No. of Recommendations: 1
There are really several issues here:
- Is the "Vanguard" plan truly run by Vanguard or is it an annuity plan run by someone else (like VALIC) which has Vanguard sub-account (fund) options within it? If it is run by Vanguard, you're OK; if it's run by someone else, look very closely at the expenses and surrender fees. (I belive Vanguard's own plans run about 60 basis points for expenses; a Vanguard choice inside VALIC would probably be 120 - 200 basis points and there would be burdesome surrender fees.)
- Assuming it is a Vanguard-run plan, is it an annuity or not? (Most university 403B plans tend to be variable annuities.) Generally it is preferable to have a 403B which is not an annuity because the costs are generally lower. (However, TIAA-CREF is an exception to this generality.)
- What specific investment choices (subaccounts) are available within each plan and how comfortable are you with them? I'm sure you don't have all the Vanguard funds available to you, but they probably give you a choice of 5 or 6 funds covering the waterfront from S&P 500 Index to Growth to Bonds. Compare the specific choices in each plan with each other and with your investment objectives. (For example, I'll bet the Vanguard plan has a S&P 500 Index choice; TIAA-CREF has an index fund but it is based on the Russell 3000. Does this make any difference to you? Same goes for the other options: Growth, Global, etc.)
- You will be hard pressed to beat the the expenses for TIAA-CREF (28 to 35 basis points depending on the fund); even though it is an annuity, its costs are lower than virtually all mutual funds except Vanguard. So if you are looking at costs, you will want to compare the costs for the Vanguard plan (underlying fund expenses + annuity expenses) to those of TIAA-CREF.
- There is one potential "gotchya" on TIAA-CREF and it has more to do with your institution's rules than it does with TIAA-CREF. If you leave your new employer and want to roll over your TIAA_CREF annuity/403B to a Rollover IRA, you may not be able to do it all in one fell swoop. The agreement that some institutions have with TIAA-CREF specify that the money can only be rolled over over a longer period of time (like 5 years), so you may want to check this out before you make a final decision.

Bottom line: All 403B partcipants should have such a good choice to make: TIAA-CREF or Vanguard; you could probably make your decision by throwing a dart and still be better off than the overwhelming majority of 403B participants nationally.

Good luck.


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