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Participant ○○

MMA

Money Market fund at TIAA may be on verge of going to zero yield. I'm not sure whether they can go negative. The notice posted on the website did not indicate the latter possibility.

I still have a lot of cash in the MMA, much of which I added when I sold off TREA. I draw my monthly RMD payments from the MMA. I'm going to leave a majority of what I have in MMA right where it is. But I may relocate some to a another fixed income fund.

As I've mentioned before, my TIAA plan provides a very small number of FI funds. There are Vanguard Inflation Protected Securities (VIPIX) and VG Total Bond Market (VBTIX), and I may relocate some more of my cash to these funds.

 

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Frequent Contributor

Re: MMA

T-C short-term bond fund may be better if any of its class is available to you. Here is the Premier class,   https://www.tiaa.org/public/investment-performance/mutualfunds/profile?ticker=21066445 

There is an indexed version too,   https://www.tiaa.org/public/investment-performance/mutualfunds/profile?ticker=90630895

YBB
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Frequent Contributor

Re: MMA

If you follow what's happened in some negative rate countries, you pay to keep money on deposit. 

We may be in a period of time where preservation of principal is what matters, even if your real return is negative.

Immediate liquidity is what I happen to value most for my cash. Reaching for yield is not in my picture.

Bob 

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Participant ○○

Re: MMA

Thanks, fellas. Yogi, I don't have either of those funds in my plan.

I will probably keep about 2 years of future RMD's in the MMA. I take RMD's monthly.

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Contributor ○

Re: MMA

You can see the trend here, where my money is parked temporarily for a few days because I remain fully invested.

I read a story yesterday in Yahoo Finance how fund flow into Vanguard is still going strong and why TIAA has to cut its work force by 75%. This speaks volume about TIAA investments.

 

Screenshot_2020-05-19 VMFXX - Vanguard Federal Money Market Fund Vanguard.png

 

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Frequent Contributor

Re: MMA

@Juris2 , in your new plan, isn't there any short-term bond fund, active or passive?

YBB
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Frequent Contributor

Re: MMA

Nat,

TIAA has NOT cut its workforce by 75%. It remains to be seen how many take the offer. 

What puzzles me is why TIAA'S proposal has drawn so little attention from the likes of the Wall Street Journal or NY Times. 

Perhaps it's not taken seriously. I certainly am skeptical. 

Bob 

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Follower ○○○

Re: MMA

Juris,

The email I received made clear that after-expense returns could indeed go negative, though conceivably this applies only to ATRAs, where I have almost all of what I still have at T-C (having transferred almost all of my IRA to Vanguard).

My ATRA options don’t include the short-term bond funds mentioned by Yogi. Nor a commitment-free 1% from TIAA Traditional. (Or so I was told this morning when I called TIAA. I need to check the prospectus to be sure.)

Unfortunately, Vanguard doesn’t offer an ATRA. Fidelity does, though it didn’t seem preferable to TIAA’s (at least for my purposes) when I checked it in March. May take another look.


From this morning’s email from TIAA:

“The Federal Reserve lowered interest rates to near zero in March in response to the COVID-19 pandemic and resulting market volatility.

Anticipating the possibility that CREF Money Market Account yields may be insufficient to cover expenses and that returns could go negative, TIAA discussed options for action with the appropriate regulators.

TIAA has put in place a limited and short-term fee waiver of expenses to help prevent the Account from having negative yields; the waiver is currently in effect through December 31, 2020, and cannot be renewed.

After the waiver expires, you may see negative returns in the Account if interest rates do not rise sufficiently to cover the Account's expenses.

Fees waived on the Account will be subject to possible recovery by TIAA after the waiver expires on December 31, 2020. Recoupment will occur when short-term interest rate levels produce a daily positive yield on a class of the Account.”


Tibbles

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Participant ○○

Re: MMA

a) Yogi, we have no short-term bond fund available. The fixed income options in my plan are narrow. In principle more options are available when I do a broader search of option for my institution on the TIAA website, but when I go to make a transfer some of those other options do not appear on the page. I ran into a similar problem at the time I closed out TREA. Some additional funds showed up as available to me, but when I moved to make an actual transfer only two non-TIAA options were available (i.e., only those two boxes were available for me to enter % or $ in). I may check with my WMA.

b) TIBBLES, thank you for reproducing the letter. It does indeed say negative yields are possible. In any case, I'm looking for alternatives. I don't want to cause further confusion by closing out the MMA; that is currently where all of my RMD monthly withdrawals come from for calendar year 2020. It is also the immediate destination of funds that I obtain from the ongoing TPA of my Trad holding.

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Participant ○○

Re: MMA


@Juris2 wrote:

Thanks, fellas. Yogi, I don't have either of those funds in my plan.

I will probably keep about 2 years of future RMD's in the MMA. I take RMD's monthly.


I suppose you thought about the following already.  It does not make much difference but, since 0% is not appealing, how about taking your RMD in early January (or now for 2020) and investing it in an FDIC-insured money market account or saving account?  Examples:  CIT Bank Money Market Account yielding 1.40% APY currently.  (It used to be higher, then down to 1.75%, 1.55%, 1.45%...)  HSBC Direct saving Account earns 1.60% APY currently. 

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Participant ○○

Re: MMA

Thanks, Learner. I think I'm not gonna rework the RMD this year. But I'll look into this possibility for 2021.

