opinions on TIAA CREF tax deferred ( variable annuity ) plans

[mh]

anyone have any general opinions on the TIAA CREF 403b tax deferred ( variable annuity ) plans

for example QCSTPX --> https://www.tiaa.org/public/investme...cker=268540687

my sister has these available via a university 403b plan that she can put money in beyond the normal 401K personal IRA's

is there a good reason to use these 403b plans as opposed to just investing any extra savings past 401K & personal ira limits into a regular old after tax vanguard fund ?

[njhowie]

Tax deferral.

Quote:

One Big Difference There is one big difference between a 403(b) and a 401(k). For both plans, you must be at least 59½ to withdraw funds; otherwise, you'll need to pay a 10% early withdrawal penalty. However, 403(b) participants enjoy a bit more leeway when it comes to exceptions to the early withdrawal penalty. For example, you can take a distribution if you have a severance from your employer. For 401(k) participants, you must be at least 55 to take a distribution following a separation of service. In either case, distributions are taxed at ordinary income rates.

Also, the combined amounts of 403b and 401k cannot be over the annual limits - which are the same for each - that is $19,500 and then an additional $6,500 for age 50 and over. So, the combined amount for 2021 is $26,000 - total. If you max out 401k, then you cannot contribute to 403b. You can split the $26,000 between the two, but can't go over the $26,000 max when added together.

Quote:

If your employer offers both a 403(b) and a 401(k), you can contribute to both plans in order to boost your retirement savings. However, there are limits on the combined total of so-called salary reduction contributions you can make in a tax year. For 2021, the contribution limit is $19,500. For those over 50, the catch-up contribution limit is $6,500.

See https://www.investopedia.com/ask/answers/03/081703.asp

[rothlev]

You can do both a 403b and a 457 -- some school districts have both, and then you can double the contributions. ( 19500 x 2)

[Winemaker]

DW had these offered to her years ago in her 403b. Big ripoff in my opinion. The broker/agent who sells these plans takes a cut. Then it goes to the Insurance company that converts it to an annuity, and takes a fee. One of my DW's options was an annuity with Fidelity funds, so Fidelity took a cut as did each of the 4 underlying mutual funds. After we wised up, it took us 10 years to claw back the monies invested, as there was a 10% penalty for early withdrawal, then 9%, then 8%, etc.

[pb4uski]

I'm not a fan of annuities in tax-deferred accounts... and especially not variable annuities. About 20 years ago TIAA-CREF had a good rep for doing right but I think that has decayed over the years.

Are there non-annuity debt and equity mutual funds or ETFs available in the 403b plan?

The link tells you what the subaccount (the mutual fund inside the VA contract) did, but what about fees or expenses at the contract level?

[MikeTN]

I have been in TIAA since 1976. It was the only choice during most of my employment at a university and a non-profit. TIAA's stock funds are pretty good (including CREF stock fund which you linked to) but it is hard to buy them without an expense charge of at least 0.30%. If she can get Vanguard stock funds for less, that is better. In fact, when I turned 591/2 I moved my 403b CREF funds to a Vanguard IRA for lower fees.

However, for safe money there are two TIAA options I like and still have:
TIAA traditional annuity has a 3% guaranteed rate at ,most institutions. In today's world it is better than a bond fund. You can turn it into an life annuity at retirement, or you can get a payout annuity over 9 years. These restrictions allow TIAA to invest long term and pay the 3% guarantee. Over the past several decades TIAA traditional had earned an amount equal to a short or intermediate-term Treasury fund, with equal safety.
TIAA Real Estate fund is a way to buy real estate with minimal risk. Expect 5% with very little fluctuation. It is not like a REIT.
If your sister is young she should be buying stocks. But a person within 10-15 years of retirement who wishes some safer investments would be well served with these two choices.

[pastoral]

One possible advantage to have a deferred 403b is that when you leave the job or reach age 59.5, you can convert it to traditional or Roth IRA, which is a way to add to your IRA. Other factors may affect whether this is a good idea, such as how long will your sister have until leaving the job or reaching 59.5, and what are the investment choices in her employer's 403b (different employers have different choices, and it can make great difference).