TIAA Traditional

[Keim]

I'm looking at my portfolio today and realized I'm about evenly split with a 50/50 mix of TIAA Traditional and Vanguard Total Bond Market/TIPS inflation protected bonds.

TIAA Traditional is a unique investment, but I've always thought of it like a unique bond since it has an income minimum guarantee. Anyhow, it occurred to me I might want to move more heavily into the TIAA, and sell a proportionate amount of the Vanguard bonds. Perhaps go 80% of my bond portfolio into TIAA.

I'm not the most knowledgeable person when it comes to this part of my portfolio, so I'm seeking opinions. What do you think, Dear Reader?

 

[LOL!]

There are various kinds of TIAA Tradiional. I have had 3 of them, but I'm sure there are more. Some things to consider:

1. Can you even put more money into your TIAA Traditional? Which kind of TIAA Traditional do you have? If more than one kind, which one(s) would you use?

2. If you do put more money in, can you get it out when you want to?

3. I think TIAA resets the guarantee interest paid in March.

Anyways, I have no problems with you putting more money into TIAA traditional.

 

[Keim]

What do you mean different kinds? I think I can only access one kind. Will need to look into it to see specifics. Been a few years.

 

[LOL!]

Please consult tiaa.org or call them up about "different kinds."

 

[Free]

I'm invested quite heavily in TIAA as well, but not exclusively.

As I understand it, TIAA funds are legacy funds with regard to interest rates. The reset is in March but will likely be a lower rate than the interest rate you get if you've had them in for a while. Also, I believe if you move funds out a
FIFI approach (first in - first out) is used, meaning if the legacy interest rates locked in earlier are higher (which in the past many years they are), and you'll lose that higher rate on the part that you transfer out. That's one of the reasons I'm cautious about moving them out. Right now I'm getting well over 4% overall.

When I retired (Dec. 2015) had almost $30,000 rolled over into TIAA from a vacation payout, and the interest rate on these funds is lower than the legacy funds I've had for a while. I started putting 25% of my designated retirement funds into it in the early 90's. At that time it was earning 6-7%. The rates have continued down in the past couple of decades. The rates depend largely on the contract(s) you and the institution have with them. There are tiered historical rate schedules based on dates invested that you can look at when you click on the fund.

I don't guarantee what I've said is 100% - so call TIAA for verification. By the way, I don't have any plans to annuitize these contracts (which TIAA likes for you to do), and right now don't intend to withdraw any funds until the RMD hits in about 8 years.

 

[nun]

TIAA-Traditional is a deferred annuity and the interest rate you get is going to depend on your retirement plan contract and the vintages of your investments. There's nothing to stop you rolling money over to TIAA-Traditional, but your access to your principal will be limited by the 10 year payout annuity....or you might turn it into a lifetime annuity at some time. The TIAA rates are usually very good.

Being 50/50 TIAA-Traditional/Vanguard Total Bond Market is very conservative and you would probably do better to sell some of the Total Bond Market and buy something like Vanguard Total Stock Market.

I've owned TIAA-Traditional since 1987 and I like it a lot.....I have a 3% guaranteed minimum and this year it's crediting at 4.8%. It's very low risk and is a great foundation for retirement. I won't annuitize it as I have pension income so I just let it accumulate.

 

[Keim]

Thanks all.

I should clarify the bold. I'm 50/50 in the bond portion of my portfolio, which is about 20% of the total portfolio.

TIAA-Traditional is a deferred annuity and the interest rate you get is going to depend on your retirement plan contract and the vintages of your investments. There's nothing to stop you rolling money over to TIAA-Traditional, but your access to your principal will be limited by the 10 year payout annuity....or you might turn it into a lifetime annuity at some time. The TIAA rates are usually very good.

Being 50/50 TIAA-Traditional/Vanguard Total Bond Market is very conservative and you would probably do better to sell some of the Total Bond Market and buy something like Vanguard Total Stock Market.

I've owned TIAA-Traditional since 1987 and I like it a lot.....I have a 3% guaranteed minimum and this year it's crediting at 4.8%. It's very low risk and is a great foundation for retirement. I won't annuitize it as I have pension income so I just let it accumulate.

 

[nun]

If your AA has only 20% bonds then you are quite aggressive.

What crediting rate do you have with TIAA-Traditional. If you like the rate and are ok locking up principal for 10 years then it can be a nice alternative to a bond fund......particularly if you expect rates to rise. Be careful though as you might be locking in a low rate if you roll into TIAA-Traditional today.




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[LOL!]

Some TIAA traditional annuity types have no lock-up period, so are highly liquid. But they also don't pay the same rates as the less liquid versions.

 

[nun]

Yes there are a lot of flavors of TIAA-Traditional. I have the Group Retirement Annuity and that allows lump sum withdrawals when you leave your job, but there's a 2.5% charge. However, that's not written in stone as I used TIAA-Traditional in a defined contribution plan to buy into my employer's DB plan without the charge, but that was a one time deal negotiated with TIAA at a high level.


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