TIAA-CREF

[megan1104]

My employer currently contributes 12% of my salary to TIAA-CREF (unmatched, which is great). I am adding another 3% to that. My question is this:

Should I contribute more to TIAA-CREF up to the $18k limit per year or should I take that "extra" money and start at Vanguard account or other fund? (We have about $300k in TIAA-CREF and another $200k in Edward Jones, but most of the latter is in 529s earmarked for college for our four little kids. We have no debt other than a mortgage.)

Thoughts or advice?

[ysette9]

Two thoughts yes, you shouod absolutely max out your 401(k). That is tax-advantage space you want to take advantage of. Two: get the hell out of Edward Jones and move your money over to Vanguard. Those people are a bunch of crooks and do not have your best interest at heart.

[seattlecyclone]

What exactly are you investing in within the TIAA-CREF account? As long as you have some low-fee options in there, the tax-deferred account is a great choice for most people!

As to other advice, I would recommend moving all of your money from Edward Jones to a low-fee provider (such as Vanguard, Fidelity, or Schwab) ASAP. Edward Jones is notorious for selling people investments with ridiculously high fees.

[Indexer]

In the long line of places to put your money TIAA probably ranks about 4th from the top(after Vanguard, Fidelity, and Schwab), and Edward Jones probably ranks about 3rd from the bottom(right above LPL and sleazy insurance salesmen).

Check your options in the 403b at TIAA. (I'm assuming 403b because TIAA is more well know for those rather than 401ks). You should probably max that out if you can.

Edward Jones is a separate question. The answer is get the $#*^ out of there. This is true for investments and especially true for 529s.

For the 529s check out your state's 529 website first. Some states have a state income tax deduction if you use their specific plan. This is worth checking on. A tax deduction can make up for a small difference in fees. If you don't get a state tax deduction call Vanguard. They have the lowest cost 529 I know of.

[TreeTired]

As @Indexer obviously knows,  they dropped the "CREF".  It's just TIAA now.

[seattlecyclone]

For the 529s check out your state's 529 website first. Some states have a state income tax deduction if you use their specific plan. This is worth checking on. A tax deduction can make up for a small difference in fees. If you don't get a state tax deduction call Vanguard. They have the lowest cost 529 I know of.

I was looking into this recently and it looked like California's ScholarShare program had a lower cost than the Vanguard-branded 529 plan. For example, California has an S&P 500 option for 0.10% while Vanguard charges 0.19%. California's age-based portfolios cost 0.11-0.18% (depending on age), while the Vanguard plan charges 0.19% for all ages. Unless there are some hidden fees in there that I haven't accounted for, it looks like California might be the way to go if you don't get a tax break for investing in your state's plan and you want to keep fees to a minimum.

[Greenpez]

For the 529s check out your state's 529 website first. Some states have a state income tax deduction if you use their specific plan. This is worth checking on. A tax deduction can make up for a small difference in fees. If you don't get a state tax deduction call Vanguard. They have the lowest cost 529 I know of.

I was looking into this recently and it looked like California's ScholarShare program had a lower cost than the Vanguard-branded 529 plan. For example, California has an S&P 500 option for 0.10% while Vanguard charges 0.19%. California's age-based portfolios cost 0.11-0.18% (depending on age), while the Vanguard plan charges 0.19% for all ages. Unless there are some hidden fees in there that I haven't accounted for, it looks like California might be the way to go if you don't get a tax break for investing in your state's plan and you want to keep fees to a minimum.

 NY has a good one too. Another diff is that Vanguard takes 3k to open where most of the state based ones do not.

[Indexer]

I was looking into this recently and it looked like California's ScholarShare program had a lower cost than the Vanguard-branded 529 plan. For example, California has an S&P 500 option for 0.10% while Vanguard charges 0.19%. California's age-based portfolios cost 0.11-0.18% (depending on age), while the Vanguard plan charges 0.19% for all ages. Unless there are some hidden fees in there that I haven't accounted for, it looks like California might be the way to go if you don't get a tax break for investing in your state's plan and you want to keep fees to a minimum.

I will admit I didn't know about that plan. It looks like the funds are run by TIAA so I already like it. However, I did just look and Vanguard's age based plans are 0.17%. The costs are closer than they look.

