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techteacher

Bringing Low Cost Options To District

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Hello fellow 403(b) participants.

 

I am brand new to the forum, though I had come across this site a little over a year ago having read Daniel Solin's The Smartest 401(k)* Book You'll Ever Read. It was then that I began educating myself about investing as I had a keen interest in preparing for my retirement. If I may take a moment to provide a little information about my background, it may serve to introduce me.

 

I am in my mid-30's and have been living and teaching in Maryland for the past ten years. Back in my early 20's I had invested a few thousand in tech companies during the dot.com bubble. The subsequent burst took good chunk of it by practicing non-diversified, market timing speculation. About five years ago having become established in my teaching career, purchasing a house, and accumulating a modest savings I knew that I had to get back into the market: I just didn't want to repeat the indiscretions of my youth. So I read Solin, Milkier, Hebner, Bernstein, and my mentor, Jack Bogle, and found the common thread was that low cost passively managed index funds are a sound investment.

 

Immediately I opened a Roth IRA for myself and had my wife do so as well. We have been making maximum contributions annually. We also have a taxable investment account, primarily holding total stock market ETF's. I have yet to participate in my district's 403(b) plan for the following reasons: There are eight vendors, six of which are insurance companies offering annuities. The remaining two offer mutual funds, but expense ratios are still approximately 2%!

 

I am reaching out to the wisdom of the crowd to seek advice on how to go about adding more affordable options, such as Vanguard, Fidelity, and T. Rowe Price to the menu. I spoke with a representative from Human Capital last year who said that vendors are selected every five years and that it had just been done the previous Spring. It may be another 3 and a half years before the selection occurs, but I figure that puts time on my side to get this done. I have written a letter to the person in Human Capital responsible for selecting the vendors; I never heard back. I intend to make an attempt to meet her in person this week. I have spoken with the leadership of my Union asking who is responsible for negotiating this. I was told that person would contact me and they never did. I just attended the national convention of my Union, the AFT, during which I met a gentleman giving a presentation on "retirement." He gleefully informed me that the AFT just signed an exclusive deal with Voya and that they offer an S&P 500 index fund for only 25 points... and a 1% annuity wrapper!

 

​It is likely I am preaching to the choir here and that many of you can commiserate. I am seeking any advice or anecdotal experience from those who have successfully added a low cost option to their district. I am quite willing to pound the pavement, collect signatures from colleagues across the district, reach out to disparate parties, etc. There is a belief that several parties have vested interest in the present vendors: I do not wish to remove them, rather add at least one affordable option.

 

I look forward to hearing from you

Pete

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Pete

 

Weclome. You seem to be able to see through all the smoke and mirrors. Go directly to your division personnel or superintendent and ask to speak to the school board. Speak to all of them or call a member you feel is most accessible. Tell him/her or them what you told us. Have a list of facts about the current selection that makes it unfair to employees. Request access to one low cost advisor. If you can't get Vanguard or the others added then see if you can get a self direct or brokerage option through a low cost company like Aspire. You can find more info about aspire in several of my threads. Also have you checked your 457b options?

 

Also

 

Have you read these yet? http://403bwise.com/k12/storylist

 

 

Keep in touch

 

Tony

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Thank you for all of the advice Tony.

 

In all of my conversations with vendors, the 457(b) never came up, nor does the district list it as an option on its website. However, I happened to have been in a colleague's room while a sales representative was giving him the pitch and she mentioned that it is now an option available to us. I asked her later about it and her response was "It does not have what you are looking for" i.e. low-cost passively managed index funds. I shall pursue it further when speaking with the district.

 

Thank you too for the stories! I had not noticed the link to the right under the K-12 section. I'll be sure to read them as well.

 

Pete

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Welcome Pete,

Thanks for sharing your story. Hopefully other teachers from around the country will start sharing theirs.

When you wrote this: "she mentioned that it is now an option available to us. I asked her later about it and her response was "It does not have what you are looking for" i.e. low-cost passively managed index funds."

 

I cringed. NEVER listen to a sales representative about ANYTHING! Every syllable is dripping with commissions and conflict of interest information.

 

But now I believe you know not to listen to a sales person about what is available on the district's vendor list. Those people will most certainly flat out lie because they can.

Always go to the district's benefits office.

 

Thanks again for sharing and as Tony said, stay in touch,

Steve

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I am an avowed optimist who always looks for the best in situations and others. With that said I concur with you Steve that self-interest dominates the tenor of the sales people's pitches. I am taking a live and let live position: They are free to sell their products to those interested and I am free to look elsewhere.

 

I shall follow up with Human Capital and provide updates here. I appreciate the support of the group thus far.

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Welcome TechTeacher,

 

Here's another resource. Along with fiduciary advisor Scott Dauenhauer, CFP, we do the twice monthly Teach and Retire Rich podcast. Our latest episode (#32) is an interview with a 7th grade teacher from Illinois who was able to add Fidelity. You can listen directly from the page below or you can download, or you can subscribe via iTunes and get all of our pods. Best of luck and stay in touch. - Dan

 

http://teachandretirerich.com/podcasts/

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Thank you very much Dan.

