Thank you for your response. Let me clarify. I have a Roth IRA that I
max out and will continue to do that every year. The reason why I
opened up the TIAA-CREF SRA account was that in my first year of job,
I am not eligible for 403(b). To put away pre-tax money (15% of
salary), I opened this account. I allocated the proceeds to different
assets like TIAA-CREF stock, global equities, index, fixed income,
real-estate, etc.

As far as I understand this money is just growing like a normal 401k.
But what I fail to understand is that it says, 'University name, TAX
DEFERRED ANNUITY PLAN'. Now what I don't understand is whether I have
already bought the annuity (i.e. whose distributions will depend upon
how my account grows with time) or I can later on choose to whether
buy the annuity (i.e. my account is still like a 401k) or just
transfer the money out.

My employers 403(b) is structured as follows:

Basic Retirement Plan (either Vanguard/TIAA-CREF). 3.5% basic + upto
5% match. no distributions allowed until age 70.5 while an employee of
the University

Supplemental Retirement Plan (either Vanguard/TIAA-CREF).
Distributions allowed at age 59.5 and 'in-service' withdrawals allowed
for qualified hardships.

Vesting is 100% and immediate. Should I change employers, all money is
available for receiving a distribution, rollover, or left alone in
plan.

In Feb 2008 when I open up 403(b), I'm thinking I'll put 5% in Basic
(to get the match) and then 15% in Supplemental Retirement Plan. Of
that 15%, 50% to Vanguard (in their index funds), and 50% to TIAA-CREF
(which is also index funds, but the confusion is the 'ANNUITY PLAN').
I don't like the 70.5 age restriction so no more than 5%. Or should i
just do the entire 100% of the 15% to Vanguard.

Now the questions is should I continue to put a little bit in the TIAA-
CREF or just have it transfered into the Vanguard Supplemental Plan
and put it in the index funds.

Thanks for your time and help.

Kind regards.

pallav <pallavgupta[at]gmail.com> writes:

[couldn't do 403b yet, so bought variable annuity]
- quote -

I couldn't find their fees in a couple of minutes of looking
online, but TIAA-CREF is known, generally, for low fees. Their
Variable Annuity product, like Vanguard and Fidelity's
"retirement" annuities - all offer no surrender charge.
That's all generally good.

There is a remaining question as to why you went with this
instead of, say, maxing out a Roth IRA first. Or if you
did max out the Roth, you didn't mention it. Moreover,
even if you'd maxed out the Roth, it's debatable whether
you're better off with a VA product or if you're better
off simply putting a sum into a very-low-turnover,
tax-efficient index fund. VAs have some advantages,
but one of their substantial disadvantages is that they
effectively turn what would have been capital gains
into regular taxable income. Perhaps cap gains won't
be taxed at a lower level than regular income when the
time comes for you to withdraw the money, but only time
will tell about that.

Anyway, as far as "guaranteed income after retirement"
VAs don't inherently do that. They *may* offer that
via either insurance riders or via having been converted
from the deferral phase to the payout phase. Note that
one need not buy deferred annuities at all - one may
accumulate capital outside of VAs and then "annuitize"
it at any time by buying an immediate annuity. That
said, if you expect to buy an immediate annuity with
the contents of a tax-efficient taxable account it's
quite possible that you'd be better off building up
that asset in a VA (since you won't have to liquidate
it and pay taxes on it when you convert from accrual
to anuitization as you would with a taxable account).

- quote -

Again, have you maxed out other non-employer options first -
like either a Roth IRA or even a traditional one without
the deductions? I'd lean towards both of those options
before adding to a VA, even a well-managed, low-fee one.

- quote -

Ah, I'd missed this on the first pass reading before I replied.
Yes, continue to max that out. But before you keep adding
money to that VA (It makes it sound more friendly when TIAA
CREF calls it a "SRA", but it's still a VA), make sure you
understand what a VA is and why you've chosen it instead of
just using a tax-efficient low-turnover taxable investment.


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I will be eligible to participate in the 403k plan of my employer
starting next Feb 07. I started work in Jan 07. Since I couldn't
contribute money this year, I opened up an account with TIAA-CREF and
about $1200 monthly (pretax) into their SRA (Supplemental Retirement
Annuity) Account. However, annuities, as far as I understand, are
insurance products for guaranteed income after retirement.

When I open up my 403k with Vanguard, I will put in 12% of my salary
along with 8.5% employer contribution to max it out. I have further 8%
of my salary I'd like to contribute to the existing SRA (so that I'm
putting away 20% of my salary each year). Should I continue to put
money into SRA? Or should I stop and roll over whatever I have
currently into the 403k when it is opened? Is that possible? If the
SRA functions just like the 403k and I have a beneficiary, what could
be a potential disadvantage?

I also have a Roth IRA that I max out. I have 30-35 year to go so I
would appreciate if someone can give me some advice on this.

Thanks for your time.

Kind regards.