Portfolio help CREF STOCK (R1) vs ?

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ctphoto
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Joined: Sat Jul 16, 2022 12:41 pm

Portfolio help CREF STOCK (R1) vs ?

Post by ctphoto »

I posted recently asking for help in managing my 92 year old mothers portfolio. Dawned on me that I also need advice about my own portfolio. I am 60 years old. I worked over 30 years for a non-profit that used TIAA-CREF. Recently sold my house and that is reason for the amount sitting in FZDXX money market. I am currently an independent contractor and my current financial status has me treading water. What comes in goes out with none left over currently for investing.

Emergency funds: Have checking account plus plenty in money market funds

Debt: No debt

Tax Filing Status: Single

Tax Rate: 12% Federal, 4.5% State

State of Residence: CT

Age: 60

Portfolio size about 1.1 million

Current retirement assets

403b with TIAA-CREF (RC)
31.9% CREF STOCK (R1)( QCSTRX) (.44%)
31% VANGUARD 500 INDEX FUND ADMIRAL (VFIAX) (.04%)

SIMPLE IRA at Fidelity
13.6% FIDELITY 500 INDEX FUND (FXAIX) (.015%)
1% FIDELITY GOVERNMENT CASH RESERVE (FDRXX) (current yield 1.35%)

Current non-retirement assets

21.3% FIDELITY MMKT PREMIUM CLASS (FZDXX) (current yield 1.63%)
.9% FIDELITY GOVERNMENT MONEY MARKET (SPAXX) (current yield 1.28%)



Questions:
1. I no longer contribute to the 403B account. I left that non-profit company 9 years ago and have just let it ride up and down with the market. The expense ratio of the CREF products are on the high side. I am wondering if I should move money out of the CREF STOCK. I have not decided if I want to annuitize my 403B at some point down the road. I could just move all the 403B money out of TIAA-CREF and into the FIDELITY IRA and then just have everything under one roof but I am not sure if that is wise or not. Is there an advantage to having funds at TIAA-CREF that I can annuitize if that made sense for me? The CREF STOCK is a very diversified fund that is currently 63.8% domestic equity and 34.9% international. Also has diversification amongst Large caps, mid caps and small caps. But I am not fond of giving up that much money every year with that expense ratio of .44% compared to the Vanguard products.

2. In my TIAA-CREF (RC) plan I also have available the following VANGUARD funds:
VANGUARD EXTENDED MARKET INDEX FUND ADMIRAL (VEXAX) (.06%)
VANGUARD TOTAL INTERNATIONAL STOCK INDEX FUND ADMIRAL (VTIAX) (.11%)
VANGUARD TOTAL BOND MARKET INDEX ADMIRAL (VBTLX) (.05%)
The_Equanimist
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Re: Portfolio help CREF STOCK (R1) vs ?

Post by The_Equanimist »

Perhaps I can be helpful with one of your questions: whether it makes sense to move funds out of the CREF Stock account into a Vanguard Total International Stock Index account.

It would not make sense if you'd want to annuitize, which is not an option with Vanguard. As a portion of my portfolio I have about $500k in the Vanguard Total International Stock Index Admiral Shares, with a very low expense ratio. At retirement I plan to move it to a CREF Stock R1 account and annuitize it, keeping the underlying investment in the stock account. In my situation (no need to pass an inheritance to heirs; twin goals of maximizing retirement income and not running out of money; adequate emergency funds in other liquid assets) the benefits of annuitizing justify the higher fees in the TIAA accounts -- even at R1 expense rates. If I were to keep the funds in Vanguard and use a safe rate of withdrawal of 4%, my monthly income would be significantly less than the TIAA payouts, and in most scenarios I'd end up with a pile of unspent money at death. Your situation may be different (though I'd venture to say it will include death!).
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windaar
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Re: Portfolio help CREF STOCK (R1) vs ?

Post by windaar »

Looks like you're 76% equities at age 60. Seems like a lot. Does that fit your risk tolerance? When do you plan to retire?
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ResearchMed
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Re: Portfolio help CREF STOCK (R1) vs ?

