Tuesday, February 23, 2016

TIAA-CREF Becomes TIAA, But Not "tee-ah"

TIAA-CREF, a company that everyone I know refer to as TIAA (or tee-ah) has now become TIAA.

But don't call them TIAA (tee-ah), no, that is a bridge to far, they are T.I.A.A. (tee-eye-ay-ay).

Note: "ay" is simply a long "a".

While there are no periods between the letters, you are not supposed to pronounce TIAA as a word, instead you are still supposed to say each letter, so much for simplification.

The CEO, Roger Ferguson says they are "shortening the name, modernizing it and making it more contemporary," but are they? Yesterday it was "tee-eye-ay-ay CREF" and today it's "tee-eye-ay-ay" with the CREF dropped. I have no idea why you have to say each letter, T...I...A....A, but then you can get away with saying CREF (pronounced...cref) without having to say those letters. Well at least you won't have to say "CREF" anymore (though CREF is not disappearing).

Yes, "tee-eye-ay-ay" is shorter than "tee-eye-ay-ay-CREF", but why not just TIAA (tee-ah), wouldn't that in reality be "shortening, modernizing...and..more contemporary"?

Monday, February 22, 2016

Isola: Why Can’t 3.6 Million Teachers Get a Group Discount on their 403(b) Plans?

My friend over at Ritholz Wealth Management, Tony Isola, is out with a new blog post today revealing the disappointing fact that Public School Employees don't get the benefit of their collective bargaining when it comes to their defined contribution 403(b) plans.

Tony elaborates:

"Companies like Walmart are able to receive massive discounts from their suppliers. The reason for this enormous competitive advantage is they buy in tremendous bulk. They maximize their gargantuan resources to get the lowest prices from their vendors.

Contrast this with teachers’ 403(b) plans, that do just the opposite. Instead of collectivizing the investment needs of millions of teachers, spindly individual contracts with plan vendors are the rule."
There is one union that I'm aware of that does use their collective power and the collective bargaining process to help teachers and that is the Wisconsin Education Association, the WEA Trust. www.weatrust.com.

Read Tony's article at his blog, A Teachable Moment.

Monday, February 01, 2016

Inga Chira on CSU Transistion to Single Vendor - Fidelity

I recently met a CSU Professor who has opened a Registered Investment Advisory firm to work with Higher Education employees, her name is Inga Chira. She wrote a short piece on the transition that the Cal State system is currently undergoing from five 403(b) vendors to just one, Fidelity.

How Do We Survive All These Investment Choices... and a BONUS: Upcoming 403(b) Changes

By Inga Chira

Big changes are coming to the Cal State 403(b) plan on April 1st. 

Right now, there are FIVE 403(b) providers. In April, there will be only ONE. And that will be Fidelity. You have probably been getting letters about this if you are enrolled in the 403(b) plan. If you are not sure how to feel about it, I am going to tell you right now: you need to feel GREAT. This is especially true of people who are not currently participating in a voluntary plan but are thinking about doing it in the future. Your life will become so much easier as the result of this consolidation.

Back in November, I was wining about how I love Fidelity but how I had to decide against them, and go for the Savings Plan 401(k) because of the expensive investment options within Fidelity. Well, my friends, that is changing. This is a big enough change to make me wish I got hired about a year later and you should appreciate this big moment. A few things you need to know about the change and what it means to you:

A. Here is the link that will give you more info on the transition: https://nb.fidelity.com/public/nb/calstate/transition-home

B. If you are a current participant in the 403(b), you will get information sent to your house in February.

C. There will be workshops and educational resources available on campus between February and April and you better go!

D. The investment choices are getting expanded and for someone (me), a passive investor who believes that a 403(b) account is not the place to do active management, this is really exciting. Starting in April, there will be 5 index funds you can use to build a really good diversified portfolio. All the available choices are on the website I mentioned above. Take a look and celebrate (just make sure you press the investments tab to see all the choices).

E. This consolidation is REALLY good for you because now, instead of getting sales pitches, you will be getting education advice. The 403(b) market is pretty messed up because the “advisors” you see on campus are really salesmen trying to convince you to choose their provider over the other bunch (see more on this on #4). When you only have one provider, it is so much easier to do what is best for employees. Fidelity will no longer have to put its efforts into snatching you as a customer from Voya or MetLife. Instead, it can focus on helping you understand what is going on in that 403(b) of yours. This is really good news.

F. On a related note, next time when you are power walking, listen to this podcast: http://teachandretirerich.com/podcasts/2015_13_fidelity.m4a in an interview with Fidelity going through the consolidation for 403(b) providers in the marketplace in general and it can explain many of the things you will be experiencing soon. I don’t want to hear that you don’t have time for this (there is always that one hour of Real Housewives of Atlanta you can trade for some 403(b) fun)!

G. The crazy idea that the more providers you can offer within your 403(b) plan, the more diversified your retirement plan is, can finally die. Having 1 or 55 providers is irrelevant; the choices you have within the provider is what matters and now you got good choices.