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| How One Teacher Got Wise to the 403(b)
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| As a child did you ever throw a pebble into a puddle and watch how the ripples move
from the center to the outside? Do you hold the belief that one simple motion can make a positive change? I for one do.
If my 403(b) story inspires you, I want you to take one pebble and throw it into the vast water of 403(b) ignorance in
order to make tiny waves. I hope you are inspired to go forth and educate your underserved colleagues. Even if you inspire
only one person, you will have made a difference. I am one of the tens of thousands of American teachers who made a very major decision about retirement based upon trust and ignorance. In 1990, I started a 403(b) with an insurance company primarily because the company was endorsed by my union. Recently I began to wonder what I was investing in, what it was costing me, and what I was earning. I gathered together my statements and created a spreadsheet to chart my return. The results were miserable. After 14 years I was earning 1.6% on my investments. I could have fared better with Atlantic City slots. Just as discerning was the uneasy feeling I had about how much these meager investments were costing me. I immediately contacted my financial adviser looking for this answer. Over the years I have worked with three representatives. The first I met with two or three times over four years. The second and third I never met. All communication occurred over the phone, as it did on this occasion. My representative was not in, but she returned my call the next day. The conversation was polite, but my questions were not answered to my satisfaction. She asked if I had received the updated retirement book. I had not. She said she would put a copy in the mail. While waiting for the membership book's arrival, I set out to learn as much I could about the 403(b). I went to the library and asked the reference librarian if there were any books about 403(b) plans. She did not know what I was talking about. You know that little voice you hear when things are not going well? Well that little voice reared its ugly head. It said: "When a reference librarian is unsure of what you are seeking things cannot be good." She directed me to the financial section and I browsed the index of about 6 books. I could only find a few sentences about the 403(b) because most of the information was about the 401(k). Needless to say I went home a bit discouraged. My next source of information was the internet. I did a Google search and hit upon the web site www.403bwise.com. I learned that the site was started by two teachers concerned about the lack of 403(b) awareness. That was a good start. I read as much as I could on the site. I found honest, easy-to-read information. Three hours later I had all these mixed emotions. I was angry because I had been so ignorant about the 403(b), but elated because I was now so much better informed about the plan. I contacted one of the operators of 403(b)wise via email to express my outrage. I also thanked him for the site. In no time, he emailed me back. I was amazed that a real person understood what I was going through. I have since read their book The 403(b) Wise Guide three times. The 174-page membership book was delivered a few days later. Let's just say this was not the way I wanted to find out what my 403(b) was costing me. To my horror, I discovered that my variable annuity was costing me 3.59% annually. The fees broke down this way: 1.92% for the subaccount; 1% for the mortality expense; and 0.67% operating expense. It would have been nice to have known all of this information up front. But in reality, I have only myself to blame. Today I am finally armed with truthful information: that fees matter and that I do not have to invest in insurance products. I learned that mutual funds have been allowed in 403(b) plans since 1974! Thanks to my new-found knowledge, I transferred my money from the variable annuity to a mutual fund account with T. Rowe Price. I now know exactly what fees I am paying (0.79% in total fees), and exactly where to look to learn what I am earning. I now want to lift the burden of excessive fees from my colleagues who are throwing away their hard earned dollars on expensive insurance products. I want to change the system. So what do educators do with knowledge? They educate! I started talking informally to fellow teachers. I soon learned that most had no idea what I was talking about. I was amazed, so I gave them copies of Shark Attack, an American Federation of Teachers article that warns of the sales practices of some TSA/403(b) agents. The subhead to the story reads: "Investors in 403(b) plans, beware: You are especially vulnerale to predators." I'll say! I also passed along information from www.403bwise.com. My discussions with teachers also revealed that a few had lost money because of surrender fees when they moved their money from an insurance company to a mutual fund. One teacher thought I was trying to sell something. In a way I was: knowledge. Only I wasn't charging anything. Some suggested that I hold a workshop for teachers. I was surprised but not deeply offended that my effort was rebuffed. However, I am not discouraged. I spoke to my union leadership and had a very positive meeting. My concerns about the 403(b) will be discussed at the next executive meeting. I am hoping that www.403bwise.com will become a link on our union web page. I am also hopeful that I might be able to write an article in the monthly union newsletter. Finally, I am going to inquire about how I can teach a non-credit course on the 403(b) at a local community college. I have no idea what will happen, but I will give it a throw. I mean a shot. You never know the power of one pebble. |
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