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.