Tim,

Thank you for your well thought out, excellent reply to my question.  You provided us with a lot of good information.

I have a 403(b) with TIAA-CREF.  I'm invested in the CREF Stock Account; 0.55% estimated annual expenses.  As you are very knowledgeable, I would believe you would agree this is a very good fund.  It has an average annual total return of 15.20% over the last 5 years as of 12/31/07.

I'm also invested in the CREF Variable Annuity Account Money Market.  It's expense charge is 0.49%.  The 7 day effective annual yield is 3.08%.  The 1 year total return is 4.78%.

Since I've just retired I am planning to rollover my 403(b) into a traditional IRA.  I'm considering moving my CREF Stock Account money into the Equity Index (TIQRX) in the Retirement Class Mutual Funds.  It's unfair to compare these two funds because they are in different classes.  However, the Net Expense Ratio is 0.34%.  It has a 5 Year Average Annual Total Return of 12.57%.

I'm considering moving my CREF Variable Annuity Account Money Market money into the Money Market (TIEXX) Retirement Class Mutual Fund.  It has a Net Expense Ratio of 0.39% and a 7-day effective annual yield of 3.48%.  The 1 year total return is 4.97%.

This looks like a good move to me based upon the lower expenses.

TIAA-CREF has been an excellent choice for my 403(b).  It certainly is a far superior choice for a 403(b) when compared to VALIC.  Some of my friends at work got hood winked into VALIC with their 403(b) money.  

My other consideration is to roll my 403(b) at TIAA-CREF into a traditional IRA at Vanguard.  They also have very low expenses.

Thank you for your comments and suggestions.

Ed, sometimes I think that I focus a little too much on expenses.  But if you've decided that you will never annuitize, and your state has not taxed your 403(b) contributions yet (they have mine, in New Jersey), and the Institutional Mutual Funds are not available in your 403(b) plan (shame on TIAA-CREF and on your employer!), then your changes sound reasonable for a withdrawal scheme.

I agree that CREF Stock is an excellent long-term investment choice.  I do try to focus on the longest-term figures available, so we should give some weight to both the disappointing 10-year figure of 4.80%, and the better "since inception" figure of 10.34%.  These are precisely comparable to TIQRX, but do keep in mind that CREF Stock is 25% foreign stocks.  Many investors might want to retain some foreign exposure in retirement.  Otherwise, I agree that TIQRX is an excellent choice.

I wanted to make sure you knew that TIAA Traditional in an IRA does not have withdrawal restrictions, although the interest rate is lower than in a Retirement Annuity school plan.  That is, you have another choice besides Money Market.

Because I don't know your or your finances (particularly, what proportion of all of your retirement money is outside your 403(b), I won't critique your asset allocation.  Obviously, everyone needs some ultra-safe money in their plan, it's just a matter of how much.  I'll only repeat my mother's story that she felt, on balance, that her colleagues who annuitized 100% in TIAA Traditional did not do that well in maintaining their retirement income against inflation.  (You didn't say you were 90% in Money Market - I'm just making a general observation about Money Markets as a retirement investment.)

One of the complex issues in retirement, I should add, is when, and how often you "liquidate" a chunk of equity and other fluctuating assets into the place (like a money market account) where you accumulate some number of months of money for withdrawal, so that you won't have to "sell low" to get living cash when the market happens to be down.

Tim 

Tim, thank you for another excellent reply.  My state, California, has not taxed my 403(b) contributions yet.  Unfortunately, the Institutional Mutual Funds are not available in my 403(b) plan with TIAA-CREF.

Your mother was smart.  I agree you need some equities in your portfolio in order to maintain your retirement income against inflation.

You make a very good point Tim about how often you "liquidate" a chunk of equity and other fluctuating assets into a money market account or something similar where you accumulate  money for withdrawal, so that you won't have to "sell low" to get cash for living expenses when the market happens to be down.  I don't remember ever hearing anyone else express this idea.  It's a good one.  I'll remember it.

We have a high percentage of our portfolio invested in money market funds and short term U.S. Government bonds.  Back in 1998 - 1999 I became alarmed at the high P.E. ratios in the U.S. stock market as well as other factors.  I moved a large percentage of our portfolio out of equities and into fixed assets.  Around March of 2003, near the bottom of the bear market,  there was an article  entitled something  like  "Three Brave Bulls" that talked about Bob Brinker and two other stock market experts who were recommending buying into a market they felt had bottomed out.  My wife and I considered following their advice but were afraid to risk buying into the market.  We also discussed DCAing into the stock market but the market was going higher and we were afraid of "chasing the market".  If you remember the sentiment and financial news stories of 2001-2002, then you can remember how difficult it was to invest money into the stock market.

Our plan is to DCA into the stock market and to make bigger purchases of stock funds during the dips in the market until we reach a comfortable asset allocation.  At our ages, 63 and 60, it's sobering to invest money in the stock market.  

During this current "pull back" or correction, a disciplined DCA plan into the stock market seems to be prudent.  While the stock market is currently so volatile, we sleep soundly at night knowing we have such a conservative portfolio.  We have found that some of our friends are not nearly so comfortable with an aggressive portfolio when the stock market hits a rough patch like it's in now.

Thanks again Tim for your comments and suggestions. 

~ Ed