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EdLaFave

Conclusion after a year of 403b/457b reform.

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This problem will not be solved for an exceedingly long time because at the end of the day teachers are amazingly apathetic. I think history has shown that ending victimization is nearly impossible without engagement from those most affected.

There have been a few exceptions (particularly teachers who’ve found me through my website), but on the whole teachers just don’t care. Surprisingly, I’ve found that teachers who are the most engaged and have the most to say about the plight of teachers, they’re the least receptive to even listening to how they can improve their personal situation, much less how to address the systemic problem.

This experience stands in stark contrast with how my coworkers responded to my declaration that our 401k is a rip off. Several people asked me to give a presentation (which was well attended), others stopped by my office for more personal help, most wound up significantly improving their retirement plans (advisers were fired, IRAs/401ks were reallocated, contributions to annuities ended, etc), and there are now jokes about starting the Church of Bogle. This difference in engagement is why 401ks are vastly superior to 403b/457b.

I was warned, but I was still surprised by how difficult it is to get a teacher to care about their own exploítation or the exploítation of their peers.

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Ed

Like I have stated all too often, It seems I made more enemies than friends trying to change the 403b world. Most of the friction was generated because so many teachers believe in the establishment as just and fair. When you attack a certain a entity like a "helpful" financial advisor they perceive you as a negative out of the mainstream person . I was too activist and somewhat cynical for most of them-Virginia is a conservative state trying to look progressive but they are not there yet.Your statements above ring true to me. Sure there were exceptions to this but generally I came to the same conclusions as you did. I have come to learn that teachers are wired differently than your average  private sector employee. For one thing they are not motivated by money . They are more intrinsically motivated and less materialistic. Unfortunately insurance and finance salespeople/companies have figured  out how to engage teachers  and essentially profit from them.

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I would have liked to have known you when you were making enemies 😀. I don’t attack anybody, I typically just state the objective truth that Plan A will consume 75% of real investment returns while Plan Z consumes just 3% and I appeal to the idea that you deserve to keep your money. So I haven’t made enemies, but I’ve found an almost aggressive level of indifference.

I’ve previously entertained the hypothesis  that teachers’ lack of interest in money (something I’m not willing to concede is actually true) is the reason for apathy. However, I’ve found that the teachers yelling the loudest about how poorly teachers are compensated are also the most apathetic about having their retirement accounts raided by fees. So it seems I’ve observed the opposite correlation being hypothesized.

Something that I’ve found generally notable about teachers (at least relative to my profession) is a generally strong willingness to voice grievances and a relative unwillingness to act on that discontent. I also see the union as being fairly disconnected from the teachers. I’m not sure if these observations have anything to do with 403b plans, but it stood out to me nonetheless.

I’ll still be around to offer my opinions to individuals seeking help, but any optimism for a collective solution has largely been extinguished.

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 strong willingness to voice grievances and a relative unwillingness to act on that discontent. 

Perhaps there are regional differences in teacher attitudes who are influenced by their environment. Perhaps teachers in Florida and California are different than teachers in Virginia. However I think your comment above rings true across the board. However nearby in West Virginia teachers who are woefully underpaid did strike and get some concessions. There is always hope for a revolution!!

 

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Sadly, I think defined benefit pensions tend to lull teachers into complacency—they know there is something that they are contributing toward, and that they have little-to-no influence over the nature of that plan.  Any savings beyond that is a "bonus," if they are persuaded to save or invest at all (I am amazed how many of my colleagues don't seem to be contributing any significant amount to a 403b). For those who manage very long careers within the pension system—35 years or more—they may be able to replace enough of their salary for a comfortable retirement with pension alone (at least that's true in California), but everybody else is going to come up way short if they don't find a cost-efficient investment plan.  

I think hopes for a collective solution may have to depend, alas, on government-based reform.  Ed, your Florida senator Rubio (among others) had a fine idea years ago: make the federal Thrift Savings Plan available to all workers.  If teachers could be funnelled into that, the cost and inappropriate product issues would be solved (for everyone!) and advocacy would just be an issue of getting them to contribute more.

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Sadly, I think defined benefit pensions tend to lull teachers into complacency—they know there is something that they are contributing toward

Whyme

I think you are right but its a false security as those defined pension plans are becoming more and more extinct and going the way of dinosaurs. I know I repeat myself, but teachers need to cover all their bases and that requires having a backup plan just in case.

