As a follow-up to the posts by Mike and Ray, Morningstar shows the following returns for Vanguard Long-Term Investment Grade as of 3/31/08:

      YTD  -   -0.7

       1 Yr -    2.4

       3  Yr -   3.4

       5  Yr -   4.8

      10  Yr -  6.1

The Vanguard fund (VWESX) is generally recognized as a high-quality bond fund and Vanguard is an excellent bond manager.  But, if you're investing in VWESX, you need to be clear on the difference between yield and total return. 

VWESX is under-performing TIAA Traditional for the past 5 years.  In fact it did worse than the "tanking" TREA for 1st quarter 2008.

Jerry 

Thanks to all of you for your replies.  I hope to become a more informed investor from visiting this forum in future.  In response to the comments:

syplatt comments:  "As to the failure of the REA to live up to its recent performance; which other Real Estate Account or Equity Account has lived up to its promise of excellent performance in today's market?"  My complaint was not about the performance but about TIAA's failure to issue its usual 3-month update on REA at a time when REA was tanking badly.  (And my reference point for "tanking" isn't the recent performance of REA.  It's the performance during the last recession, when REA still managed to deliver a 3% return.  In the past few months the annualized return of REA has been well below that.)

Jschnee comments that the total return on a bond fund should be considered.  I'm not convinced that total return is relevant when you're comparing the bond fund with a lifetime annuity as I was.  If you commit the principal for life in a bond fund or an annuity, the only thing that matters is the income stream (yield on initial investment).  I don't know how much the per share dividend rate has fluctuated in VWESX and it may not be an impressive picture.  But neither is the prospect of irrevocably giving my money to TIAA with an assurance of nothing more than a 3% return.

syplatt points out that there are alternatives to a lifetime annuity from TIAA.  Thanks, I wasn't aware of that and this shows how helpful this forum can be.  I'm revisiting the TIAA website to try learning more on this subject!

Olympia,

"But neither is the prospect of irrevocably giving my money to TIAA with an assurance of nothing more than a 3% return."

I'm not advocating annuitizing, especially as I haven't, but the fact is that the guarantee of 3% (actually, it's 2 1/2% if one annuitizes) is merely meant as an assurance that you will never be without a return at all. I believe that it comes from the days when banks and insurance companies went belly up; having taken peoples money and leaving them nothing but empty promises.

In actuality, the company has never missed paying a healthy dividend in addition to the guaranteed amount.

Personally, I have a very small pension from the Musicians Trust Fund, that I would have built up except for having reason to distrust the Union that it originated from. I don't rule out partial or even completely annuitizing thru TIAA in the future, though.

Sy

Olympia,

In the most severe credit crisis (including the massive S & L bailout of yesteryear) that has occurred during my lifetime of investing (40 years), it absolutely mystifies me that you could refer to TREAs positive return for the year as a "meltdown."

That kind of framing definitely suggests a lack of experience with investing.  As the saying goes, trees don't grow to the sky.

By the way, I too have been a Vanguard investor since the early 80s and the company has nothing--absolutely nothing--that can compare, on a risk/reward basis, with either TIAA Traditional or TREA.

A while back TIAA posted a nice essay on the concept of risk-adjusted return.  If you want to use the TIAA search function, I suggest you read it.  That concept is at the heart of successful investing.  Bob U.

Just so Bob, Sy and other know. I will be out of town for a week and may or may not have internet access. Going to see my first (and only) grand daughter.

Ray 

Congratulations to you, your wife, and the mother and father, Ray!

That's precisely why I'm in Dallas--a new grandson.  Best wishes to all, Bob U. 

"Going to see my first (and only) grand daughter."

Congratulations! You should buy her a computer as the first thing to play with in her crib. I believe a Mac has the capacity to take pictures of the user. :>)

Sy