Author Topic: Variable Annuity vs Mutual Fund, and 3 fund portfolio Q  (Read 4300 times)

TheThirstyStag

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Variable Annuity vs Mutual Fund, and 3 fund portfolio Q
« on: July 01, 2015, 09:10:38 AM »
TIAA-CREF is the only option I have for my 403(b).  Bear with me if my question is somewhat elementary, as I've been trying to understand some of their offerings compared to Vanguard.

I'm trying to build a three-fund portfolio analogous to the VTSMX/VGTSX/VBMFX Vanguard portfolio.  My investment options through TC are somewhat limited, but my employer just added TBIRX and TRIEX.  My investments now look like the following:

65% - CREF Equity Index (QCEQPX) - 0.38% ER
25% - TIAA-CREF International Equity Index Fund (TRIEX) - 0.31% ER
10% - TIAA-CREF Bond Index Fund (TBIRX) - 0.37% ER

My first question:  Is this an analogous 3-fund portfolio to Vanguard's VTSMX/VGTSX/VBMFX?

My second question:  TIAA-CREF lists QCEQPX as a "Variable annuity" type of investment, and TRIEX as a mutual fund type.  I'm not quite sure what this means, as I thought QCEQPX invests in the Russell 3000.  Can someone explain this difference to me?     I do not have TIAA-CREF equity index (TIQRX) as an investment option, but I don't know what the difference is with QCEQPX as they hold the same companies. 

My employer also added TRBIX as an investment option, but it sounds like that only invests in the smallest 2000 companies of the Russell 3000.


slugsworth

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Re: Variable Annuity vs Mutual Fund, and 3 fund portfolio Q
« Reply #1 on: July 01, 2015, 02:47:01 PM »
I don't think having an annuity in a 403b makes much sense since you would generally have higher fees in an annuity and the 403b is already tax deferred. . .

I think the fund you are looking for is: TINRX that being said, you might be able to get a pretty similar allocation form their target date fund, and it will probably save you a bit. (look at TCLOX)

TheThirstyStag

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Re: Variable Annuity vs Mutual Fund, and 3 fund portfolio Q
« Reply #2 on: July 01, 2015, 03:23:48 PM »
I don't think having an annuity in a 403b makes much sense since you would generally have higher fees in an annuity and the 403b is already tax deferred. . .

I think the fund you are looking for is: TINRX that being said, you might be able to get a pretty similar allocation form their target date fund, and it will probably save you a bit. (look at TCLOX)

TINRX is the retail version of TRBIX (retirement class), but it's moot since I don't have either as as investment option.  As far as I can tell,  TIAA-CREF Equity Index Fund (TRBIX) and CREF Equity Index (QCEQPX) invest in the same things with the former being a mutual fund, and the other being a variable annuity.  My question is, what's the difference (other than .30 vs .38 expense ratios)?  In the absence of TINRX/TRBIX, is this an acceptable substitute?  Anything else I'm missing?   TC's terminology can be very confusing at times.

MDM

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Re: Variable Annuity vs Mutual Fund, and 3 fund portfolio Q
« Reply #3 on: July 01, 2015, 05:13:30 PM »
Don't have a good answer for you.  The annuity descriptor is troublesome.  Even the prospectus (http://www.tiaa-cref.org/public/prospectuses/cref_prospectus.pdf?fundclass=RPVA) does not seem to specify your situation, as it indicates:
Quote
You or your employer can purchase a CREF variable annuity certificate or contract (which together will be referred to in this Prospectus as a “contract”) in connection with certain types of retirement plans. CREF offers the following contracts:

RA (Retirement Annuity)
GRA (Group Retirement Annuity)
SRA (Supplemental Retirement Annuity)
GSRA (Group Supplemental Retirement Annuity)
Retirement Choice and Retirement Choice Plus Annuity
Accumulation-Only
GA (Group Annuity) and Institutionally Owned GSRAs
Classic, Roth IRA and Rollover (Individual Retirement Annuity) including SEP IRAs (Simplified Employee Pension Plans)
Keogh
ATRA (After-Tax Retirement Annuity)

Do you know what your contract is?

If you can treat this as a regular mutual fund and not be forced (or need to pay a penalty to avoid having) to annuitize your proceeds, it seems ok.  But that's a big if.

regulator

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Re: Variable Annuity vs Mutual Fund, and 3 fund portfolio Q
« Reply #4 on: July 01, 2015, 05:21:09 PM »
I think the only real difference is the ER difference so I would plump for the cheaper option.  There are a few minor differences (e.g. I believe you have the option of taking annuitized variable payments when you retire, which almost nobody does), but they don't matter for someone in the accumulation phase.

