University of Rochester

Retirement Changes - 2012

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Which Investment Strategy Is Right For You?

Strategy 1: One-Step Investing (Target Date Funds)

You can choose a target date fund offering a diversified retirement portfolio in a single fund. Target date funds offer a convenient way to have your retirement savings professionally managed, broadly diversified, and automatically rebalanced. With a target date fund, you only need to select the fund closest to the year of your expected retirement, and the fund’s managers do the rest. Each target date fund consists of underlying mutual funds that invest in a broad range of stocks and bonds. Over time, the fund automatically readjusts the mix of investments to reduce the level of risk as you move through your career and into retirement.

Best for: Investors who want to leave investment allocation decisions to professional fund managers.


Alex—One-Step Investing:

When it comes to investing for retirement, Alex likes to keep things simple. He’s not an experienced investor and doesn’t have time to choose and manage a lot of funds.
  So, a target date fund appeals to him. That’s because a target date fund is a premixed, professionally managed group of investments that reflect the time he has until he expects to retire.
  Target date funds are designed to make retirement investing simple. All Alex has to do is choose the fund closest to the year he expects to retire. The fund’s managers will then adjust the mix over time, so his fund gets more conservative as he nears retirement.
  If you’re like Alex and aren’t into actively choosing and managing your retirement investments, a target date fund may be the choice for you.

What Steps to Take:
Between April 1 and June 7:
- Choose appropriate target date fund
- Update beneficiary information

Results on or after June 15:
Existing balances in mutual fund accounts and future contributions invested in the Vanguard Target Retirement Fund you select.

Strategy 2: Mix Your Own — Select Choice (Passively and Actively Managed Funds and Annuities)

You can create your portfolio by choosing from the new plans’ investment options. These investment choices cover the major asset classes—equities, fixed income, guaranteed, and money market—providing building blocks for a diversified retirement portfolio. You also have access to “active” funds (managers select underlying investments with the goal of outperforming the general market and/or a market index), and “passive” funds (managers attempt to mirror the performance of a specific market index, such as the S&P 500 Index). Passive funds generally have lower operating costs than active funds due to less active trading.

Best for: Investors who believe the funds on the new menu offer good long-term growth opportunities and want to choose their own investments.

Jen: Mix Your Own—Select Choice

Jen wants to be more involved in her investing strategy than she would be with a target date fund. As a result, she’ll create her own mix of investments among the passively and actively managed mutual funds and annuity accounts on Tier 2 and Tier 3 of the new investment menu. Since she wants part of her savings to create a guaranteed income stream when she retires, she will invest in some of the annuity accounts, which offer the option for income in retirement.
  Strategy 2 offers these investment options to her. By going with select mutual funds and annuity accounts, Jen has some choice and control to match her needs, while keeping retirement investing easy.

What Steps to Take:
Between April 1 and June 7:

- Select funds from Tier 2 or 3 the New Investment Menu
- Update beneficiary information

Results on or after June 15:
Existing balances in mutual fund accounts and future contributions invested based upon your selections

Strategy 3: Self-Directed Brokerage Account (SDBA)

Available from TIAA-CREF Brokerage Services, the SDBA lets you invest among thousands of mutual funds from hundreds of fund families not available on the new menu, including mutual funds from Fidelity, T. Rowe Price and Vanguard. An SDBA can give you greater flexibility to diversify and manage your portfolio.

Best for: Investors willing to assume responsibility for selecting investments among a large range of choices and closely monitoring their portfolio.


Elena: Self-Directed Brokerage Account

This is Elena. When it comes to her retirement investments, she wants plenty of choices. That’s why she’s
considering Strategy 3, and putting her savings in the SDBA.
  With an SDBA option, Elena is willing to research, select and manage mutual funds on her own. The brokerage window gives her the widest range of choices for her investments. Along with more flexibility comes more responsibility—choosing the appropriate funds can take a lot of time. But Elena is okay with this because she sees herself as an experienced, knowledgeable investor who wants lots of control over her investments.
  The SDBA option isn’t for most investors, but if you’re like Elena, it may be for you.


What Steps to Take:Between April 1 and April 30:
- Open a self-directed brokerage account to enable a one-time, in-kind mutual fund unit transfer
- Update beneficiary information

Results on or after June 15:
Existing balances in mutual fund accounts and future contributions transferred to available funds under the brokerage option


What happens if I do nothing?
If you don’t take any action, your existing balance(s) in the mutual fund accounts and future contributions will be automatically directed to the age-appropriate Vanguard Target Retirement Fund based on your date of birth. You can change your investment allocation instructions for future contributions at any time after the blackout period ends. (During the transition to one recordkeeper, plans will undergo a blackout period, which is expected to start at the close of business on June 7 and end by or before June 29.) Additionally, you may transfer investment balances or a portion of your balances among the plans’ investment options whenever you wish (subject to transfer restrictions that may exist under TIAA-CREF annuity contracts). If you have a new plan account with TIAA-CREF and do not designate a beneficiary, your beneficiary designation will default to “Estate.”