 

https://www.bloomberg.com/news/articles/2018-03-14/a-worrying-shift-for-pensions-retirees-will-soon-outnumber-kids

 

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You're preaching to the choir, Tony!

I know I know, we are all preaching to the choir here and thats the problem. We don't need this enlightenment, as most of us have seen the light. Like Steve said in a different thread we need more widespread activism for things to happen significantly on a larger scale when it comes to 403 abuse.  its a David and Goliath type feeling. We are only throwing stones and we are not managing to bring the monster down. The key is to get our colleagues to understand how investing works and develop financial literacy. Those that do stop here however do end up benefiting. I was one of those visitors about ten years ago and it did make s difference. While I am retired, I still run into teachers older than me who are still working out of necessity and they ask me "how did you and your wife manage to retire at a relatively young age on a Virginia teachers pension ?" They ask the question but if I offered to explain they would only want a five second response. They think its a genie in a bottle thing. We know that its a bit more complicated than that but not  by much once you understand the basics. WE need to stop funding the salesman's retirement and move that money over to the rightful owner!!
  •  

 

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Tony, 2 suggestions:

To quote a previous post, use the "Quote" button at the bottom of the post. That adds the poster's user name to the quote. It looks like you are copying and pasting and then using the " from the menu bar? That doesn't ID the quote.

To add your comment to the quote, put your cursor down below the quote box, so your comment is separate from the quote. It took me a while to figure out the new website--still learning.

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On 3/18/2018 at 6:42 AM, EdLaFave said:

This problem will not be solved for an exceedingly long time because at the end of the day teachers are amazingly apathetic. I think history has shown that ending victimization is nearly impossible without engagement from those most affected.

There have been a few exceptions (particularly teachers who’ve found me through my website), but on the whole teachers just don’t care. Surprisingly, I’ve found that teachers who are the most engaged and have the most to say about the plight of teachers, they’re the least receptive to even listening to how they can improve their personal situation, much less how to address the systemic problem.

This experience stands in stark contrast with how my coworkers responded to my declaration that our 401k is a rip off. Several people asked me to give a presentation (which was well attended), others stopped by my office for more personal help, most wound up significantly improving their retirement plans (advisers were fired, IRAs/401ks were reallocated, contributions to annuities ended, etc), and there are now jokes about starting the Church of Bogle. This difference in engagement is why 401ks are vastly superior to 403b/457b.

I was warned, but I was still surprised by how difficult it is to get a teacher to care about their own exploítation or the exploítation of their peers.

Ed, I think you may be comparing apple and oranges when you compare teachers with your coworkers. I’m guessing that your colleagues (mostly software engineers?) are much less math-phobic than are teachers. And I think teachers are not more resistant to financial knowledge than is the general public. The general public is as lazy as teachers when it comes to researching who they intrust their retirement savings with. The Edward Jones guy with an office down the street is a nice friendly guy—sure is convenient! Or, my bank, or my friend, or my dad’s broker. . .The average ER is somewhere around 1%, which indicates to me that the average American doesn’t understand how costs effect investing results! I’ve found that non-teachers are very resistant to making changes that would significantly lower their investment costs. 

I agree that teachers’ pensions lull them into thinking that their financial retirement needs are taken care of. That probably contributes to the 70% of teachers who do not save in 403b or 457 plans! Relatively low salaries probably also contributes to low participation in 403b or 457 plans. 

My point is that teachers are not unique in having a lot of resistance to educating themselves about the basics of retirement finance. It’s a national problem that benefits the majority of the financial industry. As is brought up on this forum, financial education should be part of the K-12 school curriculum.  And college curriculum! 

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2 hours ago, krow36 said:

Tony, 2 suggestions:

To quote a previous post, use the "Quote" button at the bottom of the post. That adds the poster's user name to the quote. It looks like you are copying and pasting and then using the " from the menu bar? That doesn't ID the quote.

To add your comment to the quote, put your cursor down below the quote box, so your comment is separate from the quote. It took me a while to figure out the new website--still learning.

Krow, you are very detail oriented. I never even noticed the edit button below. I will have to play with the whole gamut of tools and see what else I can learn

 

 

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On 3/18/2018 at 11:17 AM, tony said:

However nearby in West Virginia teachers who are woefully underpaid did strike and get some concessions.

Yup and I'm happy for them; they're a counter example to some of what I've personally observed. We ought to tie the lower and upper bounds of salaries to inflation. We don't need to beg for random, one-time 5% increases.