TheThirstyStag

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Re: Variable Annuity vs Mutual Fund, and 3 fund portfolio Q
« Reply #5 on: July 05, 2015, 12:52:25 AM »
Don't have a good answer for you.  The annuity descriptor is troublesome.  Even the prospectus (http://www.tiaa-cref.org/public/prospectuses/cref_prospectus.pdf?fundclass=RPVA) does not seem to specify your situation, as it indicates:
Quote
You or your employer can purchase a CREF variable annuity certificate or contract (which together will be referred to in this Prospectus as a “contract”) in connection with certain types of retirement plans. CREF offers the following contracts:

RA (Retirement Annuity)
GRA (Group Retirement Annuity)
SRA (Supplemental Retirement Annuity)
GSRA (Group Supplemental Retirement Annuity)
Retirement Choice and Retirement Choice Plus Annuity
Accumulation-Only
GA (Group Annuity) and Institutionally Owned GSRAs
Classic, Roth IRA and Rollover (Individual Retirement Annuity) including SEP IRAs (Simplified Employee Pension Plans)
Keogh
ATRA (After-Tax Retirement Annuity)

Do you know what your contract is?

If you can treat this as a regular mutual fund and not be forced (or need to pay a penalty to avoid having) to annuitize your proceeds, it seems ok.  But that's a big if.

I believe my contract is twofold:  GRA for employer contribution, SRA for employee contribution.  Both have the same investment options.

I don't see anything that suggests this must be annuitized at any point - TC seems to use the word annuity in many different (and confusing) ways.

TheThirstyStag

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Re: Variable Annuity vs Mutual Fund, and 3 fund portfolio Q
« Reply #6 on: July 05, 2015, 12:57:50 AM »
I think the only real difference is the ER difference so I would plump for the cheaper option.  There are a few minor differences (e.g. I believe you have the option of taking annuitized variable payments when you retire, which almost nobody does), but they don't matter for someone in the accumulation phase.

Again, I do not have the cheaper option (TINRX/TRBIX) available to me.  Only the variable annuity version. 

From what I can tell, I could transfer money into/out of the variable annuity version at any time, including 5 minutes before retirement, so I agree there's no need for it in the accumulation phase.

Are there any other differences (besides ER) that I should be aware of?  Anyone familiar with TIAA-CREF's strangeness?

regulator

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Re: Variable Annuity vs Mutual Fund, and 3 fund portfolio Q
« Reply #7 on: July 05, 2015, 12:39:29 PM »
I think the only real difference is the ER difference so I would plump for the cheaper option.  There are a few minor differences (e.g. I believe you have the option of taking annuitized variable payments when you retire, which almost nobody does), but they don't matter for someone in the accumulation phase.

Again, I do not have the cheaper option (TINRX/TRBIX) available to me.  Only the variable annuity version. 

From what I can tell, I could transfer money into/out of the variable annuity version at any time, including 5 minutes before retirement, so I agree there's no need for it in the accumulation phase.

Are there any other differences (besides ER) that I should be aware of?  Anyone familiar with TIAA-CREF's strangeness?

I am very familiar.  They have a unique structure that has a lot to do with the fact that mutual funds were not really a thing when they were set up.  For all intents and purposes, I think you can treat the VAs as mutual funds with slightly higher expenses.  That is what I did when DW was in TIAA-CREF, even to the point of rolling her 403B over to an IRA when she moved to other employment.

TheThirstyStag

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Re: Variable Annuity vs Mutual Fund, and 3 fund portfolio Q
« Reply #8 on: July 05, 2015, 09:52:51 PM »
I think the only real difference is the ER difference so I would plump for the cheaper option.  There are a few minor differences (e.g. I believe you have the option of taking annuitized variable payments when you retire, which almost nobody does), but they don't matter for someone in the accumulation phase.

Again, I do not have the cheaper option (TINRX/TRBIX) available to me.  Only the variable annuity version. 

From what I can tell, I could transfer money into/out of the variable annuity version at any time, including 5 minutes before retirement, so I agree there's no need for it in the accumulation phase.

Are there any other differences (besides ER) that I should be aware of?  Anyone familiar with TIAA-CREF's strangeness?

I am very familiar.  They have a unique structure that has a lot to do with the fact that mutual funds were not really a thing when they were set up.  For all intents and purposes, I think you can treat the VAs as mutual funds with slightly higher expenses.  That is what I did when DW was in TIAA-CREF, even to the point of rolling her 403B over to an IRA when she moved to other employment.

That's what I figured after pouring over their documents, but I wanted to make sure I'm not missing something subtle.  Now, to convince my employer to offer TINRX/TRBIX, or better yet some of the Vanguard funds.  Sub-0.4% ERs aren't terrible I guess, but I wish we could do better.

Thanks for your advice!