TIAA Traditional convert to now or wait

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daleddm
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TIAA Traditional convert to now or wait

Post by daleddm »

Currently weighing transferring some 403b investments in TIAA system to their Traditional (currently mostly in Vanguard funds in that plan)... I've been considering this for several months as interest rates have climbed, and while searching for reasonable clarity on their complex plan rules (vintages, crediting).

As the expectation seems to be that prevailing interest rates will continue to go up in the coming months -- the question now is whether to wait for their March reset (new vintage as I understand it) or go ahead and allocate some funds now?

Given the black box that their system seems to be (trust?) -- do you think it will matter?
Last edited by daleddm on Sun Jan 22, 2023 1:43 pm, edited 1 time in total.
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windaar
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Re: TIAA Traditional convert to now or wait

Post by windaar »

daleddm wrote: Sun Jan 22, 2023 1:20 pmwhile searching for reasonable clarity on their complex plan rules (vintages, crediting).
I'm in my 3rd decade with TIAA and I've given up trying to get clarity on TRAD. What I know is that it never goes down, and pays reasonable pre-tax interest. In my 403(b) I use it entirely in place of bonds.
go ahead and allocate some funds now?
I dont think "waiting" is ever a good strategy in investing, and few on this board do. The TRAD interest rates go up and down but never below the "guaranteed" rate, which differs according to plan and contract. I'd just convert now.
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crefwatch
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Re: TIAA Traditional convert to now or wait

Post by crefwatch »

Since the rate you get tomorrow could change in any March thereafter, I would not stress about this decision. Either you want more Fixed Income allocation or you don't. You are not making a killing in interest rate arbitrage.

TIAA has stated that there is a relationship (not a tie, or a numbered ratio) between the 10-year Treasury rate and TIAA Traditional. In fact, now that there are so many flavors of Traditional, they also say that some (like RC and RCP) cost so much less to run that they can offer a higher interest rate for them. (And incidentally, they get to change the minimum guaranteed rate for RC and RCP, an innovation in TIAA's favor. But you didn't ask about that.) But my main point is that for you, this decision is a big deal. For them, it's "only a year", plus or minus.
tibbitts
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Re: TIAA Traditional convert to now or wait

Post by tibbitts »

daleddm wrote: Sun Jan 22, 2023 1:20 pm Currently weighing transferring some 403b investments in TIAA system to their Traditional (currently mostly in Vanguard funds in that plan)... I've been considering this for several months as interest rates have climbed, and while searching for reasonable clarity on their complex plan rules (vintages, crediting).

As the expectation seems to be that prevailing interest rates will continue to go up in the coming months -- the question now is whether to wait for their March reset (new vintage as I understand it) or go ahead and allocate some funds now?

Given the black box that their system seems to be (trust?) -- do you think it will matter?
As far as I know, the dates assigned to vintages don't necessarily align with the March resets. I think it might "matter" but don't think it's predictable. If you wait for "reasonable clarity" you'll be waiting a lifetime.
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daleddm
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Re: TIAA Traditional convert to now or wait

Post by daleddm »

Thanks very much for the replies - several of you all referring to their Traditional as fixed income, as obvious as that is, seems helpful. - dm
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oldzey
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Re: TIAA Traditional convert to now or wait

Post by oldzey »

I use TRAD for my fixed income in my 403b.

I've tried to figure out the TRAD black box myself - clarity is not a word I would use to describe it.

If you figure it out - please let me know. Here's some light reading material about TRAD that I've collected over the years:

https://www.dropbox.com/sh/y08d3qbmvisa ... QrZIa?dl=0

Cheers,
oldzey
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Re: TIAA Traditional convert to now or wait

Post by crefwatch »

daleddm wrote: Sun Jan 22, 2023 10:17 pm Thanks very much for the replies - several of you all referring to their Traditional as fixed income, as obvious as that is, seems helpful. - dm
I only mentioned "fixed income" because it appeared that you might be selling equity mutual funds or CREF Variable Annuity products to buy TIAA Traditional. So your "Asset Allocation" will change if you execute this transfer.

I was referring to the fact that (crudely stated) TIAA Traditional is like a bond fund, but with NO significant principal risk or interest rate risk - which is unusual. I DID NOT mean to suggest that you would get a single fixed rate on your TIAA Traditional for the rest of your life; That's not true, and I was trying (by referring to the annual resets) in fact pointing out that this year's interest rate could be very unlike next year's or ten years from now.

Some people are disturbed by the fact that TIAA Traditional is not a fractional ownership product, like a bond or stock fund. And that the principal safety I referred to is provided by an A++ rated New York State-domiciled insurance company, not by the federal government. I am NOT disturbed by those factors.
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daleddm
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Re: TIAA Traditional convert to now or wait

Post by daleddm »

oldzey wrote: Mon Jan 23, 2023 6:40 am I use TRAD for my fixed income in my 403b.

