When it comes to planning for retirement, it's important you take into account plan fees when making investment decisions — just as you would consider how investment performance, your contribution amount, and asset allocation strategy all impact your retirement savings.
At TIAA-CREF, we believe in transparency when it comes to your plan fees and information. The topics below address some of the most frequently asked questions regarding plan fees and the value we provide to our customers.
Fees and expenses have always been part of a retirement savings plan–some fees are associated with the administration of the plan and may be covered by your employer, while others are paid by you based on the specific investments and services you choose. Generally, there are three types of costs:
- General Administrative Services
The day-to-day operation of a retirement savings plan requires administrative support to keep the plan running. Costs for services like recordkeeping, accounting, legal and trustee services, customer service support and participant communications may or may not be covered by your employer.
- Personalized Services
Personalized service fees apply to specific services that you request. For example, if your plan allows for loans and you apply for one, you may pay a one-time loan initiation fee and/or annual loan maintenance charges. These fees are charged directly to your account, if and when you use the service.
- Specific Investment Services
Investment expenses typically represent the largest portion of a plan’s cost and each investment offered within a plan charges a fee for managing and operating the investment. You pay these fees only for those investments you actually use and in proportion to the amount of your investment. These fees are not deducted directly from your account; you pay them indirectly through what is known as an expense ratio.
| What it covers | - Recordkeeping
- Accounting
- Legal
- Trustee
- Website support
- Customer service phone support
- Ongoing participant communication
| Participant transactions, like: | Costs of running a fund, like: - Investment management fees
- Accounting and legal fees
- Administrative fees
|
Who pays | In some cases, your plan; in some cases, it is shared. | Usually the participant if and when services are requested. | Deducted from a fund’s assets, resulting in a reduction in the fund’s return. |
An expense ratio is the percentage of assets an investment provider charges each year in exchange for its services. It goes toward expenses to run the fund, accounting and legal fees, fund manager’s compensation, and advertising. For example, an expense ratio of 1.5% means that each year 1.5% of the fund’s total assets are used to cover these expenses.
An expense ratio is important to understand because it affects your return. It is deducted from the fund’s assets – your total return is “net” of these fees. In other words, your return is calculated after these fees have been deducted from the fund. This allows you to compare the performance of funds charging higher or lower fees.
Keep in mind that fees do not necessarily correlate with performance. If an investment fund has a high expense ratio, it may not mean that it has better performance.
The hypothetical example in the chart below compares a $10,000 investment* with the same investment return and two different expense ratios – illustrating the effect of each on potential savings. As you can see, even small differences in fund expense ratios can translate into sizeable differences in returns over time.
Example of Expense Ratio and Impact on Savings*
| Amount Invested | $10,000 | $10,000 |
| Rate of return | 5% | 5% |
| Expense ratio | .50% | 1.30% |
| Amount after 10 years | $15,530 | $14,381 |
*This is a hypothetical example and is for illustrative purposes only. It is not intended to predict or project investment results/future values. The calculations assume no withdrawals during the period indicated and do not reflect any redemption fees. Total returns and the principal value of investments will fluctuate and results will vary.
Some investment options also charge transaction fees or have restrictions on exchanges or withdrawals (such as a short-term redemption fee). It’s important to be aware of these fees and/or restrictions when you choose your investments – please make sure to read the Fund's prospectus for such information.
For more information about your plan’s investments and fees, visit the web page for your specific plan.
It’s important to consider the costs associated with your retirement plan in relation to the quality of services and support you receive. At TIAA-CREF, we believe the sum of what we offer provides great value in your journey to and through retirement. Here are a some of the ways we help you:
- Time-tested investing principles
We use our 90 years of knowledge and experience to provide a range of diversified options and retirement income solutions that guarantee you won’t outlive your income.1 Our investment approach is rooted in fundamental, time-tested principles and our seasoned portfolio management teams are committed to delivering consistent growth and strong long-term, risk-adjusted performance while controlling expenses.2
- Guidance at every stage in life
Your needs change over time and TIAA-CREF offers a full range of financial services available as you need them, including IRAs, state sponsored 529 college savings plans,4 life insurance, and lifetime income planning to help you manage your savings throughout retirement.
- Low fees
We are committed to keeping our fees low to ensure more of your money is working hard for you. At TIAA-CREF, our fees are generally less than half the mutual fund industry average.5
Since 1918 we’ve been committed to the financial well-being of our customers. Whether you’re just starting out or an experienced investor, we’re here to listen to you, to advise you, and to help you feel confident about making financial decisions.