Normally I'm 100% in favor of lower costs. The Vanguard age based options also vary from aggressive to moderate to conservative so you have more customization in which plan fits you. That california age based plan is one size for everybody. If that one size fits you go with Cali. If it doesn't I would still use Vanguard. The costs are so close fees aren't a major issue. Having the right AA is very important.

[seattlecyclone]

Indeed. I'm torn between California and Vanguard because there's some value in having money spread across fewer different brokerage firms, but I'm not sure how many basis points that's worth to me in practice.

[megan1104]

Hi everyone,

Thanks for the responses. As for what my allocations is for TIAA, I have it set as:

Guaranteed: 18.08%
Equities: 62.76%
Real Estate: 9.67%
Fixed Income: 4.86%
Money Market: 1.88%
Multi-Asset: 2.75%

I have to say that a) I set these numbers up about 17 years ago when I started this job, b) am not sure how to tell what is a low-fee option within their options. (I work for the federal government so I think we *might* have a special set of choices, but I'm not certain.)

Regarding Edward Jones, I will definitely look into this. I really like our EJ guy personally and he's become a family friend. I know that's not a reason to stick with his company, but I do feel like that's helped lull us into a bit of a stupor over this issue. Clearly, I have more research to do but it seems like Vanguard is a good place to start regardless.

Thanks again for all of the insight.

[Another Reader]

The EJ MO is to become a family friend.    You are probably being charged a sales commission (load) when you buy a fund plus high fund management fees. This company is built on parasitism, some basic research at financial sites similar to this one will bear that statement out.  In fact, there are a couple of recent threads on EJ over at Early-Retirement.org.  For the sake of your financial future, do the research and fire these people ASAP.

If you are a federal employee, do you not have access to the TSP?  The funds in the TSP are some of the best options available.

[Choices]

In addition to maxing out your 401k, you might also consider a tIRA, Roth IRA, or backdoor Roth depending on your income.

Also, I've heard that Utah has one of the best 529s but haven't looked into it because we don't have kids. Can anyone else verify this?

[Indexer]

Regarding Edward Jones, I will definitely look into this. I really like our EJ guy personally and he's become a family friend. I know that's not a reason to stick with his company, but I do feel like that's helped lull us into a bit of a stupor over this issue. Clearly, I have more research to do but it seems like Vanguard is a good place to start regardless.

Thanks again for all of the insight.

The "cheaper" funds they use charge 4.75% upfront + 0.65% ongoing. The more expensive funds might charge nothing upfront but 2.5% forever or 5% up front and 1.5% forever.

With the cheaper fund on 200k that is almost $10,800 in year one and $1200 per year assuming no compounding.

For comparison the fund I used in the example above was the American Funds Growth fund of America class A. A pure domestic stock index fund at Vanguard will probably cost 0.05-0.1% depending on what you use.

That is $100/yr. Nope I didn't forget a decimal.  That is a difference of $10,700 in year one, and $1100(annually adjusted for growth) from then on. Thats an expensive friend is all I'm saying.

[seattlecyclone]

Also, I've heard that Utah has one of the best 529s but haven't looked into it because we don't have kids. Can anyone else verify this?

Utah's fee schedule looks a little bit higher than the California or Vanguard-branded (Nevada) plan, but not by a whole lot.

[clarkm04]

I currently have a 403(b) through TIAA. 

There's a simple process to log on to their website.  From there, you can see the expense ratios for the funds you are in.  TIAA has numerous tiers, so that's a good starting point to see what they are charging you.

The Guaranteed: is their annuity and it is hard to switch contributed money from. I stopped contributing to this since I wanted more flexibility.

Equities: is their actively managed fund.  They have an equities index with a lower expense ratio

Money market: you are paying for no return, so I would consider getting out of that

Multi-Asset: you'll pay more than just setting up diversification yourself (stock, bond, etc)

Fixed: is the bond fund.  CREF bond is generally the lowest in the few plans I've seen

Real Estate: at least for me, the expense ratio was high, so I get REIT exposure through my IRA

TIAA jacked our fees last year (fees doubled for every fund). Luckily, my company is looking to switch to Vanguard in Jan. 2017. 

They cut fees for some tiers, so your expense ratios might be even better than before last year.

Hope that helps.  PM me if you have further questions.

[Trudie]

We have about $1M in retirement investments with TIAA-CREF.  I agree that they are in the top tier, so to speak, of places you could have your money.  Absolutely max out your 403B, including catch up contributions when you are of age.