 

I've already listened to the podcast in which you interviewed the Fidelity representative who spoke about becoming the sole vendor in a district. (I believe it was #13). I shall be sure to give #32 a listen as well.

 

I appreciate these resources you have shared and am so glad to hear that teachers across the nation have been able to makes changes. If a tipping point were reached, perhaps we could even bring about legislative reform to this significantly flawed system.

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Thanks for kind words, techteacher. You and thousands of teachers stuck with bad choices are the reason we started 403bwise.com Can't wait to hear about your progress. Let us know if there is anything we can do to help.

 

Dan

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Thank you again for the Podcast recommendation Dan. It is inspiring to hear others in a similar position and how they were able to affect change. I chuckled when Mark mentioned having only 100 teachers in his district: that's how we have at my school!

 

Spoke with TSA, who happens to be the same 3rd party administrator as in Mark's distinct. The representative there said that they have several clients who use Fidelty and Vanguard, but that neither would pay the $2 a month account maintenance fee (although we know that Fidelty apparently did for Mark's district). I spoke with a representative from Vanguard who said that they would be happy to answer any questions from my district, but that they will not actively seek business i.e. no sales pitch.

 

I am going to Human Capital tomorrow to find a contact there and see how they handle the idea of adding one of these vendors. Also reaching out to Union contact for support.

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Today I had a very pleasant experience at our Human Capital office and an interesting experience with someone from the Union.

 

First, at HC I spoke with a a representative of the benefits department about adding a vendor. I mentioned how I had spoken with TSA, our 3rd party administrator, and they confirmed that they do work with Vanguard and Fidelity in other districts. The representative said that such matters are handled in December when a request for applications is made. I said that I have written a letter and am putting together a presentation on the merits of adding such vendors to our list. The representative agreed to share both the letter and presentation in December. I didn't ask then, but I think I shall request to speak at the meeting, if possible. I have the contact information of the HC representative and intend to keep in touch.

 

I am also beginning to mobilize for the beginning of the school year to speak with as many employees as possible about adding a vendor and collecting signatures on a petition. I am hoping that we shall have a stronger voice in large numbers.

 

The Union experience was as follows. I met a lady in the hallway who is still active in the Union, but has retired as a teacher. I mentioned how I was very interested in retirement even though it is about 20 years away for me. I wanted to be part of our retirement committee locally, but we do not even have one. She mentioned how there is a state-level association of retired employees. I asked whether I could join. She was puzzled, "Why do you care about retirement now?" My response "Because I want to ensure there is a pension when I do retire. I want decent investment options available now." She gave me a look like that was the strangest thing anyone has ever told her. "Different strokes for different folks" was her response. Well, she promised to pass along the information about her association to me, so I could find out more.

 

In the next couple of months I may ask member of the forum who are willing to to have a look over my letter, presentation, and accompanying materials. I wish for it to be clear, concise and compelling. I am confident that we may have a chance here and wish to make the most of this opportunity.

 

Pete

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Pete

 

At very least twenty years in advance is when you should start investing for retirement. Obviously the union person does not understand the principles of compounding and the value of time on investing much less the power of low costs.. That is unfortunate but union people are busy dealing with the present and often are ignorant about investing as a way to empower the profession. I am not a fan of The NEA and our Virginia Nea is powerless. Has zero influence because we are a right to work state. I realize teacher unions vary in strength depending on the state. Unions should be out front encouraging teachers to save from a young age and should support low cost investment options foe every school system. No discussion.

 

 

I started saving 40 years ago. Thats right. As a result my wife was able to retire at age 52. I just retired at 61. Had I not started saving at a young age I would not have the retirement money I have now. Even with the mistakes I made, the fact I made them early in my life saved me from disaster. I have no money fears now even though I am retired and still have a son in college.. I have a pension and so does my wife BUT I also saved religiously because year after year there was talk that our pensions may be eliminated, reduced, or changed. I covered all my bases because you never know what could happen in the future. Plus I grew up in an immigrant italian family where being frugal was a necessity and not a choice.

 

My only advice to you is don't give up, don't be intimidated , don't give in to naysayers and don't be too trusting of experts with fancy titles after their names. Do your own reading and research and continue your quest for better investing choices. You are doing a great thing!!!

 

Thank-you for keeping us updated and please continue to do so.

 

Tony

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I appreciate your advice and sharing your story Tony. It is inspirational and demonstrates to me and others that it can be done.

 

This is an aside, but today my wife just negotiated a contract with a new company. One of the benefits they advertised was "401(k) plan with employer matching on up to 4% of your annual income." I sent her with a few questions, one being "who is the vendor?" When she asked during the interview the gentleman looked puzzled and replied "I don't have a clue. Hey, are you a teacher or an investor?" We both laughed when she related this to me, but it made me feel grateful. Along the lines of what you had said, most are quite occupied by the present, which I certainly respect. However, it certainly doesn't hurt to also consider the future and set goals that can be worked on now, in order to get there then.

 

That is certainly motivational Dan! I shall heed the sage's advice. A mentor of mine would say "Straight and narrow is the path. Waste no time!"

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