This is the article displaying the target-date index portfolios by TIAA. Here you will find a description, performance, and resources for the portfolios as well as detailed information on how to implement them yourself.
- TIAA target-date portfolios, 102 years of investing wisdom benchmarked
- Description of the TIAA Lifecycle portfolios
- Performance of the TIAA Lifecycle portfolios
- Asset Allocation for the TIAA Lifecycle portfolios
- Resources for the TIAA Lifecycle portfolios
TIAA target-date portfolios, 102 years of investing wisdom benchmarked
TIAA is the leading provider to people within academic, research, medical, cultural and governmental fields. TIAA has $1 trillion in combined assets under management.
TIAA is a non-profit organization established 102 years ago in 1918 by the philanthropist and industrialist Andrew Carnegie.
The Lifecycle Funds glidepath, the planned progression of asset allocation changes over time, has been structured with the objective of maximizing risk-adjusted outcomes by investing in a diversified portfolio of equity, fixed income, and direct real estate investments.
– TIAA-CREF fund description
Let’s spend a few minutes discussing a real-life super-hero.
Andrew Carnegie is one of my heroes. Andrew Carnegie transcends what it means to be a superhero. Spiderman, Superman or even Doctor Manhattan are called superheroes because of their obvious super-human abilities. Andrew Carnegie didn’t have superpowers as such but he arguable did more for humanity than all of the fictitious superheroes ever did, combined.
Andrew Carnegie was deeply passionate about spreading and democratizing knowledge. He founded libraries and gave away donations to further education and science. It is estimated he gave away $65 billion in the last 10 years of his life (in modern-day dollars).
“The man who dies rich, dies disgraced.”
― Andrew Carnegie
Alright, let’s get back to investing and TIAA.
Description of the TIAA Lifecycle portfolios
The TIAA target-date funds are called Lifecycle funds. They are made of other funds. They are funds of funds in other words. This is the standard and smart way of constructing a target-date fund. Many if not most other target-date funds are constructed this way, fx, Dimensional Fund Advisors, Vanguard, and Fidelity.
Please note, these are called Lifecycle Index Fund. They use passive index funds. TIAA also has active Lifecycle funds which are twice as expensive if you buy them in fund form.
Disclaimer: These are target-date funds. By design, their asset allocation will change over time. In general, target-date funds shift more of their assets towards bonds as you age to lower your risk. This means that the asset allocation below will have changed until we update it here at portfolioeinstein.com.
The simple illustration below is one of the most elegant explanations of how a glide-path work.
They follow a standard glide path philosophy as do all other target-date portfolios. The closer you are to retirement age the greater the bond allocation will be. Bonds (fixed income) have a lower risk level than stocks (equities).
See the video below. It is TIAA promotional video on its target-date funds.
The portfolios are relatively simple. They use 4-6 different asset classes. I particularly like that the 2060 portfolio has a low allocation to bonds. Usually, the standard is around 10% but TIAA only uses 5%. Bonds are present to shield the portfolio against volatility, wild swings in price in other words. A 5% allocation to bonds or even 10%allocation to bonds isn’t going to shield the portfolio in any noticeable fashion. It’s about as effective as a few ants trying to slow down an 18-wheeler truck.
Let’s see how they perform.
Performance of the TIAA Lifecycle portfolios
|Portfolio name||Asset class count||1 year return (2019)||Year to date||10 year return||CAGR since 1989||Drawdown||Risk Level||Expense ratio||Yield|
|S&P 500 (Benchmark)||1||31.46%||3.69%||13.52%||10.54%||-37.63%||5 - very high risk||0.04%||1.79%|
|TIAA-CREF Lifecycle 2030||6||22.01%||1.94%||8.89%||8.77%||-25.50%||3 - medium risk||0.04%||2.10%|
|TIAA-CREF Lifecycle 2040||4||25.19%||2.09%||10.04%||9.20%||-32.56%||4 - high risk||0.04%||2.14%|
|TIAA-CREF Lifecycle 2050||4||26.50%||2.15%||10.51%||9.35%||-35.52%||5 - very high risk||0.04%||2.14%|
|TIAA-CREF Lifecycle 2060||4||26.95%||2.17%||10.66%||9.40%||-36.60%||5 - very high risk||0.04%||2.14%|
|TIAA-CREF Lifecycle Index Retirement Income||6||15.90%||1.49%||6.52%||7.65%||-13.27%||2 - low risk||0.04%||1.86%|
Asset Allocation for the TIAA Lifecycle portfolios
TIAA-CREF Lifecycle 2030
- 48.70% US Total Stock Market (VTI)
- 14.90% Int. Developed Blend (VEA)
- 5.40% Emerging Markets (VWO)
- 1.30% Short Term Treasury (VGSH)
- 28.40% Total US Bond Market (BND)
- 1.30% TIPS (VTIP)
TIAA-CREF Lifecycle 2040
- 59.90% US Total Stock Market (VTI)
- 18.50% Int. Developed Blend (VEA)
- 6.70% Emerging Markets (VWO)
- 14.90% Total US Bond Market (BND)
TIAA-CREF Lifecycle 2050
- 64.70% US Total Stock Market (VTI)
- 19.90% Int. Developed Blend (VEA)
- 7.20% Emerging Markets (VWO)
- 8.20% Total US Bond Market (BND)
TIAA-CREF Lifecycle 2060
- 66.30% US Total Stock Market (VTI)
- 20.40% Int. Developed Blend (VEA)
- 7.50% Emerging Markets (VWO)
- 5.80% Total US Bond Market (BND)
TIAA-CREF Lifecycle Index Retirement Income
This is for when you are already in retirement.
- 28.20% US Total Stock Market (VTI)
- 8.70% Int. Developed Blend (VEA)
- 3.20% Emerging Markets (VWO)
- 10.00% Short Term Treasury (VGSH)
- 39.90% Total US Bond Market (BND)
- 10.00% TIPS (VTIP)
Check the best mutual funds and ETFs here.
Resources for the TIAA Lifecycle portfolios
Here is the TIAA youtube channel. It is slightly schizophrenic about how it wants to present itself. You can still find good investing tidbits.
You can compare different Target Date Funds in the article What Is The Best Target Date Fund?
If you need a primer on target-date portfolios you should go read article Target Date Fund Portfolios.
The TIAA index target-date portfolios are simple and easy to understand portfolios. I like their low allocation to bonds when you’re just starting.
What’s your position on holding bonds in your retirement account?