Author Topic: TIAA-CREF fund management - worth the $$?  (Read 3162 times)

OzzieandHarriet

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TIAA-CREF fund management - worth the $$?
« on: June 12, 2015, 01:14:39 PM »
Synopsis: I left my full-time job 2 years ago at age 55. My husband, now 55, is still working full time. My ex-employer used TIAA-CREF for employees' retirement accounts, and I left my retirement savings with them. Husband's retirement savings are with Vanguard, and we have some taxable accounts and IRAs with Vanguard as well. Because I still have the TIAA-CREF account, we were able to have a financial advisor look over our entire picture and give us some allocation and planning advice at no charge.

So now we have some nicely printed charts and tables and the results of their Monte Carlo projections, which basically tell us we are pretty well set up to finance our lives to age 95 and beyond. This was based on husband working at his current job for a couple more years and included drawing SS when we're eligible. The only changes suggested were to make some small allocation adjustments (to slightly more conservative investments).

I knew there would be sales pitch for them to manage our money, and there was. The fee would be between .07 and .085% per year, which translates into less than $10k per year for the amount they would be managing (i.e., they wouldn't actively manage all assets, from my understanding -- we had only a brief conversation about it at the end of our consult, so I may be wrong about that). We told the guy we'd think it over.

So my question is: is this worth it? Also: would it be insane to move all of our Vanguard investments to TIAA-CREF? The fees for the latter are of course higher. Or (my gut feeling) would it be better to continue as we've been doing, and perhaps following the suggestions for reallocation, with yearly check-ins (for no extra charge)?

I was thinking before of moving my retirement money to Vanguard, but perhaps availing ourselves of the included services might make keeping it where it is worthwhile. Husband has about double what I have, so that's approximately 1/3 of our assets.

I appreciate any thoughts on this. I am reasonably intelligent (and of course frugal!) but not super educated about investing and finances, and husband is the same.
« Last Edit: June 12, 2015, 01:18:14 PM by OzzieandHarriet »

MDM

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Re: TIAA-CREF fund management - worth the $$?
« Reply #1 on: June 12, 2015, 01:33:18 PM »
The fee would be between .07 and .085% per year, which translates into less than $10k per year for the amount they would be managing (i.e., they wouldn't actively manage all assets, from my understanding -- we had only a brief conversation about it at the end of our consult, so I may be wrong about that). We told the guy we'd think it over.

Either there is a decimal point error, or with $10,000/0.00085 = $11,764,706 as only part of your assets you are indeed set for age 95 and beyond. :)

Between this forum and http://www.bogleheads.org/forum/viewforum.php?f=1 you can probably get the help you need.  But it really is a personal decision.  Is there a specific way you would expect the advisor to add value, or is it a more generic "fear of the unknown"?

geekette

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Re: TIAA-CREF fund management - worth the $$?
« Reply #2 on: June 12, 2015, 01:53:31 PM »
I would never put the word "only" in front of $10k a year in management fees.  That said, there's some odd math going on there. 

Argyle

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Re: TIAA-CREF fund management - worth the $$?
« Reply #3 on: June 12, 2015, 01:57:01 PM »
$10,000 a year!  In ten years that's $100,000 in fees!  Not even mentioning the returns you would have earned on that $100,000.  I just can't believe a manager could earn you $100,000 more than you could get yourself in ten years, even with his nice charts. 

Remember, a big part of maximizing returns is minimizing fees.  He doesn't mention that because that's the one thing he can't do for you. 

I vote for Vanguard.

OzzieandHarriet

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Re: TIAA-CREF fund management - worth the $$?
« Reply #4 on: June 12, 2015, 02:34:56 PM »
Math: Am I wrong about this? 1% of (let's say) 1 million = 10,000. If fees are 0.85%, that's .0085 x 1,000,000 = 8,500. I think he said the amount they'd manage would be about 800K. (That's not all of our assets, but a chunk.) So somewhere in there. Would we earn that much more? Perhaps perhaps not. My instinct tells me it would be a wash, and maybe a net loss over leaving things as they are (most of $ with Vanguard) and doing the managing ourselves, but maybe I'm not appreciating what expert help would provide.

Psychology: It seems they start the session with asking what you would do if one or both of you were incapacitated and needed expensive care, and/or if one of you died and the remaining person needed someone to manage their affairs. In our case, we don't have a good contingency plan for me because we don't have children, and my family kind of sucks, so there's no one reliable to give POA/medical POA. Husband's family is better, but I am not confident they care enough about me to go out of their way to put the kind of effort required into taking care of me if it were needed and husband weren't around. So that scares you into thinking you need a lot more money and a lot more help managing it than maybe you do. But having been through assisting our mothers with their final illnesses, we know all too well how much is involved with all that.

I don't really expect to live to be 95 because it's not in the family genes, but you never know.

geekette

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Re: TIAA-CREF fund management - worth the $$?
« Reply #5 on: June 12, 2015, 02:55:35 PM »
There's a factor of 10 difference between your first post (The fee would be between .07 and .085% per year) and your second (If fees are 0.85%).  Which is it?

OzzieandHarriet

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Re: TIAA-CREF fund management - worth the $$?
« Reply #6 on: June 12, 2015, 03:29:04 PM »
There's a factor of 10 difference between your first post (The fee would be between .07 and .085% per year) and your second (If fees are 0.85%).  Which is it?

Less than 1%. I put the decimal in the wrong place.

MDM

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Re: TIAA-CREF fund management - worth the $$?
« Reply #7 on: June 12, 2015, 04:24:42 PM »
I think he said the amount they'd manage would be about 800K.

If you want to pay someone, Vanguard will charge 0.3% (or $3,000 for $1 Million in assets) for what appears to be a similar service.  See https://investor.vanguard.com/financial-advisor/financial-advice.