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Newbie 403b question (TIAA-CREF)
Old 02-21-2012, 05:23 PM   #1
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Newbie 403b question (TIAA-CREF)

DW has a mandatory 403(b) plan at her employer as a SS substitute.

Only two possible choices for providers: TIAA-CREF and Valic. She is with TIAA-CREF.

We were wondering about increasing her contribution. We certainly can increase her contribution, but her employer has contributed all they are going to contribute.

While searching here, I found the 403bwise site and also read the 403b-related threads. My conclusion was that TIAA-CREF was "better than the average bear" when it comes to costs and fees for administering to an annuity plan.

Her "Personalized rate of return" last year with TIAA-CREF was 3.8%. I found how they calculated that figure in her quarterly statement - Modified Dietz method. OK -I can dig that.....I understand IRR calculations and their method seems reasonable and we aren't getting hoodwinked with fuzzy math on return calculations. (I think....)

(OK - here's where the dumb questions part of this post starts....)

So I was trying to find out how much it costs us in fees or admin charges or whatever for her participation in this 403(b) plan. I read every word and number on her statements and it was not there anywhere. So I called TIAA-CREF. I did not get a satisfactory answer. Well, I guess I really got no answer. I finally got to the point at the end of the conversation where I was told fees were discussed in prospectuses with links on the home page and I could go sort it out if I wanted. The main point I was beaten over the head with was: "Look, any fees are already calculated in in your personalized rate of return - so don't worry about it."

Let's say DW and I want to devote an extra $250/month to retirement savings. We can fill out a form and it becomes a payroll deduction. In the spirit of full disclosure, DW and I have not always been the best savers (I can't find an embarrassed emoticon...) and pre-paycheck deductions will likely provide the support for the spine we sometimes lack.

Or we could take after-tax dollars and start the Roth IRA we really should do with Vanguard and known-and-low fees. (We don't even have a Roth in our portfolio - embarrassed emoticon again....)

Any thoughts or insights are appreciated.
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Old 02-21-2012, 05:46 PM   #2
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A few thoughts. TIAA is a low cost plan, although I don't have any data handy to back that up. I think might be in line with something between Vanguard and Fidelity. However, whether you invest in TIAA on a pre-tax basis or in a Roth mostly depends on your tax bracket. If you're in the 25% or higher federal bracket now and will likely be in the 15% bracket when you retire, the 403b is the higher priority. However, if you'll be in the same bracket before and after, then the Roth is probably a good option. Ideally, you would max both; then you don't have to struggle with the decision.
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Old 02-21-2012, 05:49 PM   #3
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Here's the morningstar report on the TIAA-CREF Growth and Income Fund Instl, for example. The expense ratio is .47%, so the cost does appear to be not far from Vanguard.
TIGRX TIAA-CREF Growth & Income Instl, mutual funds, quote, price - Morningstar
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Old 02-21-2012, 07:20 PM   #4
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I've been with TIAA-CREF for 30 years and think they're a fine company. The only fees you pay for your 403B are the expenses in each of the individual funds. The prospectuses, or online, will tell you what those are. They are generally quite competitive.

There are a couple of unique funds you may have available, the Guaranteed Account and the Real Estate Account. They are worth considering in your overall allocation. The rest of their funds are pretty much like mutual funds available elsewhere and should let you get to an allocation that suits you.

Most participants have an opportunity every month or so to meet with an advisor. I frequently found that useful and never have been pushed to buy anything. They are not commissioned.

As you saw on 403bwise, a lot of vendors in this market are expensive and poor performers. TIAA-CREF is not one of those.

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Old 02-21-2012, 08:18 PM   #5
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I'm a retiree who had TIAA-CREF 403B plans available for a few years (and my wife had them for more years.) In all the research I did at the time, they are a very reputable, low-fee company. Even though their 403B plans are technically annuities, they are not the "bad" annuities you sometimes read about.

You are very smart, given the choice between VALIC and TIAA-CREF to go with the latter. (This statement is based on my research when my daughter, an employee of a hospital, had VALIC as one of the few choices available to her. I researched the expenses and other charges with VALIC and was convinced that TIAA-CREF was a far better option.)
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Old 02-21-2012, 10:11 PM   #6
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TIAA-CREF is a very reputable company so you have made a good choice.

No need to be embarrassed about spending it if it hits your bank, the important thing is that you know your own weaknesses and accommodate them. Nuttin' wrong with that in my book.

Most people will have a higher tax bracket while working than when retired, and as panacea suggests, the 403b would come first and then the Roth. You'll have to think through your own situation.
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Old 02-22-2012, 03:43 AM   #7
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re: Fund fees/costs - A couple of weeks ago I received a statement from my old 401(k) provider. The statement indicated that it was a compliance issue to send the statement which listed all(?) fund fees within the provider. IOW some arm of the US gummint was telling them to send me this form since I still have fund(s) with them. I take it you have NOT received such a form?

re: Roths - I'm the local cheerleader for these IRAs but I would agree it depends upon your tax bracket now and later. However, do you really know what your tax bracket will be later? I don't. If I were a betting person, I would bet on higher rates in the future, but then, I don't actually bet.

If I were to offer a suggestion, I would suggest at least hedging your bets by having tIRAs AND Roths. In addition to their tax-free growth, Roths also offer some other advantages - such as being able to take out your contributions, tax and penalty free (not the earnings, though) in an emergency.

Sounds like you have seen the light and are now on your way. re: an "embarrassed emoticon", you could use the blush.

Don't forget, YMMV.
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Old 02-22-2012, 05:38 AM   #8
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If you look at the fund performance data in your TIAA-CREF account the theres a tab for expenses. Here are a few for the CREF annuities. The TIAA_CREF Retirement Class and Institutional funds tend to be more expensive, which is why I don't understand they are offered and why I avoid them. My next question is what gives with the annuity structure. Is it just a hold over from TIAA being an insurance company.

Gross (%)
Bond Market 1 0.44%
Equity Index 1 0.42%
Global Equities 1 0.49%
Growth 1 0.45%
Bond 1 0.44%
Money Market 1 0.42%
Social Choice 1 0.43%
Stock 1 0.47%
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