Post by ResearchMed »

The_Equanimist wrote: Tue Aug 29, 2023 5:23 pm Perhaps I can be helpful with one of your questions: whether it makes sense to move funds out of the CREF Stock account into a Vanguard Total International Stock Index account.

It would not make sense if you'd want to annuitize, which is not an option with Vanguard. As a portion of my portfolio I have about $500k in the Vanguard Total International Stock Index Admiral Shares, with a very low expense ratio. At retirement I plan to move it to a CREF Stock R1 account and annuitize it, keeping the underlying investment in the stock account. In my situation (no need to pass an inheritance to heirs; twin goals of maximizing retirement income and not running out of money; adequate emergency funds in other liquid assets) the benefits of annuitizing justify the higher fees in the TIAA accounts -- even at R1 expense rates. If I were to keep the funds in Vanguard and use a safe rate of withdrawal of 4%, my monthly income would be significantly less than the TIAA payouts, and in most scenarios I'd end up with a pile of unspent money at death. Your situation may be different (though I'd venture to say it will include death!).

If I understand OP's 403b choices, they can purchase a few Vanguard funds (and perhaps other choices?) as listed, within the 403b plan.
IF that is the case, then chances are they can still annuitize in the future if they wish.
However, they would not have any of the "extra" from holding older vintages for any of the money that had been held within the 403b plan, but not in Trad Ann.

If you are concerned about the CREF Stock Fund expense (what is it, exactly?), you could swap out for what is likely a lower expense Vanguard fund, and later swap back in if you want to use the CREF stock fund as part of a life annuity. You could use a similar ratio of the US and International Vanguard funds to approximate the CREF stock fund, if you wanted to keep a similar allocation... or you could change things a bit.

OP: Did your post really go > one year to get a response? If so, apologies on behalf of all of us!

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crefwatch
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Re: Portfolio help CREF STOCK (R1) vs ?

Post by crefwatch »

I have never had an RC account, but I did work at a tiny NFP that could only offer R1 CREF units, because of their small size.

The first thing to do is to go to your Quarterly Statement and make sure whether or not your plan has Plan Servicing Credits and Debits. If you do, you can either try to calculate, or better, find an employer handout that says what their numbers are. It's possible that you are actually getting a huge discount on the stated ER of CREF Stock, and will actually pay perhaps 0.11% for a 0.04% Vanguard Fund.

In any case, if your plan has both Vanguard index funds and CREF Stock, you can always accumulate in the Vanguard fund, and transfer it to CREF the month before you annuitize (IF you decide to annuitize.) I personally would transfer the year before, because TIAA ... has a lot of latency!

There is nothing wrong with CREF Stock (or CREF Equity Index) except for the R1 Expense Ratio. I suggest that while you still have friends at the 403(b), you get a statement, maybe on a TIAA form, that you have "separated from service" - just because it sometimes gets annoying to prove that this is so.

As noted, you may wish to shift towards a lower-risk asset allocation as you approach retirement age. There is plenty of discussion of that (non-TIAA) issue on this board, and on the associated Wiki. (Link top of page) If you can stomach the 8-year withdrawal period, you may wish to consider TIAA Traditional as part of your (new ... ) Fixed Income allocation, because (unlike Bond mutual funds and the CREF Bond Fund VA) it does not decline in value when prevailing interest rates move up. Note that RMDs are, in fact, available proportionately from TIAA Traditional, because the IRS will not allow TIAA to hold on to money that must be taxed. You don't have to DO anything to free up such otherwise restricted amounts.

Separately, there is also a good base of discussions here about whether someone who "has enough to retire" would want to annuitize or not. Related (but large!) issues are age to take Social Security, desire to do Roth Conversions, and IRMAA planning if doing Roth Conversions. I'm surprised how low your tax rate is. Note that you could roll over LESS than all of your 403(b) to the IRA, if you want to do more Roth Conversions.
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