20 hours ago, whyme said:

I think defined benefit pensions tend to lull teachers into complacency

That's a solid hypothesis. However, I imagine if I had a pension I'd still be very upset that somebody was basically stealing money from my supplemental account. If I could I'd test this hypothesis with another profession that also has a pension, but I don't think I'll ever know for sure why people have behaved the way they have.

20 hours ago, whyme said:

Ed, your Florida senator Rubio (among others) had a fine idea years ago: make the federal Thrift Savings Plan available to all workers.

Rubio is well known in Florida for talking quite a bit and doing very little unless it we're talking about cutting services for everyday people or using deficit spending to finance corporate tax cuts.

Having said that, using the TSP for 403b and 457b plans would be genius. Similarly we could expand the FRS Investment Option (alternative to a pension in Florida) to handle 403b/457b plans too. These ideas would be fantastic.

15 minutes ago, krow36 said:

Ed, I think you may be comparing apple and oranges when you compare teachers with your coworkers. I’m guessing that your colleagues (mostly software engineers?) are much less math-phobic than are teachers.

Fair enough. I can only gather so much data in my personal life...not nearly enough to come to a scientifically valid conclusion. However, I must note that the non-technical folks were equally receptive as the technical folks.

18 minutes ago, krow36 said:

I think teachers are not more resistant to financial knowledge than is the general public.

I'm not ready to specify a reason that this problem exists. Resistance to financial knowledge, unwillingness to take action, etc...who knows for sure? Maybe all of the above.

Your hypothesis may be true, but I'm still left wondering why the general public has 401ks that are far less awful. I suspect they engage more strongly.

20 minutes ago, krow36 said:

I’ve found that non-teachers are very resistant to making changes that would significantly lower their investment costs. 

To be clear, the population at large does not invest well. I used to be in that group. However, my anecdotal observations show that teachers invest (or don't invest) far worse than any other group that I have personal experience with. It isn't particularly close either.

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One group of educators that are left out of the discussion here are the financial savvy educators, and I wonder if the percent of DIYers in education are about the same as the general public. I think that most schools in this country have at least one teacher or administrator who knows the annuity rip off but keeps there big mouth shut. Administrators are notoriously silent because they are in a higher socioeconomic status and they don't want to be sued for giving wrong advice, BUT IF THEY READ HERE over time, we do not give advice but show how those annuities are not appropriate products due to their high costs, illiquidity and low performance. This group goes about his or her business and does not participate here or do the other things we advocates do. I had one teacher at the workshop last Saturday say he heard about me and the workshop from Bogleheads, but not from here. 

School administrators I am told invest in real estate to get passive income. White Coat Investor blog by an MD talks only to high-income earners and they talk about real estate investing frequently. 

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T

33 minutes ago, sschullo said:

One group of educators that are left out of the discussion here are the financial savvy educators, and I wonder if the percent of DIYers in education are about the same as the general public. I think that most schools in this country have at least one teacher or administrator who knows the annuity rip off but keeps there big mouth shut. Administrators are notoriously silent because they are in a higher socioeconomic status and they don't want to be sued for giving wrong advice, BUT IF THEY READ HERE over time. This group goes about his or her business and does not participate here or do the other things we advocates do. I had one teacher at the workshop last Saturday say he heard about me and the workshop from Bogleheads, but not here. 

School administrators I am told invest in real estate to get passive income. White Coat Investor blog by an MD talks only to high-income earners and they talk about real estate investing frequently. 

I see people asking questions about 403bs all the time on Bogleheads. I also notice they are often referred here but some don't make it here to ask their questions. Its sad in a way because those here know more about the ins and outs of the 403b system better than most.

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1 hour ago, EdLaFave said:

Your hypothesis may be true, but I'm still left wondering why the general public has 401ks that are far less awful. I suspect they engage more strongly.

To be clear, the population at large does not invest well. I used to be in that group. However, my anecdotal observations show that teachers invest (or don't invest) far worse than any other group that I have personal experience with. It isn't particularly close either.

Ed, you may be correct that teachers as a group “are far worse than any other group” in their retirement investment knowledge and practice. However I think that the non-ERISA, multivendor 403b free-for-all that teachers deal with is fairly unique. If a for-profit company provided a pension but also allowed multiple salespersons to come onsite and sell non-vetted, non-ERISA 403b contracts to individuals, and this had been happening since the start of deferred-contribution plans in the 1970s, . . . .It’s a setup for the K-12 Wild West mess that the ERISA 401k world has avoided.

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