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I have a 403b plan with TIAA-CREF, should I move it to an IRA when I retire in four years or leave it where it is?

Aug 31, 2014 by Damon B. from Ann Arbor, MI in  |  Flag
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3 votes

I was a senior portfolio manager at TIAA-CREF for 7 years. Your investment options likely include two that would be difficult to find replacements for it you rolled over your funds at another firm. This is TIAA Traditional and Real Estate. There are various reasons why rolling over your 403b to an IRA with a different firm could make sense, but you should consider keeping some allocation of these funds at TIAA depending on your specific financial needs.

The guaranteed rate on your Traditional will depend on the contract type and vintage, but it's going to be a positive number whatever it is and may look relatively attractive in a rising interest rate environment. Real Estate is a nice asset to have as it is somewhere between stocks and bonds on the risk spectrum. It's quite different than the REITs other firms may have, so it's worth consideration retaining some portion of this in your 403b even if you move other funds into an IRA.

Comment   |  Flag   |  Sep 12, 2014 from Austin, TX

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Damon, I'm a TIAA CREF registerd advisor, meaning we manage clients' accounts within TIAA CREF as well as accounts at other custodians. First, you should know that every employer negotiates with TIAA CREF about what offerings will exist in their retirement plans, and we see a wide range, so the first thing to do is see how many funds you have available and whether they are actively managed with higher expense ratios or if they are lower cost index funds. Can you put together a nice low cost diversified portfolio? Morningstar.com portfolio analysis tool may help you if you want to do this yourself.

Great advisors do a lot of things, especially if they are fiduciary, comprehensive advisors, focusing on the whole picture. They incorporate small and mid cap stocks (which data shows do beat the S&P 500 over the long term, but are much more volatile) in the proportion appropriate to you, help you understand 'tax diversification' and the associated somewhat complicated tax rules, so you can move into tax free Roth options if that is what makes the most sense for you. They review insurance options (e.g. long term care) and estate planning holes, and guide you through the withdrawal phase. NAPFA is a great source for finding someone who can explore this topic with you, and many NAPFA advisors will meet with you at no cost to discuss your situation.

Comment   |  Flag   |  Sep 01, 2014 from Cincinnati, OH

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It is a least worth it to consider moving to an IRA. Some factors to consider...

  1. Are there asset classes that I would like to access that I can get to through an IRA and not my 403(b)?

  2. How do the expenses compare? Will my expenses go down if I transfer to an IRA?

  3. Do the expenses I pay to the 403(b) provide value that I will not receive in an IRA?

  4. Will I need professional advice to allocate my assets if I move to the IRA?

Those are just some to get your started thinking.

2 Comments   |  Flag   |  Aug 31, 2014 from Alexandria, VA
Damon B.

No; 2. My expenses will not go down; 3. maybe; 4. My portfolio has gone up 122% since 2010, I'm not sure I'll gain much from professional advice. What percentage of professionals beat the Standard & Poor 500 Index each year?

Flag |  Aug 31, 2014 near Ann Arbor, MI
Eric E. Foster, CPA, CFP®

I wouldn't think the primary question is where you assets will reside, but rather how they are invested. What did you lose in 2007/2008? If you have doubled your money in the past 4.5 years then I'm guessing you are largely in stocks. If you can deal with significant losses between now and retirement then you might just leave it alone as TIAA is a good enough institution to utilize. Regardless of recent performance, if your allocation is the same as it was in 2009 there is a chance that you are not allocated correctly for the risks of today (coupled with the fact that we are all older). That is, unless you can again afford to suffer large losses within close proximity to retirement. If you can then you're in a unique spot. For most people the value of an advisor is not to "beat the market", but rather to help objectively assess your portfolio risk and help determine how it may affect your retirement income.

Flag |  Sep 12, 2014 near Knoxville, TN

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Jason gives a great answer. I would add we want to weigh the totality of the options that are available to you, and the overall income plan via the financial plan prior to picking an investment provider.

You may not receive the benefits of international yield curves and real estate markets through a single provider.

There are also significant benefits to the ability to rebalance, which there are some roadblocks to doing effectively when invested in an annuity option that restricts withdrawals.

Comment   |  Flag   |  Nov 08, 2014

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Talk with trusted advisor before moving a retirement plan to an IRA. There are many factors unique to your situation that will inform your decision, including age at retirement, need for access to the assets, available investments, need for investment/planning advice.

Here's hoping the next 4 years fly by!

Comment   |  Flag   |  Sep 03, 2014 from Midland, MI

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