A question about momentum

[amf1411]

I have $190,000 in a TIAA-CREF account, $152k of which is through my current job, and $37k of which is left over from previous jobs*.  I believe I could roll this $37k into an IRA with Vanguard, thereby lowering my expense ratios and saving myself a good amount of money as the accounts continue to grow.

BUT here's my question.  Am I losing out on accelerated earnings within the TIAA-CREF if I reduce the value of my account by $37k?  I've tried to figure this out on my own, but haven't been able to.  How does a person figure this out?

Another way of asking this question is "at which point do we really start to gain momentum?"

I'm 38, single, no kids.  Income about $55k, maxing out 403(b) every year, and have been contributing to a Roth for the last several years (changing that over to a traditional IRA as of 2014 after reading more on this site).

*Breakdown of $37,000:
$5200 deferred annuity plan
$32,000 defined retirement contribution plan

[Cecil]

Are you referring to the idea that at some point, your earnings start to "accelerate" and grow by themselves?

In that case, it doesn't matter whether you have 1 account of $200k, or 10 accounts of $20k. Every dollar you own earns you a bit of interest regardless of which account it's in. You should put your dollars in the cheapest place possible (Vanguard is awesome!).

The momentum you feel is more psychological than anything. Every dollar you invest gives you a tiny little extra push.

[Zamboni]

nvm, I thought this would be a question about the momentum theory of investing.

[matchewed]

Returns are based on percentage. There is no loss of momentum.

[KingCoin]

Doesn't matter if the accounts are split.

You should build an Excel spreadsheet to prove it to yourself.

[amf1411]

Thanks -- that's what I was trying to figure out.  If I split the big pot into smaller pots, would the % be the same overall.  And I think you've answered that question.  I wasn't able to wrap my brain around it myself.

[matchewed]

The simple way to think of it is with the number 100.

If 100 increases by 7% you will get 107.

If I split 100 into 30 and 70 then raise both by 7% you will get 32.1 and 74.9. Add those two together and you get 107. So as long as you invest in similarly performing funds with similar expense ratios you should expect very similar returns no matter how many splits you do.

[aj_yooper]

I have $190,000 in a TIAA-CREF account, $152k of which is through my current job, and $37k of which is left over from previous jobs*.  I believe I could roll this $37k into an IRA with Vanguard, thereby lowering my expense ratios and saving myself a good amount of money as the accounts continue to grow.

BUT here's my question.  Am I losing out on accelerated earnings within the TIAA-CREF if I reduce the value of my account by $37k?  I've tried to figure this out on my own, but haven't been able to.  How does a person figure this out?

Another way of asking this question is "at which point do we really start to gain momentum?"

I'm 38, single, no kids.  Income about $55k, maxing out 403(b) every year, and have been contributing to a Roth for the last several years (changing that over to a traditional IRA as of 2014 after reading more on this site).

*Breakdown of $37,000:
$5200 deferred annuity plan
$32,000 defined retirement contribution plan

You are doing pretty well.  I like that you are doing a traditional IRA vs. a Roth.  That will save you some income taxes if you retire in a lower tax bracket than your current level.

What category is the TIAA-CREF?  403b, 457, or ?

Re your $32000 in a defined retirement contribution plan:  Do you have a vested pension there?  If so, it may be best to let it stay depending on the payout plan and stability of the pension.  If you are not vested, and that pension is not coordinated with your current job and you don't see yourself going back into that system, you might want to transfer it to a rollover IRA.  Talk with your human resources staff to get clarification on this.  If you do a rollover, go online to Vanguard and call the number to transfer funds to Vanguard.  They will do the forms for you on-line and they can expedite transfers.

Is the deferred annuity plan a 457?  If it is a 457, then you might want to keep it there.  Look into the plan details.  Again, human resources.

My wife has a 457 and we were all set to move it to Vanguard, but then learned that she will not pay Illinois taxes on any withdrawals (IL state employee) from the 457 so we are leaving it there.  She has good investment choices too.

There is value to consolidating accounts, if you don't lose benefits in the transfer.