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Contributor ○

Re: MMA

Another related News. Northern Trust shuts prime money market fund after turmoil.

The zero Fed rate is causing a lot of problems to many people who are savers.

"At the end of last month, the fund had assets under management of $1.8bn, down from $3.8bn on February 28, according to Crane Data. Prime funds such as Prime Obligations invest the majority of their assets in very short-term debt — mostly commercial paper or overnight “repo” loans. The industry suffered withdrawals totalling $160bn in March, about 15 per cent of prime fund assets, according to Crane, before the Federal Reserve stepped in to support money markets and reversed the outflows."

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Re: MMA

https://www.barrons.com/articles/northern-trust-is-shutting-down-a-prime-money-market-fund-515899922...

".....The firm (ticker: NTRS) will stop accepting purchase orders or exchange purchase orders for the Northern Institutional Prime Obligations Portfolio (NPAXX) after the close of trading on June 12. It plans to liquidate the fund by July 10.....Before that date, investors will be able to redeem their shares or exchange their net asset value for shares in another fund under the firm’s Northern Institutional Funds umbrella. Investors who wait until after July 10 will receive a cash distribution of the net asset value of their holdings.....“The Board of Trustees of Northern Institutional Funds has determined, after consideration of a number of factors, that it is in the best interests of the Prime Obligations Portfolio and its shareholders that the Portfolio be liquidated and terminated,” the company said in a Monday filing....."

YBB
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Participant ○○

Re: MMA

Edited May 23rd:

My transfer from the MMA to bond funds went through last night. I still have about 8% of my TIAA account valuation in the MMA. My MMA represents a bit less than 2 years of future RMD payments.*  I'm going to consider further extractions from the MMA beyond the scheduled RMD transfers to cash in the coming year. I may liquidate the remainder of the MMA after this year's monthly RMD payments are done in December. In that case I would of course have to use a different source for my RMD in 2021.

* A combination of withdrawals from the MMA and an ongoing TPA from TIAA Traditional funds my RMD's.

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Contributor ○

Re: MMA

Is it not a good idea to move the assets to another vendor (I know that you are a Fidelity customer) so that you will always have a better investment choices as well as convenience? That was one of the reasons I moved to Vanguard, specifically for cost issue but also convenience where I am not limited to the types investments - such as ETFs. I do not understand the reason for your problems. If it does not work out, cut the chord.

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Participant ○○

Re: MMA

Yes it would be. But I really can't move my TIAA GRA account holdings at this point. However I do have a Fidelity brokerage account as well as a Fidelity IRA. I have a lot of investment options in both of those accounts. About 25% of my investment holdings are at Fidelity. (Not counting real property, of course.)

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Frequent Contributor

Re: MMA

Barron's has a story on negative rates next year on CREF M-Mkt VA and TIAA Access M-Mkt VA.   https://www.barrons.com/articles/tiaa-says-negative-yields-could-soon-be-a-possibility-in-money-mark...

TIAA has warned that negative yields may be possible for some money-market funds. Specifically, TIAA has temporarily waived some fees to December 31, 2020 for CREF Money-Market VA and TIAA Access Money-Market VA; then, starting next year, yields on these may become negative. Under the new rules since 2016, these two are considered government money-market funds. Rules differ for retail prime money-market funds [these can have gates and redemption fees] and institutional prime [these have floating NAV in addition].

YBB
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Follower ○○○

Re: MMA

@yogibearbull  Thanks for posting the Barron’s story. A negative, zero, or barely positive interest rate (before expenses), combined with CREF MMA’s expenses (.48% for R3, .28% for R2, .22% for R1), would make the account an uncomfortable place to park a significant amount of cash.

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Frequent Contributor

Re: MMA

Note that these are TIAA & CREF VAs with unit values other than $1. So it is interesting that T-C M-Mkt fund with $1 NAV wasn't mentioned by TIAA. Does it want to have a blackeye for being the first this time with breaking the buck? Or will it just close it like Fido did for its Treasury m-mkt fund, or liquidate like Northern Trust m-mkt fund?

As Barron's piece noted, m-mkt funds waived fees for as long as necessary after 2008-09 crisis as they were stunned by Reserve Primary Fund failure [its operators were jailed], ZIRP then, and Fed's temporary guarantees [at 10 bps; to 2010] for m-mkt funds then. But this time, the fund families are more prepared and they are also watching the actions of Fidelity, Northern Trust, TIAA.

Some fund families don't have frequent trading restrictions for ultra-short-term and/or short-term bond funds. My guess is that this will become more common. Then, some fund families may get out of m-mkt fund regulated business and let people use ultra-ST and/or ST bond funds with minor NAV fluctuations [true only for investment-grade ST bond funds, but not for ST-HY bond funds].

YBB
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Participant ○○

Re: MMA

I will likely reduce my use of the MMA so that it performs just one function -- temporary storage of cash from the annual TPA withdrawal of my TIAA Traditional holdings. It's temporary until I reallocate or withdraw that cash. Currently I use the MMA as the account from which my RMD payments are sent to my credit union each month. I may continue using the MMA for that purpose only, but I don't like the idea that I would be paying TIAA to hold that cash -- if there were a negative interest rate. (Added: I have ca. 8 more years of TPA withdrawals to make. The TPA's, however, only cover a third to a half of my annual RMD's.)

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