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The point of the article was the poor 403b options and fees. Not all teachers by any stretch have comfy pensions, most by far don't, and if they appear to, then they likely paid in to the plan & don't get SS. It would have been far far smarter for my wife to have put her 403b monthy amounts into about any index fund in an IRA, and come out much farther ahead. That's the point I don't understand WHY the article DIDN'T make! If the 403b stinks, DON'T USE IT!
Absolutely. After the IRA, a taxable account can even make sense.
The solution to the too-expensive employer defined-contribution plan is the same as the solution to the lack of an employer defined-contribution plan: end them. Raise IRA limits instead. Allow employers to make matching contributions to employee IRAs. Offer incentives to employers to allow payroll withholding for IRA contributions. Educate the public about where to go to open a low-minimum low-cost IRA.
I read that New York Times article the other day and rolled my eyes. Where I live, public school teachers vest 2% per year of service. The pension has COLA provisions. The pension is the average of their three highest years pay. If they retire before age 65, they get full health benefits. The union pay scale in my town for a teacher with a master's and 20 years experience is about $80K. Lots of teachers retire with 70% to 80% of their pay. On top of that, they can contribute to a 403(b). The management fees in their mutual fund options are comparable to what mine look like in my 401(k). I've never had a low fee option like Vanguard. I've pretty much never had an employee match. I'm trying to understand the bizarre universe where some New York Times reporter lives where that is a bad deal. Nobody I know in the private sector gets anything like that deal.
I don't know many people in the private sector who will even have 50% replacement income when they retire. Pensions are long gone and maxing out your 401(k) won't get you anything close to replacement income unless you have a hefty employer match. Most people don't have those.
Ok.....but where were you (and others) 42 years ago when I started my first year of teaching at a whopping salary of $4,500 a year!!!
Yup. I don't remember people eager to join the ranks of us "starving" teachers. We didn't make it at the start but will take it now.
Spoken like someone truly clueless about the rigors and sacrifices of teaching.
The point of the article was the poor 403b options and fees. Not all teachers by any stretch have comfy pensions, most by far don't, and if they appear to, then they likely paid in to the plan & don't get SS. It would have been far far smarter for my wife to have put her 403b monthy amounts into about any index fund in an IRA, and come out much farther ahead. That's the point I don't understand WHY the article DIDN'T make! If the 403b stinks, DON'T USE IT!
That is all very true. The counter argument is that employers should have a fiduciary responsibility to offer employees a plan that doesn't stink and is designed with employee options in mind. Yes even when given a range of choices some will choose options others think aren't good. IRA's have contribution thresholds lower than 401/403 plans along with other constraints. The following link has some interesting thoughts including using your 403/401 after full IRA contributions.
Spoken like someone truly clueless about the rigors and sacrifices of teaching.
The point of the article was the poor 403b options and fees. Not all teachers by any stretch have comfy pensions, most by far don't, and if they appear to, then they likely paid in to the plan & don't get SS. It would have been far far smarter for my wife to have put her 403b monthy amounts into about any index fund in an IRA, and come out much farther ahead. That's the point I don't understand WHY the article DIDN'T make! If the 403b stinks, DON'T USE IT!
180 days is three weeks shorter than my teaching contract. It's four weeks shorter than many other VA teaching contracts. I'd make the trade to 180.
OP was trying to hit at liquidity for public employees with pensions. With a generous pension, the need to save for retirement is greatly reduced. I'm sure there are many public employees who have little to nothing saved other than the pension, but in many cases, their private savings will just act as a large emergency fund if the pension can cover routine bills.
Yes and yes, however the nature of the need can change. As we age our liquid cash needs for health care can increase considerably. We have been pricing what the possible cost for home health care along with institutional is and it ain't cheap and often requires cash to get in the door. I know this will get some folks panties bunched up but I was told the following years ago and embraced and am glad we did:
Have at least three times your annual fixed income in investments. You can use that to pay yourself a COLA and hedge against low benefit/SS COLA adjustments and even more importantly against COLA freezes which some states are doing or rampant inflation not matched by your COLA increase. All very real possibilities in the years ahead.
Just the Boy Scout in me and trying to be prepared.
Again this isn't about their pensions but about their investment portfolios's. 150K income with no savings/liquidity is no panacea.
How many people get $150K in pension income, or can withdraw that much from their 401(k) each year without significantly running it down? "Panacea" it isn't, but it's a nice living.
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