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This article was posted on Bogleheads and is being praised for unveiling this issue as well as garnering much sympathy for the teachers. I would assume that these 403b plans also apply to other state workers who are getting a similar bad deal. I did not care for the way the article focused on single mothers and pictures of handicapped persons - it was not relevant to the article but I suppose that might be the style of the NYT. However three of my relatives are schoolteachers with two being single mothers and one the main breadwinner for a family of five - and none have any interest in or knowledge of investing so they could be easily manipulated by 403b financial advisors. I suppose I'm lucky with my simple, boring TSP - five index funds with very low expense ratios. Nothing to get you rich quick but a good way to just plod along toward retirement.
Note: My niece now makes $46K after ten years of teaching in Texas public schools. Does not pay into social security. It is going to take a heck of a multiplier to get her pension up to $75K.
ABQ
Many in her position took on part time jobs simply to build up their SS.
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Quote:
Originally Posted by ABQ2015
This article was posted on Bogleheads and is being praised for unveiling this issue as well as garnering much sympathy for the teachers. I would assume that these 403b plans also apply to other state workers who are getting a similar bad deal. I did not care for the way the article focused on single mothers and pictures of handicapped persons - it was not relevant to the article but I suppose that might be the style of the NYT. ,,,.
Yup, different audience / site focus. If this was posted in 'investing' and title was "403(b) participants are getting hosed by fees?" My response would have been far different.
Teachers + overarching 'retirement plan' =. Who needs a 403(b)? IMHO (only)
The articles I have seen in past 10 yrs pointed out the same, as did the 401k Frontline from over 10 yrs ago. I am left coast based so Teacher retirement plans are CaPERS and PERS resulting in HUGE windfalll pensions in yrs before 2000. We will pay for that eternally (through our lifetime). My property taxes alone increased 1000% since retirement. 50%+ flows to failed schools.
Good deal! (We homeschooled + donated 20 hrs / week free assistance to the public schools)
We are generations of teachers, no complaints about 403(b) at the holiday dinner table.
$150,000 income per year in retirement is no panacea?? How do you figure that? That would be way more than any retiree needs and would be an ultra luxurious very abundant life for most any retiree. Many retirees (if not most) live on a tiny or small fraction of that.
Note I said without liquidity. Or the ability to pay cash if needed. We put out well over 20K in the last year to help our son win a child custody case that would have had a very negative outcome if we hadn't been able to pay. His ex had drained him and we were able to save the situation. That's why. Happy that we could have and would have been devastated if we hadn't been able. I have spoken over the years to many Grandparents who have lost contact/relationship with their grandchildren because of a nasty divorce. Glad we won for many reasons beyond just this. It also includes a major medical need perhaps not covered or medication not covered or a major home repair. There are many in NC who have had their homes and LOTS impacted by the floods who don't have the liquidity to bounce back and are in many ways homeless as they go through the FEMA process. Get real without liquidity your options are debt or not at all.
Again I noted no liquidity and 150K however if you are able to save significant parts of that income you can after 10 years or so be on the way to having that liquididty
Aren't the teachers' unions INFAMOUS and perhaps the most politically powerful in the country?
Your union contracts negotiate benefits just like my CWA phone company union did.
My first search reveals the Boston teachers' union totally "all in" for the very nice benefits package - which includes mandatory PUBLIC PENSION participation and optional other savings - including pushing and EDUCATING very thoroughly on benefits including the evil 403B:
And like any other vehicle ie. 401K, you have the option of directing your contribution to many different directions or simply choosing another vehicle like:
State’s Deferred Compensation or 457 Program
Similar in many ways to a 403(b) Plan, the state’s Deferred Compensation Plan is administered by Great West (1-877-457-1900). It allows you to place pre-tax money into a tax-deferred account composed of a variety of stock and bond mutual funds. Your account is allowed to grow tax-deferred without being taxed until withdrawal, normally at retirement. The city’s contact person is Nicholas Baseel.
In the state’s 457 plan, all the homework has been done for you, as the state has chosen the mutual funds for you. The funds chosen are both actively and passively managed (index) funds. You choose only how much you wish to set aside and where you wish to allocate your funds. Fees are minimal, much lower than in 403(b) plans generally and monitored by the state.
If people want the government or some other stranger to provide ALL their needs without bothering to research and understand what's going on, not much I can say about that except oh well.
I guess it's too much for them to even consider deciding/understanding if sacrificing Roth benefits in exchange for a 401 match is smart (it is). Even though Suze Orman's been on TV for a generation (LOL) and there are thousands of tools online TELLING YOU about expense ratios above the national average etc.
Last edited by runswithscissors; 10-23-2016 at 10:17 AM..
The current crop of lawsuits are all directed at universities. Many of whom already have great vendors (Fidelity, TIAA-CREF, and Vanguard). And while the fees in these plans could be lower they are all grossly better than the majority of K-12 plans offered to our public school teachers.
Don't believe me?
Check out our list of K-12 Stories where numerous teachers detail how they were sold horrible 403(b) products.