A couple of suggestions:
(1) If you don't have one already, open a brokerage window in your TIAA-CREF retirement account.  This will immediately increase a thousand-fold the options you have to hold in your accounts, including individual stocks, and funds from other fund families.  You can hold many other firms' instruments for no added fees (other than the initial exchange fee, which is pocket change.)
(2) If you have retirement assets of at least $500K, consider getting a free wealth management advisor.  You never give them discretion to move your money around, and since they are employed by TIAA you never get charged fees for their services (not hidden, they really are free).  We've found this helpful with asset allocation decisions.  And, frankly.... I get real tired of phone trees and automated systems when I have paperwork that needs to be processed.  My advisor and the people in the office have been tremendously helpful with that stuff -- particularly when moving funds over (like to do a megabackdoor roth).
(3)  Although there are one time trading fees, you can hold Vanguard within a brokerage window at TIAA.
(4)  They have great online tools.  I regularly read their articles.  And I use their 360 degree financial view tool.
(5)  I like consistency.  I like knowing that when I start getting my money out I will have some help.  And I like knowing I can deal with a person I know.  But, I wouldn't pay for it...

[pbkmaine]

Also take a look at your TIAA options. They have opened up their platform in the past few years. You may be able to get Vanguard or TIAA's own low-cost index funds without going through the brokerage window.

[Dee18]

I have funds in TIAA guaranteed accounts from two different employers.  One has limits on getting the money out, the other does not.  So check with your TIAA rep about the terms.

[megan1104]

Thanks, everyone, for all of the very helpful advice.

Trudie, I really appreciate your insight since you are in the TIAA world. I apologize for my very basic question, but what exactly does opening a brokerage window entail or even mean? I would love to access Vanguard index funds through TIAA. Ultimately, it sounds like Vanguard is the best on all fronts.

I'm trying not to kick myself for asking some of these questions years ago, but I suppose it's better late than never ...

[Trudie]

Thanks, everyone, for all of the very helpful advice.

Trudie, I really appreciate your insight since you are in the TIAA world. I apologize for my very basic question, but what exactly does opening a brokerage window entail or even mean? I would love to access Vanguard index funds through TIAA. Ultimately, it sounds like Vanguard is the best on all fronts.

I'm trying not to kick myself for asking some of these questions years ago, but I suppose it's better late than never ...

Without a "brokerage window" you will have access to all the TIAA retirement funds/products, which may be sufficient for you.  But say you feel that something is lacking in what you hope to be a diversified retirement portfolio, or you don't like the options TIAA retirement offers (like maybe you think they're underperforming to their peers, or the fees are too high).  A brokerage "window" allows you to purchase individual stocks, ETs, mutual funds of other companies and put them inside your IRA/403B/401K.  If you have a TIAA rep talk to that person.  Otherwise, just call TIAA and ask them how you would do this.  It is free; it just gives you more options.  For instance, my retirement portfolio consists of TIAA funds at this point, but I have a brokerage window that I used many years ago to buy shares of Berkshire Hathaway B because, you know, Warren Buffett.

[luchorpan]

Sorry to revive this old-ish thread. I'm going to start contributing to a 457b through my new employer. I can choose either Fidelity or TIAA as the vendor. Both of them offer low-cost Vanguard funds like VINIX/VTSNX within my employer's "core lineup" of choices.

If I have access to the same funds, is there anything that should tip me towards Fidelity or TIAA? I'm trying to figure out if there are any fees on top of the fund ERs. Any suggestions of where to find that information?

[wenchsenior]

The EJ MO is to become a family friend.    You are probably being charged a sales commission (load) when you buy a fund plus high fund management fees. This company is built on parasitism, some basic research at financial sites similar to this one will bear that statement out.  In fact, there are a couple of recent threads on EJ over at Early-Retirement.org.  For the sake of your financial future, do the research and fire these people ASAP.

If you are a federal employee, do you not have access to the TSP?  The funds in the TSP are some of the best options available.

I am also interested in this. I've never heard of a Fed being in TIAA rather than TSP.

Get away from Edward Jones ASAP! (ETA: never mind, I see you are in the process of doing it...excellent!)

[megan1104]

I am a federal employee, but not a civil servant which is why I don't have access to TSP. (I'm a Smithsonian employee working on a NASA contract so it's a bit funky.)