Vanguard is a well-known investment company that primarily sells mutual and index funds. Investors recognize Vanguard as having some of the lowest expense ratios in the industry, and the firm has continued to lower expenses on some of its funds in recent years amid competition. The Teacher's Insurance and Annuity Association, known as TIAA and formerly known as TIAA-CREF, is also a mutual fund investment company that tends to provide more services to institutional investors, such as teacher retirement plans. Both companies provide similar services as far as helping investors prepare for retirement, though there are some key differences as well.
While both Vanguard and TIAA are investment companies, there are critical distinctions between them, including their expense ratios, fee structuring and product offerings.
Exploring the Story
The TIAA organization was founded in 1918 to provide life insurance and retirement benefits for teachers. It formed CREF, the College Retirement Equities Fund, in 1952 to enable educators to invest indirectly in the market to earn greater returns.
Vanguard was formed by investor John Bogle in 1974, and in 1976 it introduced the Vanguard 500, considered the first, low-cost index fund that enabled investors to track a market index as opposed to investing in particular stocks or relying on high-priced stock pickers to direct their investment.
A History of Satisfied Investors
Both Vanguard and TIAA have a history of satisfied investors in their 401k plans and other investment opportunities. Consumer research firm J.D. Power and Associates reported in 2018 that Vanguard received its highest satisfaction numbers in a survey of self-directed investors, meaning people who have some contact with an investment advisor but no primary advisor guiding their investments. TIAA set a new record for its own customer satisfaction scores in 2017.
Life Insurance Options
TIAA sells life insurance and offer a variety of insurance plans, from term life products to permanent life insurance plans that don't expire. Vanguard strictly sells investment products and does not carry insurance products.
Investment Expenses
Vanguard, as a company, has a history of keeping investment expenses in its mutual funds lower than most other companies. The expenses are lower because Vanguard fund managers tend to hold investments longer than other companies, saving on sales charges and capital gains. According to InvestmentNews, Vanguard equity funds have an average expense ratio of 0.18 percent, which is 82 percent below the industry average. TIAA's expense ratios range from 1.34 percent, to merely 0.05 percent on the lowest fee funds.
Exploring Index Funds
Vanguard developed the concept of the low-cost, index mutual fund. An index fund invests in stock mixes that match a certain index, such as the Standard and Poor's 500. A S&P 500 index fund would purchase each stock listed in the S&P 500. Since these funds hold these investments and do not trade them unless the index changes, the sales and management expenses are much lower with an index fund, and these lower expenses significantly improve the return on investment.
FAQs
The fund has returned 1.89 percent over the past year, 12.10 percent over the past three years, 9.91 percent over the past five years and 11.34 percent over the past decade.
Is Vanguard good for retirees? ›
One of the best ways to hedge risks and diversify your bets include betting on the total stock market of the US instead of picking individual stocks. The Vanguard Total Stock Market ETF is one of the best Vanguard funds for retirement according to Redditors and market analysts.
What happened to TIAA-CREF? ›
TIAA-CREF plans restructuring to make CREF a separate account within TIAA. Executives of TIAA-CREF are moving to delete the hyphen from the financial services organization's name by eliminating CREF as a corporate entity and making it a separate account within the restructured TIAA.
What is the Morningstar rating for TIAA-CREF retirement funds? ›
A sound investment process and strong management team underpin TIAA-CREF S&P 500 Index Retire's Morningstar Medalist Rating of Silver.
What is a realistic rate of return in retirement? ›
Generating sufficient retirement income means planning ahead of time but being able to adapt to evolving circ*mstances. As a result, keeping a realistic rate of return in mind can help you aim for a defined target. Many consider a conservative rate of return in retirement 10% or less because of historical returns.
Is TIAA a good retirement plan? ›
60% of TIAA-CREF Funds and Variable Annuity Accounts received a Morningstar overall rating of 4- or 5-stars (40.24% 4 stars and 19.51% 5 stars), based on risk-adjusted returns as of March 31, 2022.
What are the cons of Vanguard? ›
Cons
- Relatively high minimum investment requirements for many fund options.
- Higher-than-average per-contract options fee.
- Slow process to open an account.
- No trading platform for active traders.
- No fractional shares of stocks or ETFs.
Vanguard is paid by the funds to provide administration and other services. If Vanguard ever did go bankrupt, the funds would not be affected and would simply hire another firm to provide these services.
Is it safe to have all my money at Vanguard? ›
Money market funds and other securities held in the Vanguard Brokerage Account are eligible for SIPC coverage. Securities in your brokerage account are protected up to $500,000. To learn more, visit the SIPC's website. Up to $250,000 by FDIC insurance.
Is TIAA in trouble? ›
The Securities and Exchange Commission today announced that TIAA-CREF Individual & Institutional Services LLC (TC Services), a subsidiary of Teachers Insurance and Annuity Association of America (TIAA), will pay $97 million to settle charges of inaccurate and misleading statements and a failure to adequately disclose ...
It offers a limited range of personal, business and commercial services, but it's best known for Yield Pledge checking and savings accounts that promise competitive rates. TIAA is a worthy choice for anyone who wants to earn interest on deposits without worrying about account fees and minimums.
What is the TIAA controversy? ›
Beginning in 2012 and continuing through March 2018, TIAA capitalized on its reputation and client goodwill and employed a fraudulent and misleading marketing pitch to convince its clients to roll over assets from low-cost, employer-sponsored retirement plans to higher-cost, individually-managed accounts in TIAA's ...
Is TIAA-CREF a good annuity? ›
For its stability, claims-paying ability and overall financial strength, Teachers Insurance and Annuity Association of America (TIAA) is a member of one of only three insurance groups in the United States to currently hold the highest rating available to U.S. insurers from three of the four leading insurance company ...
Is TIAA better than 401k? ›
Both are defined-contribution plans, but a 401(k) is designed to provide supplemental income in retirement and attempts to maximize the funds in it, while a TIAA plan is intended to provide a guaranteed lifetime annual income by annuitizing the money in the plan, making the amount saved less paramount.
What are the top TIAA-CREF mutual funds? ›
Below we share with you three top-ranked TIAA Mutual Funds, namely, TIAA-CREF Growth & Income Fund Retail Class TIIRX, TIAA-CREF Large-Cap Value Fund Premier Class TRCPX, and TIAA-CREF Real Estate Securities Fund Retirement Class TRRSX.
What is the rate of return on a TIAA IRA? ›
When you contribute or roll over money to a TIAA IRA, you can earn a rate of 5.2% in TIAA Traditional* through February 29, 2024.
What is a reasonable rate of return on an annuity? ›
Current average annuity rates fixed can expect between 3.60% and 5.25% ranging between 2 years and ten years in length. Use our fixed annuity calculator to solve your guaranteed rate of return.
What is the rating of TIAA-CREF? ›
01Ratings
| Rating | Action | Type |
|---|
| AAA | Affirmed | Long Term Insurer Financial Strength |
