I thought it might be good to post this here as a stand-alone story because so many come here looking to do exactly what this music teacher did. Note: Eric is also the subject of our latest Teach and Retire Rich podcast (#49) http://teachandretirerich.com/podcasts/ and http://traffic.libsyn.com/teachandretirerich/2017_49_music_teacher_. - Dan
My 403b Story: How to add a vendor to your school and switch from AXA
When I finally received my first full time teaching job in 2010, I was thrilled to have a job. I was so concerned with making sure my students liked me and impressing my administrators that I didn’t have time to learn or care about my retirement. Unfortunately, after a year I was let go due to budgets. For the next three years, my girlfriend (also a teacher) and I bounced around from several school districts, always being let go due to budget cuts. I applied to everywhere in the state, and in 3 years I sent out over 200 cover letters, went on over 60 interviews, and I made it to probably 15 different final round interviews. Frustration mounting, I considered quitting teaching.
In the summer of 2013, we got married. My wife had just been hired by a district, and I had an interview at that very same district. We got lucky, and I got hired as well. Needless to say, we were swelling with happiness to work in the same district. So happy, in fact, that that same feeling from my first job crept in of wanting to impress that I once again did not consider my finances. This time, there was a representative from AXA. You know the rest of the story.
In truth, I didn’t quite understand what I was signing. We had just signed everything from marriage certificates, change of name forms, we were moving to a new town, new apartment, and a new job with new insurances and all of the other bells and whistles, I’m embarrassed to say that I though the rep from AXA was from our district office. This was just something else you signed, right?
Our rep was nice, and quite helpful. Her boyfriend was a science teacher in a neighboring district, so she took it upon herself to learn a lot about student loans. She would come to our house every 6 months to discuss our contributions and finances. Of all of the reps we could have gotten when we read other peoples stories, we consider ourselves lucky.
Then in 2015, I became obsessed with the topic of personal finance. A friend introduced me to YNAB, and my life changed. I’ve read every book on finance that I had time for, my wife and I have paid off more than half of our original debts, we reduced our expenditures and increased our incomes with hobbies, I was giving financial presentations to my coworkers on basic finance… but that 403b was nagging me. I just didn’t understand it. Every time I would ask our representative about it, she would explain it, but I still couldn’t understand it. For awhile, I considered it, “one of those things” I will never understand.
Finally, I found this podcast and website, and I bought Dan’s book. I had all the information I needed to become the most well informed person in the room on 403b’s. As I researched, I discovered AXA had high fees, and the statements I got were not crystal clear with information I wanted. So we decided to make the switch. The real problem was, the rest of our provider list was just awful.
Here is where the nightmare begins. I emailed my human resources department about the possibility of opening up Vanguard, Fidelity, or Aspire to our school. The administrator made it clear that we only had access to the providers that our 3rd party, The OMNI Group, made available. So I called OMNI, and they told me the school had the right to choose their providers. I emailed my HR department again, and the admin told me that was, in fact, not true. So I called OMNI again, relaying the information. They told me that if we were to add other providers, we would not have access to the “P3” program, essentially dropping a group of providers so we can add one. This seemed ridiculous, but I took the information back to my union, hoping that if I could convince them that one great option was better than 15 bad ones, they would back me.
The union leaders knew I was fired up about this topic. I asked if I could speak to the district on the first day of school or send out an email. They came to visit me in person to let me know I had made some waves in the district office. I was surprised, I just wanted what was best for everyone. They said that when I was ready, the district had given me a green light to add any vendor allowed on the P3 program if I could convince 5 other teachers to join it. Aspire was on that list, so I agreed.
A few months later, the administrator I was emailing had retired, and a new administrator was in charge of HR. I figured this would be a great time to ask. I still don’t know what happened behind the scenes, but after I emailed my union saying I was going to start talking to my co-workers, they emailed me back a few days later to say that Aspire had been added. A day after that, the new administrator emailed the district, letting us know Aspire was open for business at our district.
Here is what you can expect from vendors if you decide to switch companies:
Create a new account:
Create account with Aspire: 8-10 days to confirm new account.
Change contributions with 3rd party, OMNI: 1-2 pay cycles to process paperwork.
AXA, Aspire, and OMNI all need to approve each others paperwork to transfer our funds. You can send each companies paperwork to each other, but OMNI sends an approval which can cut down on the faxing time: 3-5 days to fax everything back and forth, 1-2 weeks to process. We were each charged $15 and 5% of our account value by AXA to terminate, and another $65 rollover fee.
What did all of this ridiculous work save us?
$30 yearly fee for accounts under $25,000
1.2% M&E fee
1% (average) fee from all 11 variable funds,
???% - Representative charge
Total: 2.2% +$30 yearly fee plus maybe another 1%.
$40 yearly fee
.15% fee from Aspire
.16% Vanguard retirement account fee
0% - Self-directed (With an advisor you can access 25,000+ funds. Without one you are limited to retirement shares).
Total: .31% + $40 yearly charge
In summary, the change was worth it. From a quick check on an interest rate calculator, my savings is going to be in the tens of thousands. Since this is for my wife and I, we might be talking about hundreds of thousands. This whole process took us over two years, but I no longer wonder about my 403b.