I've tried to figure out the TRAD black box myself - clarity is not a word I would use to describe it.

If you figure it out - please let me know. Here's some light reading material about TRAD that I've collected over the years:

https://www.dropbox.com/sh/y08d3qbmvisa ... QrZIa?dl=0

Cheers,
oldzey



Thank you for the readings … you've been at this awhile. I have been doing the same, that is, searching for what you might consider objective (?) information on the company to supplement their own marketing materials (no shortage of those).

I noted the 2014 doc among yours that came from (chicken or egg?) this, a rare paper not seemingly penned in-house:

https://pensionresearchcouncil.wharton. ... oodman.pdf

… then shows up at the TIAA Institute, word for word. OK, fine. Digging thru those institute docs finds a lot of author affiliations with something called the Charles River Associates (“strategic expertise”).

Then there’s the many leadership changes in the last few years - for example the new CFO who was with Prudential and AIG … and the new $20m CEO, from JP Morgan Chase. Sale of their banking arm that their reps had been pushing. Just doesn’t have that same “non-profit” sense about it that has carried them for 100 yrs. (and umm, the recent $ 97m fine for misleading clients… )

It’s clear many have done well with this company. I’m just trying to sort out their marketing and widely recognized obfuscations and get a sense I can (really: should) trust them going forward.
aristotelian
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Re: TIAA Traditional convert to now or wait

Post by aristotelian »

crefwatch wrote: Sun Jan 22, 2023 2:08 pm Since the rate you get tomorrow could change in any March thereafter, I would not stress about this decision. Either you want more Fixed Income allocation or you don't. You are not making a killing in interest rate arbitrage.

TIAA has stated that there is a relationship (not a tie, or a numbered ratio) between the 10-year Treasury rate and TIAA Traditional. In fact, now that there are so many flavors of Traditional, they also say that some (like RC and RCP) cost so much less to run that they can offer a higher interest rate for them. (And incidentally, they get to change the minimum guaranteed rate for RC and RCP, an innovation in TIAA's favor. But you didn't ask about that.) But my main point is that for you, this decision is a big deal. For them, it's "only a year", plus or minus.
Agreed, the crediting rate goes up and down with prevailing interest rates. If rates rise, the crediting rate for TIAA Traditional should rise. If TIAA suits your needs, I would not hesitate to go for it now.
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Re: TIAA Traditional convert to now or wait

Post by tibbitts »

daleddm wrote: Mon Jan 23, 2023 11:24 am It’s clear many have done well with this company. I’m just trying to sort out their marketing and widely recognized obfuscations and get a sense I can (really: should) trust them going forward.
It seems that you're concerned that TIAA is becoming more like... any other company you could choose to trust going forward. What's the practical alternative?
manuvns
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Re: TIAA Traditional convert to now or wait

Post by manuvns »

What are the chances thet total bond market fund or TIPS will outperform TIAA Traditional in the long run ?


TIAA Traditional and The Mistake Many Academics Make
https://www.youtube.com/watch?v=T7dmj92N57k
Thanks!
student
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Re: TIAA Traditional convert to now or wait

Post by student »

manuvns wrote: Mon Jan 23, 2023 12:50 pm What are the chances thet total bond market fund or TIPS will outperform TIAA Traditional in the long run ?


TIAA Traditional and The Mistake Many Academics Make
https://www.youtube.com/watch?v=T7dmj92N57k
Outperform? Probably not. I think TIAA Traditional's return will be slightly below TBM but it smooths out the curve. http://collegeretirement.blogspot.com/2 ... -deal.html
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oldzey
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Re: TIAA Traditional convert to now or wait

Post by oldzey »

You might also consider perusing the TIAA Funds Discussion Forum over at Morningstar. Many of the members there have significant knowledge and a great deal of experience specifically pertaining to TIAA financial products.

https://community.morningstar.com/s/top ... tiaa-funds
"The broker said the stock was 'poised to move.' Silly me, I thought he meant up." ― Randy Thurman
manuvns
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Re: TIAA Traditional convert to now or wait

Post by manuvns »

student wrote: Mon Jan 23, 2023 1:45 pm
manuvns wrote: Mon Jan 23, 2023 12:50 pm What are the chances thet total bond market fund or TIPS will outperform TIAA Traditional in the long run ?


