I'm retired and currently have 100% of my TIAA-CREF money in TIAA RE (it's equivalent to 35% of  total assets).  I've enjoyed the recent performance but have been persuaded by the insightful postings from Bob, Ray, Sy, Tim, and others that it's time to move out of TREA.  I would move all or most of the money to TIAA Traditional except that I don't have a need to annuitize and I want the flexibility to reallocate to TREA without using a TPA.  I  don't want to use the bond funds since I currently own PIMCO and Met West in a Schwab IRA and prefer those funds. 

Some recent postings indicated that an IRA provided greater flexibility for moving in and out of TIAA Traditional.  I became curious and called the counseling center today.  I spoke with a very helpful counselor (who informed me that I have a Wealth Advisor assigned to me - I did recall a letter about this but until now I had no need to make contact).  The counselor told me that I could move my RA money to a TIAA-CREF IRA and have access to both TIAA Traditional and TREA within the IRA.  At first, I thought I misunderstood her and told her that TREA is not listed as an IRA choice on the website. She said that I was correct but if an IRA is set up with RA funds, you have access to TREA.  She explained that TIAA Traditional earns .75% less in the IRA than the RA - this is clearly indicated on the website and has been mentioned in postings.

I apparently could also open a brokerage account in the IRA and have access to no-transaction fee mutual funds and ETFs.  It sounds too good to be true.  Does anyone have experience with moving RA funds to a TIAA-CREF IRA?  Other than the lower interest rate for TIAA Traditional, are there some disadvantages that I'm missing?  Do they really differentiate between IRAs depending on the source of the funds and manage it correctly?  I'll follow up with my Wealth Advisor but would appreciate any advice based on personal experience.

 Thanks,

Jerry 

Yes, you can open an IRA with/without opening an brokerage account. I have an IRA without a brokerage account and moved my SRA money two years ago to this IRA. I become self-employed as of today and I am planning to move my RA to the existing IRA because I will no longer tied to my employer. I am waiting for my last paycheck on May 30 and move the money. -Nat

With the exception of the Traditional Account you indeed may roll over funds from a RA or GRA to your IRA and there may be some other benefits from doing so but it depends on the state in which you reside. Here in AZ our elder law attorney recommends placing funds in an IRA given AZ law.

I do not know of any disadvantage of doing so other than the reduced interest rate mentioned. If there is any, it escapes me.

Sy might have some experiential knowledge about your third question; I don't.

In my case the only investment choices I do not seem to have in my IRA are access to the TIAA Access Account with the ever slightly lower ERs and the addition of three or four none T-C mutual funds and neither of these are of great significance to me. 

 Ray

For those of us who are Michigan residents there is an immense disadvantage to doing a rollover--we automatically lose the 100% state income tax exemption on our retirement income.

I have no idea whether any other states have this rule, and of course if you live in state without an income tax it's a non-issue.  Bob U. 

Nat and Ray, many thanks for confirming what I learned from the counseling center.

Bob, thanks for warning me about state income tax implications.  I do live in a high tax state - New Jersey.  While there is some pension income exclusion in NJ, it's far less than 100% and linked to total income.  My preliminary assessment is that there's no disadvantage, with regard to state taxes, in transferring to IRA.  But, I'll obtain professional tax advice before acting.

Jerry  

I live in a state where there is no state income tax. I am also using TIAA through TPA accounts that would take another 7 years for transfer. -Nat.

Well, I thank you for your kind remarks about previous posts by me and others.  But speaking for myself, I hope I have most often commented on questions like "Is 50% TIAA Real Estate Account (REA) of a total portfolio too large an allocation?", rather than on the question of "Is it "time" to move out of X account?".

But you really asked a question about a rollover within TIAA-CREF, not about asset allocation, so I won't pursue that issue.  I hope you've read the entire nearby thread titled New TIAA Trad Rates.  It discusses a number of issues directly related to your TIAA Traditional investment interests - but not that of rolling over an account.

A year or two ago, I did exactly what you propose, including opening a TIAA-CREF brokerage account in the IRA.  I did not previously have a TIAA-CREF IRA account, but had four different 403(b) accounts.  One issue you should consider is whether the account you propose to roll over might have already been taxed by a state that does not allow excluding 403(b) salary reductions from current reported income.  New Jersey is one such state.  You would pay that tax again upon withdrawing your contributions from a rollover IRA.

The main reason I did the rollover was to get additional options in an account that only offered the CREF annuities and the two TIAA accounts.  Another approach might be to just wait (or ask your school's HR department) whether they are likely to sign up to increase the number of options you available to you.  That is the trend today, although I've worked for many tiny N-F-Ps that are not following the trend!

