Hi,

Please excuse a possibly ignorant post. In my 403(b), I am eligible to invest in several CREF Variable Annuities (VA) as well as a number of TIAA-CREF Institutional Mutual Funds. I am a firm believer of passive investing and in keeping costs down. For a long time, I have held the VA Equity Index, which tracks the Russell 3000 and has a modest ER of 0.48%, as a core holding. I augmented this with a couple of Institutional mutual funds to get a small and value tilt. The ER of this fund seems to be drifting inexorably upward.

It recently occurred to me that I could probably save money by switching the VA Equity Index to the S&P 500 Institutional Mutual Fund. This has an ER of only 0.32. I could likely boost my other mutual fund holdings (small-cap blend index and large cap value) to create the same overall large/mid/small and V/B/G profiles as I hold now. My question is: what does the VA buy us? Is there some advantage to the Variable Annuity that I am unaware of? In short, is there any reason not to do the switch I am thinking of?

Thanks,

PaulF