I'm set to retire this coming June. In anticipation of this, the folks at TIAA-CREF (where my 403b money resides) invited me in for a financial checkup.They offer this gratis, but they also let you know that you can engage them to manage your money for you ... for, in my case, 0.55% per annum.Their computer took in all my personal info, objectives, etc., etc., and spit out the results for me. As it turns out, the advice is that I pay somebody 0.55% of my money to put 89% of it in various muni funds, 6% in a short-term bond fund, and 5% in a stock fund.I'm supposed to pay someone $5K/year to do that? Hello?
Did they give you a free jar of Vaseline?No to mention that putting 89% into any kind of bond fund seems kinda insanely risky -- a guaranteed loss when interest rates rise.
Something is not right here.Your 403b is tax deferred. There is absolutely no reason to use a tax deferred vehicle to purchase tax free munis.Did they really recommend 90% of your 403b be placed in munis? If so, I would ask to speak to that person's boss, and their boss too.No computer software program should recommend:1. Such a high percentage of a single asset class.2. Buying munis in a retirement account.
Hawkwin, good point. Perhaps they were advising me on how they would invest money I took out of the 403b. To be honest, I was so surprised by their "advice" that I may have missed that part. Regardless, their advice may have been appropriate for the good old days, but certainly not for these days (and the foreseeable future).
Even if that were the case, why would they advise you pull money out of tax deferred vehicle, tax it, only to buy something that would generate tax free income? You'd be better off coverting some to a Roth and then you would be both fed and state tax free regardless of the investment.Nothing about this makes sense.
Nothing about this makes sense. No argument here. I will call them and ask them about it. I'll report back when I have their answer.
I just had my twice yearly investment meeting with TIAA-CREF for our 403b's and received NO advice about muni's. In fact I don't think they offer muni bond funds:https://www.tiaa-cref.org/public/tcfpi/InvestResearchIf you received the formal analysis (about every three to five years) you should have received an extensive written report. Mine was a 30 page analysis and a 30 page list of recommendations for options on bringing my investments more toward our indicated investment style (aggressive but after 65). You might look in the report you should have received.I also am not charged for their advice. Your plan may have different benefits, but our free advice option is from two different institutional plans.I've always felt that their Monte Carlo analysis was very good and their advice was based upon MY survey of my investment risk. We've had two advisors and one was great and the other very good. I'd check back/push back.Sorry so late to the discussion. I've worked with TIAA-CREF at non-profit institutions for years and would be happy to report this instance if it happened. It seems odd.BobRYR Home Fool
Bob (and Hawkwin, and others),Since I am retiring in June 2014, I had two meetings recently with TIAA-CREF to help get ready. In addition to my TIAA-CREF, I have some Schwab accounts that in aggregate are roughly equal in size to my TIAA-CREF, plus a fairly large (for me, at least) credit union account (in excess of $100K).The T-C advisor was proposing a way for me to move funds out of those other places and into T-C for management. I also intend to begin annual withdrawals from TIAA and more them into CREF funds, since I have way more in the TIAA side than I want to keep there. (I know: I shoulda changed the allocation a long time ago; but I didn't. And it actually turned out quite well.)So, their proposition is that I move $750K into their management, for which they would charge me 0.55% per annum. The recommended mix is:86% munis, divided among five muni funds: Wells Fargo SMAVX, Bernstein SNDPX, Thornburg THMIX, T. Rowe Price PRSMX, and Oppenheimer OPITX.5% DFA US large-cap value (DFSIX)3% emerging market PIMCO bond3% Aberdeen equity long short fund (GGUIX)3% cashAll of these funds have fees, of course, in addition to the management fee.To me, this looks nutty. If I wanted to accomplish their objective, I could do this with some ETFs and/or Vanguard plain-vanilla funds all by myself, and save a lot of money.Equally important, munis are about the last place I would put 86% of my money these days. I already have some muni exposure, which I cut in half in May ... and glad I did. The muni market is facing way too much turmoil for my comfort, which is partly why I am sitting so heavily in cash.Comments, critiques, suggestions VERY welcome.