I would be sorry if you made the decision only to get liquidity of your TIAA Traditional account.  Assuming you are currently getting 0.75% more interest, you would be paying a price for the liquidity-you don't get something for nothing.  And ... liquidity ... means that the phrase I mentioned in the first paragraph, "time to move out..." is a factor for you.  Now, it's been pointed out that we don't need a second newsboard with dogmatic Boglehead opposition to market-timing.  But I just want you to consider that three generations of retirees have lived very well with restrictions on their TIAA Traditional withdrawals.  While I can understand the aversion to the TPA requirement, I doubt that it has actually forced very many people to eat cat food for nine years.

Like you, I also wanted to be able to buy stocks and ETFs in my IRA.  I recently paid a $22.45 commission to buy 500 shares of BMR, a medical REIT, at $21 a share.  I consider that an acceptable commission.  But lots of internet posters would say it's laughably large.

On the other hand, the online brokerage product is a very clunky machine.  I have a Vanguard account that's much better onscreen, and much easier to use.  For example, to get cash into your IRA/Brokerage, you have to go to the IRA screen and move money into an "Option" called "Brokerage Account".  After this money appears in the money market type account in the Brokerage, you login to your brokerage account and make the trade you want.  But in your IRA view, the entire brokerage account appears as a single dollar figure.  I haven't investigated how "current" that figure is because I don't care too much.  The trade execution is normal, "internet-fast".

The TIAA-CREF open-end mutual fund "supermarket" (to use the common generic term for the adopted "house" mutual fund offerings) has plenty of funds, but few of the big names like Vanguard nor Fidelity, and the web interface is even worse than the cash movement I described above.  Referring to your OP (original post), I don't believe there is any such thing as a transaction-free ETF purchase.  When TIAA-CREF first introduced the brokerage account, anyone was free to use the sample interface (I mean, for browsing non-customers considering opening an account) to look at the transaction-free funds.  But you can't just produce a list of them.  You have to navigate the irritating screening dialog I referred to a moment ago.  It's excruciating, and seems designed to prevent you from seeing the entire list at once.

On the plus side, I suspect (this is pure speculation on my part) that because my rollover was within TIAA-CREF, they didn't press the question of whether I was "eligible" to liquidate my 403(b) from an employer I left ten years ago.  That is, they did not ask me to get a certification of termination, which several posters trying to leave TIAA-CREF entirely have complained about.

All that said, I'm not sorry I made the rollover.  But computer-averse or unsophisticated users might be a little disappointed.

Tim 

Tim

I should have made it clearer that asset allocation rather than market timing is my major objective.  I want to reduce my TREA allocation from 35% to 20%; the declining returns plus recent posts about savvy people reducing their allocations added impetus.

I can relate to your proliferation of 403-b accounts.  When I retired in 2006, my wife and I had 2 IRAs, 2 457s, my Keogh, a Fidelity 403b, TIAA-CREF RA, a 401K, and 2 State of Ohio defined benefit pensions.  We rolled over all of the tax-deferreds, except TIAA-CREF, into our existing IRAs at Schwab, where we also have a joint brokerage account and a joint account at Schwab Bank.  We have the added benefit of a Schwab retail office in our town.  While I managed all of the tax-deferreds as a single portfolio, it's much easier with the 2 IRAs.  I kept TIAA-CREF solely to have access to TREA.  While I mentioned the other features of the TIAA-CREF IRA, I doubt that I would make much use of them. 

Your statement that "that three generations of retirees have lived very well with restrictions on their TIAA Traditional . . " is right on target.  I've benefited in a similar way.  I only contributed to TIAA-CREF from 1969-82 when I took a job in industry.  In the late 1980s, TIAA-CREF finally relented after years of protest and permitted members to rollover accumulations - not just new contributions - if (and this was a big if for me) your former employer(s) agreed.   I wanted more investment options so I called my former employers Columbia and Rutgers to see if they permitted rollovers.  At the time Columbia permitted it for current employees but not former employees (a nonsensical policy) and Rutgers (really the State of NJ) had not addressed the issue and wasn't planning to in the near future.  I kept trying but grew weary of the effort and decided to use CREF stock and subsequently Equity Index as my core index fund.  With Equity Index and then TREA, my RA has outperformed most of my other investments. As you stated, I've done well because of the restrictions.

I appreciate your caveat about double taxation (I'm pretty sure it's not a problem but I will check it again) and detailed description of the IRA features.  Your comments about the limitations of the TIAA-CREF IRA website have given me pause but then again there are some "empty"  or non-functional RA contracts listed on my RA website.  I'm now undecided about the IRA transfer and will devote some additional time to thinking it through.

