Early in a teacher’s career they are often approached by someone to “help” them with their retirement. This person often is meeting with the teacher in their classroom after a long day of teaching. Teachers are often overwhelmed by the stress of teaching, welcome the help to make sure their retirement is taken care of, and why wouldn’t trust this person, obviously they can be trusted otherwise the school district wouldn’t give them access to the teachers, right?!
If you are a teacher, or know a teacher, this story will sound familiar. Almost every school district offers 403b/457b options to their teachers and staff. The 403b/457b plans are the 401k equivalent that most Americans have access to through their employers. However, unlike the 401k plans which are highly regulated to protect the employees from predatory options that benefit the person “selling” the plans, the sales persons selling the 403b plans are not. Most 403b plans are insurance annuity products that prey on teachers, administrators, and school staff.
You might think this seems unlikely or even impossible, but it is happening in classrooms across America everyday. These salespeople are costing these teachers 40% of their lifetime returns on their investments. That’s 40 cents on every dollar invested. So if a teacher invests $6,000 per year for 35 years with a 8% annual return, they would have $1,033,900.82 at retirement. If the same teacher invests with an insurance agent for the same amount, time period, and annual return, however, the insurance product has a 2.0% administration fee per year, the teacher would only have $668,608.68 at retirement. This is roughly 40% opportunity costs to the teacher.
If you are a teacher, or know a teacher, and have questions about this, you are welcome to reach out to me. I am happy to talk with folks about how 403b/457b, and it’s at no cost to you. But unlike Insurance Agents, I don’t get paid to have you sign up for garage annuities. Now to be clear, I am not a financial advisor. But I do understand how the Insurance companies prey on teachers, and I want to help those teachers find a better, low cost alternative to invest their retirement funds. Why am I doing this, because I have been married to an awesome teacher for the past 13 years, and she too was taken by an insurance agent early in her career. Thinking of my wife, and her coworkers, I want to help any teacher who asks for help make better retirement decisions.
Following is a link to the first episode from 403bwise.org about teachers and their 403b: Learned by Being Burned: Episode 1 – Someone walked into my room. The short series that explores the dysfunctional world of supplemental retirement plans, the maddening industry behind them, and the growing movement to fix what is broken.