In order to understand their suggestions, I'd ask more about this:"So, their proposition is that I move $750K into their management,"What % of your pie is this?80%+ in Muni's sounds stupid, but it's not clear what % of your overall portfolio that is.Investment Advice must always be placed in context...Ben
Well, I still don't know what to say. The funds mentioned even have fairly high expense rates compared to an index (and you probably do want managed funds in muni's in this climate). I do hope that they were suggesting an after-tax account and not tax-deferred for this suggestion. I'd also guess that you were looking into a self-managed account. I haven't done that at TIAA-CREF, but there is NO expense for this at Vanguard for either an after-tax or tax-deferred brokerage account. Also, at the aggregate $$$ levels you're suggesting you get free trades and some free advice.Suggestions:1. I just received my emailed request for feedback from my session. You should too and I'd strongly suggest that you give them your negative feedback. If you didn't get the suggestion in writing that too is a major negative.2. Chances are you're employed by a college, university, or other non-profit. I'd talk with your HR or business office and express your astonishment. Find out which TIAA-CREF rep is linked with your account and ask them to make a call.3. If you give me your institution and permission (no name) to use this example, I'll bump it to one of the national staff I used to work with. At 62 they might recommend a 50% bond/TIAA allocation based upon your risk tolerance, but not 40% or above in muni's IMO.4. I wouldn't do business with the place you described.5. You'll probably take some time to move the TIAA annuity out (I think it's even yearly payouts for 7 years unless it is in a discretionary contract). Be prepared for that since you said you had a high percentage in the annuity.6. Before you leave I'd still get the analysis that they have. THEN leave if you don't find a better advisor.7. Since I worked for non-profits for over 40 years I'd still say that TIAA-CREF is a really good organization IMO. They aren't a lousy 401k/403b with high fees that many are forced to accept. Their major criticism is that they are too conservative with their funds. That's why your experience upsets me.BobRYR Home Fool
Bob, Ben:I've got over $900K in TIAA-CREF (almost all of it in traditional TIAA) and an equal amount in Schwab and cash.I asked the TIAA-CREF guy back in May to send me the paperwork so that I could begin annual withdrawals from TIAA to shift into my CREF mix of Vanguard funds: 50% VBAIX, 25% VITSX, 20% VTSNX, 5% VEMIX. (I chose that mix myself.) I asked him again last Thursday when I met with him the second time. I am still waiting ... but not much longer.Bob, thank you for your offer -- and I may take you up on it at some point. But for now, I'm going to talk with the top guy at the local TIAA-CREF office and get some answers. (I'm at U. Mich. I'd like to think that we are a pretty good customer for TIAA-CREF.)I did a bit of research on the recommended funds. Some of them look fine. But some of them have things like 2% loads, fairly high fees (compared to Vanguard) and 2-star ratings. Plus the .55% overall management fee. I wouldn't go so far as to call it a ripoff, but I am not happy with the advice.
PS: Bob, I have all this on paper. I have four bound reports they provided me with.
The .55% fee is not bad. In fact, that it fairly typical for "active management." this assumes they have discretionary trading authority to move your funds around without notice or permission. You are paying them the .55% to do that, not to simply pick the fund most recommended by Morningstar.As far as fees and loads, you cannot necessarily go by what you read online. Loads are waived on funds in a managed account. You will sometimes see funds with a .lw after the five-digit symbol indicating that the fund is load waived. Also, 12b1 fees are typically rebated to the customer so that management fee you see online is usually 25 basis points higher than what you actually pay.Now, all of this is not to say you need a managed account for your money but it is not as bad as it seems.Their recommendation for 90% in muni funds is just the opposite.If you were my client and you really wanted munis and could benefit from such, I would place you in individual muni bonds with the size of account you have. No management fees, better transparency, more dynamic - and much easier as the advisor to get rid of a single muni holding if we feel that there is too much risk.Remember, SOMEONE owned all those Detroit bonds. SOMEONE was invested in muni bond funds that held those and investors had no option to get out other than to sell the fund.
Oh yeah ... they'll listen to U of Mich and your Business Officer/HR should come out of their chair with all those muni's, esp with Detroit so near.I've had half my funds in TIAA-CREF (for DW and me -- she's still working) and about half in Vanguard. I'm trying to decide whether to send my part to Vanguard now that I've retired. TIAA-CREF personal advice has been the reason to stay, because I always considered it very good for DW if/when I take the dirt nap. They have to have a big office in Ann Arbor. We have a big one here in Princeton.Good luck! Glad to hear you're pressing. If you leave you'll still be helping those who could get the same bad advice and not know it.BobRYR Home Fool
Update: I have been waiting 12 days, and counting, for a piece of paper to make it 1.5 miles from the local TIAA-CREF office to my house so that I can authorize annual transfers from my TIAA into my CREF ... where I can invest it more or less as I wish in a broad array of funds, including some ultra-cheap, ultra-good Vanguard funds. Geez, scan it and email me a .pdf maybe? What year is this?So I phoned the head TIAA-CREF wealth mgmnt guy in the state, and he is setting me up with another advisor, a more experienced one. He is also checking to find out where the breakdown in service occurred.I will give them one more chance to do this right. More and more, I am thinking that if I got this far under my own steam, I may be best served by just sticking to that.
Update on my trials and travails with TIAA-CREF.Back in September, I wrote here: "I asked the TIAA-CREF guy back in May to send me the paperwork so that I could begin annual withdrawals from TIAA to shift into my CREF mix of Vanguard funds: 50% VBAIX, 25% VITSX, 20% VTSNX, 5% VEMIX. (I chose that mix myself.) I asked him again last Thursday when I met with him the second time. I am still waiting ... but not much longer."I waited 2 more weeks, and the paperwork still had not arrived. So I complained and got an appointment with a senior guy in the local office. I went to the follow-up meeting, asked questions, got answers.After mulling it over -- and confirming that it was permissible to do what I wanted to do -- I decided to begin making annual withdrawals from my TIAA account, moving the proceeds into my CREF mix of Vanguard funds. (There are no tax consequences, since I am not taking any money out of the accounts.)I signed the required papers and mailed them to the local office, 1.5 miles from my house. Two weeks pass and I get no confirmation call or email or anything, and so I phone the office. They have no record of having received the papers from me ... sent in the prepaid, pre-addressed envelope with which they provided me.So on the afternoon before I am leaving town for 3 months, I rush over to the office and sign the papers in person. Finally, I have a message from TIAA-CREF that they are processing my request, which is to begin in January.I may at some point decide to purchase a TIAA annuity with part of money. But my intention at this point is to move money into the mutual funds so that I have control of the money and not TIAA.
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