Check out this list of vendors selling 403(b) products in the state of California. Click on one of the insurance companies and peruse some of the gems they are selling teachers. Called 403bcompare, the site is run by the state of California. Note: you have to check in two place to get total fees. See the "Fees and Charges" tab and then hit the "Subaccounts" tab to find the cost of the underlining investment. Add these charges together to get the total cost.
K-12 Teachers Sold a Product Charging 3.43% in Fees
An August 14, 2016 visit to 403bcompare showed that AXA — a big seller of K-12 403(b)s — was offering something called the AXA EQUI-VEST Series 201 (Roth Eligible) product. This offering shows a 1% personal income benefit charge; $30 annual administration fee; and a six year rolling surrender charge according to the Fees and Charges tab. Add to that a 2.43% annual expense fee shown in the Subaccounts tab for investing in the AXA Agressive Allocation fund. Folks, that's over 3.43% in fees!!!
Aren't the teachers' unions INFAMOUS and perhaps the most politically powerful in the country?
Your union contracts negotiate benefits just like my CWA phone company union did.
My first search reveals the Boston teachers' union totally "all in" for the very nice benefits package - which includes mandatory PUBLIC PENSION participation and optional other savings - including pushing and EDUCATING very thoroughly on the evil 403B:
And like any other vehicle ie. 401K, you have the option of directing your contribution to many different directions or simply choosing another vehicle like:
State’s Deferred Compensation or 457 Program
Similar in many ways to a 403(b) Plan, the state’s Deferred Compensation Plan is administered by Great West (1-877-457-1900). It allows you to place pre-tax money into a tax-deferred account composed of a variety of stock and bond mutual funds. Your account is allowed to grow tax-deferred without being taxed until withdrawal, normally at retirement. The city’s contact person is Nicholas Baseel.
In the state’s 457 plan, all the homework has been done for you, as the state has chosen the mutual funds for you. The funds chosen are both actively and passively managed (index) funds. You choose only how much you wish to set aside and where you wish to allocate your funds. Fees are minimal, much lower than in 403(b) plans generally and monitored by the state.
If people want the government or some other stranger to provide ALL their needs without bothering to research and understand what's going on, not much I can say about that except oh well.
Unfortunately employers in 403B programs don't currently have the same responsibilities as 401K employers. Many of the investment options offered especially in smaller districts are only annuities offered by insurance companies. In many cases small districts have given the contract to provide retirement plans to local insurance companies that often have ties to board of education members. The site 403Bwise which I previously linked has done a good job over the years documenting and advocating for. As you note unions are especially guilty of not representing the interest of their members when it comes to 403B plans. There are companies especially insurance companies that have very cozy relations with their local union and can often be found sponsoring rooms and perks at union meetings etc. Trips? Incentives? Hey they are insurance companies. In addition personal relationships develop and there are usually no ethical standards preventing gift cards and friendly lunch dates with union leaders and their friends selling financial instruments.
I understand many of the participants in this forum are either unable or unwilling to retire with a financial cushion of liquidity. That is either their choice or their circumstance but it isn't everyone and for those who seek that cushion plan on and Bwise and aware. Advocate within your employment environment for the best choices possible others are and have. The results over the years will be worth it when you hit living in retirement zone.
Really? Who is getting $200K pensions with full medical? Got a cite? Would love to read that.
Professional couples each with pensions full employment histories and deferring SS to 66/70 will often find themselves in the 120-200K range especially if not selecting spousal options. Investment income if used with low fees will easily take them into that range or even higher. That is what the thread is about. That third investment stool called investments and not pensions or SS. Full medical depends on the district and there are many in some states that offer it. Other states not so many.
The articles I have seen in past 10 yrs pointed out the same, as did the 401k Frontline from over 10 yrs ago. I am left coast based so Teacher retirement plans are CaPERS and PERS resulting in HUGE windfalll pensions in yrs before 2000. We will pay for that eternally (through our lifetime). My property taxes alone increased 1000% since retirement. 50%+ flows to failed schools.
Your property taxes didn't increase 1000% in California prop 13 guarantees that your taxes will never go up more than 2% in a year, so I'm not sure what you are talking about.
Now it's the 120k to 200k range? Not the 200k+ you mentioned earlier? Just a slight 80k/year difference, barely noticeable, right?
Teachers, not principals, aren't getting 100k per year pensions unless they are highly specialized and live in an extremely high cost of living area. Even then, I doubt it's many. The teachers in my area top out around 65k/year salary (after 12 years experience and having a masters degree) and their pension is a percentage of that (75% or 80% if I recall). And they don't pay into social security so they don't get that.
Quote:
Originally Posted by TuborgP
Professional couples each with pensions full employment histories and deferring SS to 66/70 will often find themselves in the 120-200K range especially if not selecting spousal options. Investment income if used with low fees will easily take them into that range or even higher. That is what the thread is about. That third investment stool called investments and not pensions or SS. Full medical depends on the district and there are many in some states that offer it. Other states not so many.
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