CPP asks:
Do you guys have any opinions on TIAA-CREF Lifecycle funds versus Vanguard? I am currently in the former, but I could change if it makes sense. I have this feeling you guys addressed this on-blog, but I couldn’t find the post. Happy New Year!!!
This one is pretty easy. Vanguard lifecycle funds (aka Target date funds) are almost at-cost. The fees are almost the same as the fees would be if you put together the already-low-cost index funds that make their lifecycle fund. TIAA-CREF charges extra for the convenience. Vanguard will save you hundreds if not thousands of dollars over the course of your investing career. (IIRC, it is a factor of 10 difference if you do this in an IRA, but within your 403(b) plan you will have to look at the fees yourself.)
That said, there are some complications.
1. TIAA-CREF will send out a representative to talk to you, fill out forms for you, etc. If you’re unlikely to do anything without someone holding your hand, this is a reason to stick with TIAA-CREF. I do not know if Vanguard will do this for you, as we do not have the Vanguard option at our school, but my guess is you would do things over the phone if you want help.
2. TIAA-CREF and Vanguard have slightly different ideas about what appropriate investment paths and allocations are. My personal belief is that I don’t know any better than either TIAA-CREF or Vanguard (and they don’t really know either). Still, you may have strong beliefs that may or may not be correct and one or the other program may better fit these beliefs.
Additionally, TIAA-CREF is not one of the 403(b)/401(k) companies that is actively trying to rip you off. Even though their fees are higher than those for Vanguard, they’re still among the lowest in the industry. With new legislation about transparency, fees for the entire industry may be dropping, so it may make less of a difference what lifecycle fund you choose in the future.
Grumpy Rumblings (of the formerly untenured) 
January 11, 2013 at 7:22 am
I adore Vanguard. This is a good reminder that I MUST do my old 401k roll over as it is from TIAA-Cref to Vanguard.
This isn’t relevent for target date funds but one feature that TIAA offers that Vanguard does not is automatic rebalancing, on your birthday I believe. How great is that? And why does Vanguard not offer this?
But at the end of the day it’s all about the low fees for me. Especially when a company like Vanguard offers so many great options- if only they would start a frontier market fund. Emerging markets are no longer emerging for the most part.
January 11, 2013 at 7:31 am
I have no idea why Vanguard wouldn’t offer that. Luckily the lifecycle funds automatically rebalance!
January 11, 2013 at 9:37 am
My 403(b) is with TIAA-CREF, and I meet with an adviser once a year. (If you have $50K or more at Vanguard (Voyager Status), you can have access to a third party that analyzes your portfolio for retirement and makes recommendations based on your goals: https://personal.vanguard.com/us/insights/retirement/financial-engines . That is where I house my Roth IRA and non-retirement funds.) Both TIAA-CREF advisers were not fans of their own lifecycle funds and took the time to build me a portfolio that matched my comfort level in terms of risk.
January 11, 2013 at 9:43 am
Not TIAA-CREF specifically (they’re generally “good guys”), but more generally, it should be noted that generally advisers make more money when they “build a portfolio” rather than using an index fund or lifecycle fund made from index funds. This will vary by company and their policies for kickbacks, as well as their fees for doing the lifecycle fund. There’s a reason DH’s tiny town has TWO Edward Jones offices but isn’t big enough for a McDonald’s.
January 11, 2013 at 10:01 am
You are right; I did ask them if they got a cut, and they said no. (Sorry, didn’t think that to mention that.)
January 12, 2013 at 1:01 pm
You guys are very smart!
January 12, 2013 at 1:51 pm
I have no interest in advisers, but Vanguard has gone to bat for me pretty much every time I’ve tried to do a rollover. (I say “tried” because after I quit my job, I still showed up in my employer’s database as employed and thus ineligible for a rollover right until I got re-hired and was thus, as a prospective employee, ineligible for a rollover. Not Vanguard’s fault.)
January 12, 2013 at 1:55 pm
Yeah, us too, but over the phone rather than in person. :)
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