Jerry

Jerry,

Maybe there's some useful information buried in the enclosed link, "Living Well in Retirement."  http://www.tiaa-cref.org/support/learningcenter/living-in-retirement/index.html

Bob U. 

Well, I thought I ought to go to the TIAA-CREF website to investigate whether you could page through the mutual fund supermarket without opening a brokerage account.  You can't, you can only use a Java demo limited to the Kaufman Fund.  On the plus side, they do have a .PDF file (look near the top of this page ) that claims they have Vanguard funds.

So I decided to log into my TIAA-CREF brokerage account and see what the Vanguard list looked like.  First of all, they've changed the login procedure for the fourth time in 18 months. (Generally, with more security each time.)  And because I haven't logged in since ... well... say, four weeks ago, my Firefox cookies must have expired, and I had to answer my security question, as well as login in the new way.

I finally got in, to be greeted by the message,

 An important message for our customers
    * You may experience an issue with the Mutual Funds functions 'Fund Details', 'Purchase Shares', 'Exchange Shares' and 'Open a New Mutual Fund Account', are currently unavailable. 'See summaries' is available. Please try again later.

Then, I saw my brokerage account in a quarter-screen window that could not be resized or maximized.  Luckily, the greeting quoted above didn't prevent me from proceeding a little further, since I wasn't actually going to buy anything, I'll guess.

So after I typed "Vanguard" into the box, I had to use the scrollbar to expose the "Continue" button.  This offered me about 8 Vanguard fund names, and I could click a button to see the next 8 names after that page loaded.  But when I pretended to be ready to buy Vanguard 500 Index Fund or Vanguard Convertible Securities, I got the reply,

This Fund does not participate in TIAA-CREF Brokerage Services's No Transaction Fee Program. Transaction fees are as listed in the commission schedule.

Sorry, I did not have the inclination to do all this typing and clicking 24 times to see if any of the Vanguard funds were actually available!

So what does this mean?  I would say it means that my first post about my TIAA-CREF brokerage account was too kind.  The interface is worse.  And I should have told you that the money-market equivalent is actually an FDIC-insured product (yielding about 1.97% annualized in April, 2008) from Washington Mutual ...

Since there's no affect on the web, I just have to tell you that I'm shaking my head.  I tried to write something both honest and favorable about this TIAA-CREF product, but I don't know whether to laugh or cry!

Edit: Sorry, I just could not find this recent letter from D----P----, Director, Brokerage Services yesterday.  It's also relevant to a decision to open an account.  This is OCR, so don't blame them for misspellings.  My comments in [Brackets]:

Important Changes to your TIAA-CREF Brokerage Account

Dear FBO Timothy H-------- B--------- IRA: [!] ...     ...   ...

·    We will be reducing your online equities trading costs:
- $19.95 - for clients with brokerage assets of less than $500,000
- $15.95 - for clients with brokerage assets over 8500,000

Removal of per-share fees for equity trades
Reduced fees for Automated Telephone System service

[ BUT READ ON ......] 

We will no longer apply the $20 inactivity fee for accounts that have not traded with us for a 12-month time period. However, if your account holds assets of less than $500,000, a $30* annual account maintenance fee will apply; this includes the Cash Solutions Silver account. Cash Solutions Gold and Platinum account holders, as well as our retirement account holders, will not be subject to the $30 annual maintenance fee.

To review the full brokerage services fee schedule or to see the features and benefits of a Cash Solutions Gold or Platinum account, please go to www.tiaa-cref.org/services/ brokerage/index.html.
*The fee will be charged the first anniversary of the month in which your account was opened.  [END OF QUOTATION]

Tim 

Tim:

I appreciate the additional (discouraging) info on the TIAA-CREF website.  If I do the rollover to the IRA, I probably won't bother to open the brokerage account.  Based on your experience, it will be less frustrating to continue executing all of my mutual fund transactions in our Schwab accounts.

Maybe I just have to get past my reluctance to lock up money in TIAA Traditional in my RA.  TIAA Traditional was 25% of my TIAA-CREF assets in 1990 when I did a TPA into my CREF account.  It proved to be a timely move.  I replaced the fixed income portion of my assets with Nationwide stable value accounts in my wife's 457s and they were invaluable in weathering the 2000-2002 downturn. 

The link provided by Bob in the previous post also reminded me that my pre-1986 RA accumulations are grandfathered and don't have to be included when calculating required minimum distributions.  That's another reason to maintain my RA account.

Thanks agains.

Jerry 

 

Bob:

I thought I posted a thank you for the website link many hours ago but it went to cyberspace instead.  I appreciate the link - there's lots of good info.  I've concluded that I'll review the issues with my WMA and tax attorney beofre acting.

Jerry