Retirement Allocations

Patrick Lyons

May 15, 2007

Unofficial Informal Meeting

• Disclaimer - I (PJL) am not a professional financial planner.

• Purpose of meeting is to promote discussion.

• I would like to hear other people’s opinions.

• Like it or not, we all should (must) be proactive financial planners.

• We continually make implicit (or explicit) allocation decisions.

Allocations: Fixed for Life?

• Should allocations change as overall market conditions change?

• It’s been a wild ride• What will the next 30

years bring???

Market Yield on 1 Year US Treasury Bills

0.00

2.00

4.00

6.00

8.00

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18.00

Apr

-53

Apr

-57

Apr

-61

Apr

-65

Apr

-69

Apr

-73

Apr

-77

Apr

-81

Apr

-85

Apr

-89

Apr

-93

Apr

-97

Apr

-01

Apr

-05

TIAA Since May 1996

• Rode Growth up• Rode Growth down• TIAA advice – stick

with it. It will come back eventually.

TIAA Since Jan 2000

• Major alternatives– Stock

– Growth

– Real Estate

– Inf Bond

TIAA-CREF Starting Jan, 2000

0.00

50.00

100.00

150.00

200.00

250.00

300.00

350.00

Jan

20

00

Jan

20

01

Jan

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Jan

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Jan

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Jan

20

05

Jan

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Jan

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07

Stock

Growth

RealEstate

InfBond

PJL Since Jan 2000

• Would have been nice to switch Growth to Real Estate

• Unrealistic to expect• Would have $2.2mil +

TIAA Traditional for retirement

• But, …

$1,121 Investment Starting Jan, 2000

500

750

1,000

1,250

1,500

1,750

2,000

2,250

2,500

Jan

2000

Jan

2001

Jan

2002

Jan

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Jan

2004

Jan

2005

Jan

2006

Jan

2007

Stock

Growth

RealEstate

InfBond

PJL Since Jan 2001

• One year later, Growth down 30%

• Ready to switch to Real Estate, but just did not do it.

• Would have $1.6mil + TIAA Traditional. Close to retirement goal.

$911 Investment Starting Jan, 2001

500

750

1,000

1,250

1,500

1,750

2,000

Jan2001

Jan2002

Jan2003

Jan2004

Jan2005

Jan2006

Jan2007

Stock

Growth

RealEstate

InfBond

PJL Since Jan 2005

• Relative decision• Since July, 2006

– Stock better increase than Real Estate, but

– Real Estate less volatile

• Real Estate:– Only 1 withdrawal per

quarter

$758 Investment Starting Jan, 2005

700

750

800

850

900

950

1,000

1,050

1,100

Jan 2005 Jul 2005 Jan 2006 Jul 2006 Jan 2007

Stock

Growth

RealEstate

InfBond

CREF Since May 1, 2006

• In previous graph, since July 18, 2006– Slope of Stock (33%) better than– Slope of Real Estate (13%).

• Even since May 1, 2006– Slope of Stock slightly better than Real Estate.

Annualized Total Return from July 18, 2006 to May 1, 2007

  Stock Growth RealEstate    

May 1, 2007 1025 910 985 Stock Growth RealEstate

Jul 18, 2006 812 745 892 33.4% 28.2% 13.3%

CREF Stock

• Uses composite benchmark of:– Russell 3000 Index - broad U.S. stockmarket

– MSCI EAFE+Canada Index – 22 developed nations

– MSCI Emerging Markets Index – 25 emerging nations.

• Benchmark weightings recalculated daily:– March 31, 2007 weights were:

• 76.2% US• 22.6% developed nations• 1.2% emerging nations.

• Morningstar Ratings – 5 star for 3, 5, 10 years

Allocation History

Traditional Stock RealEstate Inf Bond Total

Sep 2, 2005 23% 49% 23% 6% $1,024

Jun 14, 2006 22% 24% 49% 5% $1,092

Aug 18, 2006 22% 0% 78% 0% $1,138

Nov 1, 2006 22% 60% 18% 0% $1,165

May 14, 2007 20% 62% 18% 0% $1,303

May 15, 2007 20% 75% ? 5% ? 0% $1,303

• Should I increase Stock and decrease Real Estate?

Non TIAA-CREF Alternatives

• Switch some to Fidelity?– Any investment similar to TIAA Real Estate?

• Switch some to Met Life?– Any investment similar to TIAA Real Estate?