about 59%
2008-2009: decrease to about 41%
2009-present: increase to about 56%

During 3-4Q 2008 and 1Q 2009, my CREF Stock balance decreased 37.6%, my TIAA Traditional balance increased 6.6%, and the total decreased 17.5%. During that period I continued contributions as before.
Last edited by 22twain on Thu Aug 08, 2013 12:48 pm, edited 3 times in total.
Help save endangered words! When you write "princiPLE", make sure you don't really mean "princiPAL"!

User avatar
Garco
Posts: 728
Joined: Wed Jan 23, 2013 2:04 am

Re: The fate of the 50/50 TIAA-CREF portfolio?

Post by Garco » Wed Aug 07, 2013 11:39 pm

jasg wrote:Despite the post-1997 changes, they still seem to be a good company. Do many here use them? If you could take advantage of their funds, annuities and Vanguard funds (albeit Investor grade) would you?
I have a mix of VG and T-C funds. Namely, VG index funds (e.g., SP500 + Extended) as well as TIAA Real Estate and Trad annuity.

Valuethinker
Posts: 40280
Joined: Fri May 11, 2007 11:07 am

Re: The fate of the 50/50 TIAA-CREF portfolio?

Post by Valuethinker » Thu Aug 08, 2013 1:20 pm

jasg wrote:Despite the post-1997 changes, they still seem to be a good company. Do many here use them? If you could take advantage of their funds, annuities and Vanguard funds (albeit Investor grade) would you?
They are still a good company but I believe ERs have crept up. There is quite an active TIAA board on Morningstar.

The RE Annuity is basically unique for individual investors in the USA, and so merits attention. So in a way is TIAA 'Trad' and that is a relatively safe way of investing money.

If you don't have access to VG then TIAA is not a bad fund manager to invest with-- eg for university employees.

The Wizard
Posts: 13356
Joined: Tue Mar 23, 2010 1:45 pm
Location: Reading, MA

Re: The fate of the 50/50 TIAA-CREF portfolio?

Post by The Wizard » Thu Aug 08, 2013 1:38 pm

I was in a TIAA-CREF plan for all 41 years of my employment.
While I can't answer the OP's question directly, I will say that a lot of the success of long-time T-C participants has to do with high contribution percentages.
From day one of my employment, I was required to contribute 5% of my nominal salary to my T-C 403(b) plan, while the university/employer contributed 10%. I've seen these percentages at other places also.
In addition, we could setup optional Supplemental Retirement Accounts with upper limits increasing most years up to $23,000 as of 2013.
Starting early with decent percentages like this is half the battle...
Attempted new signature...

jims44
Posts: 1
Joined: Thu Aug 08, 2013 2:32 pm

Re: The fate of the 50/50 TIAA-CREF portfolio?

Post by jims44 » Thu Aug 08, 2013 2:59 pm

Here is a data point from a 1977/78 investment in TIAA/CREF. I opened an SRA (supplementary retirement account) and contributed $100 a month for 15 months, 50% to TIAA Traditional and 50% to CREF Stock. I have not touched that account over these many years. As of August 7, 2013 the $750 invested in TIAA Traditional had grown to $7,807; the $750 invested in CREF Stock had grown to $23,591.

The late 70s were a very good time to put money into stocks. But I did not know that.

Jim

Valuethinker
Posts: 40280
Joined: Fri May 11, 2007 11:07 am

Re: The fate of the 50/50 TIAA-CREF portfolio?

Post by Valuethinker » Thu Aug 08, 2013 3:43 pm

The Wizard wrote:I was in a TIAA-CREF plan for all 41 years of my employment.
While I can't answer the OP's question directly, I will say that a lot of the success of long-time T-C participants has to do with high contribution percentages.
From day one of my employment, I was required to contribute 5% of my nominal salary to my T-C 403(b) plan, while the university/employer contributed 10%. I've seen these percentages at other places also.
In addition, we could setup optional Supplemental Retirement Accounts with upper limits increasing most years up to $23,000 as of 2013.
Starting early with decent percentages like this is half the battle...
I imagine, though, that since most academics are not finished their Phd (and postdocs) till aged 26-28 they are not starting paying in in significant amounts until similar ages as their peers?

User avatar
Garco
Posts: 728
Joined: Wed Jan 23, 2013 2:04 am

Re: The fate of the 50/50 TIAA-CREF portfolio?

