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EdLaFave

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

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4 minutes ago, krow36 said:

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 is an interesting thought. I wish I could run a simulation to find the answer. I hypothesize that enough workers would stand up and prevent a good portion of the nonsense we see in K-12, but I'm not overly confident in that hypothesis.

At any rate, the awful nature of the 403b/457b world can only exist because of teachers' willingness to accept it. I'm reasonably confident that level of acceptance won't change for a very long time (if at all). Hopefully I'm wrong.

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On 3/19/2018 at 12:44 PM, krow36 said:

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.

Agree with krow that the 403b world with public k12 districts has NO ERISA protections!!! In fact, here in California and a few other states insurance agents and their conflicts of interest practices and their terrible products are not only allowed but are protected by state insurance codes. The California code 770.3 is the most hideous of all, and nobody talks about this or the two times we tried to update this terrible and cruel code. 

I wrote a book about this mess. My book received a review by an attorney, James Reardon, and posted this on Amazon:

Boy, does Steve Schullo tell it like is. As former President of an RIA firm who has a J.D. degree; I’ve done a fair amount of plaintiff’s recovery work as an expert witness until my recent retirement. Fighting Powerful Interests lays bare the inner workings of the insurance industry, It’s the most truthful account I have seen in my 27 years in the financial services industry. Teachers everywhere should know of and appreciate this account of an exhaustive two person crusade spanning a number of years to free teachers and non-profits from predatory practices not permitted to occur in other professions.

I love it this review because its the truth that we all intimately know here!!!!!!

READERS, PLEASE do NOT purchase my book. I can give you a pdf copy but I need your email. PM me your email. All I would like back from you is a review on Amazon: https://www.amazon.com/Fighting-Powerful-Interests-Educators-Tax-sheltered-ebook/product-reviews/B00UODW0ME/ref=cm_cr_dp_d_show_all_top?ie=UTF8&reviewerType=all_reviews 

If more teachers took a look at my book, they would understand the problem and know one possible solution to the 403b MESS: a low cost mutual fund platform using 457(b) and having an oversight committee. 

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21 hours ago, EdLaFave said:

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.

I'm no fan of Rubio, but extending access to the TSP strikes me as a good idea, wherever it comes from (I believe there are some liberal-identified organizations or politicians who have also supported this, though I don't have the names off the top of my head).  I'm not sure whether Rubio's proposal extended to 403b accounts--it was mostly aimed at workers who had no access to a 401k or 403b--but I'd support a universal, transportable (across employers) TSP account with the same contribution limits as the 401k.  This could effectively eliminate the 403b (except, perhaps, as site for additional savings for those who have maxed the TSP), and with it, all the inherited connections to annuity sales fees, exaggerated fund fees, third party wrap fees, awful fund choices, etc.  The industry that thrives on those fees would fight it to the death, but should the country arrive at a moment friendly to worker-focused retirement reform, I think this idea could gain wide support.

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However anybody feels, Rubio hasn’t been reliable.

I too would love to see the TSP available to everybody for every type of account. I’m shocked Rubio wouldn’t consider that to be big government, but I’d support him 100%. 

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On 3/19/2018 at 2:12 PM, EdLaFave said:

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.

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.

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.

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.

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.

To be cl

 

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I think financial literacy while a good idea in our schools will not necessarily solve the 403b crisis or the rip-off sneaky financial models being used in our culture.. I have to wonder if more education just leads more teachers into the laps of these sharks. Might they be better served staying ignorant?  I taught Financial Literacy. I tried to educate the kids on expense ratios and index funds but what I noticed was that while it opened their minds to saving more , it did not necessarily lead them to distinguishing between good investing and bad investing or differentiating between the good guys and the bad guys. That takes a whole new level of sophistication.  I guess getting that spark towards understanding finance makes financial literacy a worthwhile pursuit but there is so much muddled and fake information being dispensed in the financial world that it would be easy to end up leading people inadvertently to making bad decisions with our good intentions. Thats what happened to me!! And who profited-the very forces I was trying to avoid!

I think books like Steve wrote about powerful interests groups is very specific in its financial education and should be required reading after financial literacy basics are instilled in our citizens. Ed, your primer and guide on investing specific to your state for teachers is also a great guide as are Dan Otter's books. An oversite committee is a great idea if you can keep them free from bias and influence from the outside finance world and that may not always be easy. Just look what happened at the NEA!!

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