Relatively high expense ratios for TIAA-CREF 403B

[dirtbiker]

My 401K is through Principal, and I have it all in an S&P 500 ETF with an expense ratio of 0.05%. Perfect for me at this point in my life.

My wife, however, has her 403B through TIAA-CREF, and they have far fewer investment options, all with much higher expense ratios. They range from 0.51% to 1.3%. I hate throwing money away at high expense ratios when high quality ETFs are so cheap.

Are there any options? Can the funds be rolled over into another 401K that has better investment options? Or are we stuck with what they offer us?

 

[kgtest]

Stuck with what they offer until internal employees make a stink to whomever would pursue changing the options/plan that her company is tied to. I made a stink in my companies plan right when I started, the comptroller made a change (I wasn't the only one complaining) and now all is well with my 1 single ETF that is actually a decent expense ratio. I understand the angst with the opportunity cost eaten up with those high expenses. Nobody like's paying more for something than they should be.

 

[dirtbiker]

Thanks for the reply. That's what I was afraid of. Oh well.

I'll put a bug in her ear to complain... But I tend to think it won't do any good, as she works for the state university system, where change happens VERY slowly, if not at all.

 

[MRG]

Thanks for the reply. That's what I was afraid of. Oh well.

I'll put a bug in her ear to complain... But I tend to think it won't do any good, as she works for the state university system, where change happens VERY slowly, if not at all.

Getting anyone to throw out tiaa in an educational environment is similar to getting fish swimming in sand. They pretty much own that business.

 

[target2019]

I'm surprised that your Principal 401k has an ETF with .05 E/R.
Have to see if we have an S&P 500 equivalent.
.5 is not crazy high.

 

[dirtbiker]

I'm surprised that your Principal 401k has an ETF with .05 E/R.
Have to see if we have an S&P 500 equivalent.
.5 is not crazy high.

Yeah, I was happy to see they had one. It's this one https://www.principal.com/InvestmentProfiles/index.faces?symbol=NX097

Yeah, .5 isn't crazy high by any means, but over the course of 20-30 years, it adds up to be a significant amount. But, I guess it could be worse.

 

[Badger]

I suppose others have had good experiences with TIAA-CREF but was not pleased. They were an alternative choice instead of the state retirement plan. The investment choices were limited and the performance was terrible. I ended up with about 1/3 - 1/4 of what the state would have paid in pension. I accept part of the responsibility but it was also due to the poor handling of how this alternative account was presented by TIAA-CREF as well as the college. I hope your experience is better.


Cheers!

 

[dirtbiker]

I suppose others have had good experiences with TIAA-CREF but was not pleased. They were an alternative choice instead of the state retirement plan. The investment choices were limited and the performance was terrible. I ended up with about 1/3 - 1/4 of what the state would have paid in pension. I accept part of the responsibility but it was also due to the poor handling of how this alternative account was presented by TIAA-CREF as well as the college. I hope your experience is better.


Cheers!

Fortunately for us, the 403B through TIAA-CREF is in addition to her pension (which isn't free, as they take 10.5% out of her pay for), there just isn't any matching. That's a bummer about your savings being lower than a pension would have been. They also offered a matching program with a much smaller pension as another option, which they pushed really hard (and is the only thing available now for new hires). Hearing your experience, I'm glad we turned it down.

I used to have a 403B through them in a past job, and the returns were basically market performing, so I was happy with that (but not happy with paying 0.5% expense ratio when far cheaper ETFs are readily available), and that was with a mix of a few of their growth funds. We set up my wife's account with the same mix of investments.

 

[target2019]

Yeah, I was happy to see they had one. It's this one https://www.principal.com/InvestmentProfiles/index.faces?symbol=NX097

Yeah, .5 isn't crazy high by any means, but over the course of 20-30 years, it adds up to be a significant amount. But, I guess it could be worse.

In my plan, that investment requires going into a "separate account."
Since I am working at the company a very limited number of years, I did not go with that option. I'm using AF Balanced 50/50 fund.

 

[Clone]

Fortunately for us, the 403B through TIAA-CREF is in addition to her pension (which isn't free, as they take 10.5% out of her pay for), there just isn't any matching. That's a bummer about your savings being lower than a pension would have been. They also offered a matching program with a much smaller pension as another option, which they pushed really hard (and is the only thing available now for new hires). Hearing your experience, I'm glad we turned it down.

I used to have a 403B through them in a past job, and the returns were basically market performing, so I was happy with that (but not happy with paying 0.5% expense ratio when far cheaper ETFs are readily available), and that was with a mix of a few of their growth funds. We set up my wife's account with the same mix of investments.

I just looked at my TIAA/CREF account. One of the investments thatis available is Vanguard VINIX with a gross and net expense ratio of 0.04%. I do not see anything from Principal. So different organizations might have different choices available to them?

 

[dirtbiker]

I just looked at my TIAA/CREF account. One of the investments thatis available is Vanguard VINIX with a gross and net expense ratio of 0.04%. I do not see anything from Principal. So different organizations might have different choices available to them?

That's definitely not available to us, but a Google search revealed that the minimum investment is $5,000,000. We don't have that amount of money in there. Maybe that's why it's not available to us?

Regardless, I think you're right, in that different organizations have different choices available to them... Which makes no sense to me. Why not have all the choices available? I really don't understand the reasoning in that.

 

[Big_Hitter]

Regardless, I think you're right, in that different organizations have different choices available to them... Which makes no sense to me. Why not have all the choices available? I really don't understand the reasoning in that.

plan sponsors are allowed to choose investment options for the plan as long as they abide by fiduciary requirements

please refer to ERISA Sections 404a and 404c

 

[Chuckanut]

I suppose others have had good experiences with TIAA-CREF but was not pleased.

TIAA-CREF used to be the Gold Standard for education and non-profit retirements accounts, but I have read articles that their attitude has changed and some people in the plans are not feeling good about how they are treated and what is offered.

https://clark.com/personal-finance-credit/investing-retirement/tiaa-403b-legal-trouble/

Among the allegations, employees were allegedly under pressure to create fear in new retirees in an effort to con them into buying high-cost investments.
“If they cry, they buy” was a mantra within the company’s sales force, according to whistleblowers.
Here’s another line that was thrown around internally as part of refining the sales process:
“Making the client ‘feel the pain'”

I have no idea if any of this is true. Just beware if you participate in TIIA-CREF. I hope these problems are either not true or a one-off done by a few renegades in the organization.

 

[Clone]

Here is a screenshot of the lowest expense ratios I can access (I think). That being said, I plan to move these to Fidelity shortly. The TIAA/CREF web interface is almost unusable.

 

[Clone]

So, here are the rest of the options that appear to be available to me.

 

[dirtbiker]

Good news. Although the TIAA-CREF investment options weren't good, what I didn't realize is that my wife has the option to choose either Fidelity or TIAA-CREF, and if one isn't chosen, it automatically goes to TIAA-CREF. Turns out my wife didn't know that either when she was initially filling out her HR paperwork. We just changed the contributions to Fidelity, and the investments to an S&P 500 ETF with an operating expense of 0.015%.