TIAA Traditional and The Mistake Many Academics Make
https://www.youtube.com/watch?v=T7dmj92N57k
Outperform? Probably not. I think TIAA Traditional's return will be slightly below TBM but it smooths out the curve. http://collegeretirement.blogspot.com/2 ... -deal.html
There are way too many variables to consider if you go by only the interest rates offered vs. bonds. If you want your contributions to take advantage of abnormally high credit rates that are offered now, sure. Remember - a little more than a year ago some TIAA Traditional contracts were offering less than 4%. These rates should eventually revert to their historic means. More importantly, you should examine how much of your current and future expenses are from guaranteed sources and if you really need more insurance (TIAA traditional) and less liquidity in your portfolio. If you need more guaranteed income, then it can be a good idea to add more to TIAA traditional.
Thanks!
student
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Re: TIAA Traditional convert to now or wait

Post by student »

manuvns wrote: Mon Jan 23, 2023 2:27 pm
student wrote: Mon Jan 23, 2023 1:45 pm
manuvns wrote: Mon Jan 23, 2023 12:50 pm What are the chances thet total bond market fund or TIPS will outperform TIAA Traditional in the long run ?


TIAA Traditional and The Mistake Many Academics Make
https://www.youtube.com/watch?v=T7dmj92N57k
Outperform? Probably not. I think TIAA Traditional's return will be slightly below TBM but it smooths out the curve. http://collegeretirement.blogspot.com/2 ... -deal.html
There are way too many variables to consider if you go by only the interest rates offered vs. bonds. If you want your contributions to take advantage of abnormally high credit rates that are offered now, sure. Remember - a little more than a year ago some TIAA Traditional contracts were offering less than 4%. These rates should eventually revert to their historic means. More importantly, you should examine how much of your current and future expenses are from guaranteed sources and if you really need more insurance (TIAA traditional) and less liquidity in your portfolio. If you need more guaranteed income, then it can be a good idea to add more to TIAA traditional.
I understand. For me, I take my volatility on the equity side. On the "bond" side, I either go with TBM or TIAA Traditional, and I do not want volatility. So I go with TIAA Traditional with the expectation that it will slightly underperform as shown in that one study. (I could not find any additional studies.) Roughly 1/3 of it is in the illiquid version.
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beernutz
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Re: TIAA Traditional convert to now or wait

Post by beernutz »

In August of 2022 I went all in on TIAA Traditional in my nearly 7 figure TIAA account. Prior to that my TIAA assest allocation was about 50/50 with most of the equity side in TISPX (their SP500 index fund) but now it is 0/100% Fixed Income, all of which is Traditional paying 4.75%. I think traditional may be up to 5.5% currently.

I think the benefit of converting to TIAA Traditional earlier is that the longer you hold it the more "loyalty bonus" you will receive should you decide to annuitize it down the road.

I am just taking withdrawals from my TIAA Traditional as it is GSRA so there's no TPA restriction on withdrawals, and other than continuing after my death I don't see a big advantage to annuitizing it into a guaranteed income stream now.
Don't gamble; take all your savings and buy some good stock and hold it till it goes up, then sell it. If it don't go up, don't buy it. --Will Rogers
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Re: TIAA Traditional convert to now or wait

Post by crefwatch »

manuvns wrote: Mon Jan 23, 2023 12:50 pm What are the chances thet total bond market fund or TIPS will outperform TIAA Traditional in the long run ?

TIAA Traditional and The Mistake Many Academics Make
https://www.youtube.com/watch?v=T7dmj92N57k
Well, what were the chances TBM would go down 10% in 2022, while TIAA Traditional went up (Total Return) by a few percent?

I don't care for that YouTube at all. Every statement in it is true, but it's only of value to people who are unwilling to read the documentation about their retirement plan. Do you need total liquidity while you are making monthly salary reductions? I see that the poster has 15 subscribers, as of today. Do you feel that a five-year bank CD is also a crushing restriction on your financial liberty?

The YouTube fails to note that MRDs can be, effectively, made from [time] restricted TIAA Traditional accounts by electing proportional withdrawals. It is false to hint (by omission, I mean) that you might have to eat cat food while TIAA sits on "your" money.
student
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Re: TIAA Traditional convert to now or wait

Post by student »

crefwatch wrote: Tue Jan 24, 2023 9:12 am
manuvns wrote: Mon Jan 23, 2023 12:50 pm What are the chances thet total bond market fund or TIPS will outperform TIAA Traditional in the long run ?

TIAA Traditional and The Mistake Many Academics Make
https://www.youtube.com/watch?v=T7dmj92N57k
Well, what were the chances TBM would go down 10% in 2022, while TIAA Traditional went up (Total Return) by a few percent?

I don't care for that YouTube at all. Every statement in it is true, but it's only of value to people who are unwilling to read the documentation about their retirement plan. Do you need total liquidity while you are making monthly salary reductions? I see that the poster has 15 subscribers, as of today. Do you feel that a five-year bank CD is also a crushing restriction on your financial liberty?

The YouTube fails to note that MRDs can be, effectively, made from [time] restricted TIAA Traditional accounts by electing proportional withdrawals. It is false to hint (by omission, I mean) that you might have to eat cat food while TIAA sits on "your" money.
I agree with you about that youtube video. It provides nothing substantial. Here is the fee schedule for the firm https://atlasfiduciary.com/about/ Look like a typical 1% fee person.
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