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I'm about twenty years from retirement and I haven't given TIAA traditional much thought. I figured that it would be something that I would switch my money into only once I retired and set up my distribution plan from TIAA.<P>

However, I just read a very interesting post over on Bonds & Fixed Income Investments board: <P>

The relevant part is quoted below. Loki now has me thinking that I should be considering TIAA traditional in my 403b account for the Bond/Fixed Income portion of my asset allocation strategy. However, I'm confused about what TIAA traditional really is. Is there a benefit to beginning to drip money in now as opposed to waiting until near retirement? How are the interest rates deterimined? Does money that is in there longer get preferential treatment?<P>

Confused and Dazed,

I'm lucky enough to have TIAA-Traditional as an option, and it's great for the regular retirement portion. But for Supplemental, which is increasingly where the money goes, since they raised the limits, TIAA-Traditonal pays 75 basis points less (it's been as much as 150 basis points). There's a reason for this: with the regular portion, you can't take the money out until a drip during retirement, while for Supplemental you can switch the money around, so they use shorter maturities for Supplemental. I can't match the regular TIAA Traditional on my own with a Treasury ladder, but I can beat Supplemental by about 50 basis points, and probably beat the yield on their bond fund by 25 basis points (given the expense ratio). Speaking of expense ratios, I can see no reason why these retirement plans are defined as annuities, when all you are doing is putting money into a fund, and they charge at least an extra .25% expense ratio for the same thing as you would get in a taxable account, and that's TIAA-Cref, one of the good guys.
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