Post by Garco » Thu Aug 08, 2013 5:30 pm

Valuethinker wrote:
The Wizard wrote:I was in a TIAA-CREF plan for all 41 years of my employment.
While I can't answer the OP's question directly, I will say that a lot of the success of long-time T-C participants has to do with high contribution percentages.
From day one of my employment, I was required to contribute 5% of my nominal salary to my T-C 403(b) plan, while the university/employer contributed 10%. I've seen these percentages at other places also.
In addition, we could setup optional Supplemental Retirement Accounts with upper limits increasing most years up to $23,000 as of 2013.
Starting early with decent percentages like this is half the battle...
I imagine, though, that since most academics are not finished their Phd (and postdocs) till aged 26-28 they are not starting paying in in significant amounts until similar ages as their peers?
From what I'm reading, most people in any kind of career are not starting serious investing in their early 20's. Also, for those academics who successfully climb up the standard promotion ladder, they will likely have good institutional match programs in their 403b's and few if any job interruptions.

Valuethinker
Posts: 40280
Joined: Fri May 11, 2007 11:07 am

Re: The fate of the 50/50 TIAA-CREF portfolio?

Post by Valuethinker » Fri Aug 09, 2013 2:41 am

Garco wrote:
Valuethinker wrote:
The Wizard wrote:I was in a TIAA-CREF plan for all 41 years of my employment.
While I can't answer the OP's question directly, I will say that a lot of the success of long-time T-C participants has to do with high contribution percentages.
From day one of my employment, I was required to contribute 5% of my nominal salary to my T-C 403(b) plan, while the university/employer contributed 10%. I've seen these percentages at other places also.
In addition, we could setup optional Supplemental Retirement Accounts with upper limits increasing most years up to $23,000 as of 2013.
Starting early with decent percentages like this is half the battle...
I imagine, though, that since most academics are not finished their Phd (and postdocs) till aged 26-28 they are not starting paying in in significant amounts until similar ages as their peers?
From what I'm reading, most people in any kind of career are not starting serious investing in their early 20's. Also, for those academics who successfully climb up the standard promotion ladder, they will likely have good institutional match programs in their 403b's and few if any job interruptions.
But that's not the point The Wizard was making. He said it was contributions, substantial, early. I wondered if that was so 'early' given that most academics do not really start their careers until their late 20s?

User avatar
Garco
Posts: 728
Joined: Wed Jan 23, 2013 2:04 am

Re: The fate of the 50/50 TIAA-CREF portfolio?

Post by Garco » Fri Aug 09, 2013 9:05 am

If, as an academic, you start contributing 15% per annum (5% + 10% match) to a 403b from age 28 (for me it was 27) every year til age 67 you're going to have a lot of money. Yes, it would be nice to start earlier, but how many people really do?

Topic Author
Browser
Posts: 4857
Joined: Wed Sep 05, 2012 4:54 pm

Re: The fate of the 50/50 TIAA-CREF portfolio?

Post by Browser » Sat Aug 10, 2013 8:58 am

Garco wrote:If, as an academic, you start contributing 15% per annum (5% + 10% match) to a 403b from age 28 (for me it was 27) every year til age 67 you're going to have a lot of money. Yes, it would be nice to start earlier, but how many people really do?
I started when I first started teaching. Auto contributed for 7 years until I got the boot by missing tenure. Then I totally forgot about it -- if I had known how to do it, I would have withdrawn everything. Good thing I didn't because 10 years later it had grown to a nice sum.
We don't know where we are, or where we're going -- but we're making good time.

The Wizard
Posts: 13356
Joined: Tue Mar 23, 2010 1:45 pm
Location: Reading, MA

Re: The fate of the 50/50 TIAA-CREF portfolio?

Post by The Wizard » Sat Aug 10, 2013 9:08 am

Garco wrote:If, as an academic, you start contributing 15% per annum (5% + 10% match) to a 403b from age 28 (for me it was 27) every year til age 67 you're going to have a lot of money. Yes, it would be nice to start earlier, but how many people really do?
By early, I meant relative to starting full employment. We've had more than one poster recently out of college with large student loans and possibly other household startup expenses who decides to put off retirement investing until finances are looking better. That's not always the best way to go...
Attempted new signature...

User avatar
Garco
Posts: 728
Joined: Wed Jan 23, 2013 2:04 am

Re: The fate of the 50/50 TIAA-CREF portfolio?

Post by Garco » Sat Aug 10, 2013 9:39 am

I agree. I'm trying to convince my daughter that despite her very large loan overhang (which I'm going to help her to eliminate) she should be putting money to work in tax deferred savings/investments. I think sometimes people think putting in only $5K a year isn't going to matter enough and they can make it up later. They need to become acquainted with the wonders of compound growth.

Post Reply