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ScottO

Professional Development Day 403(b) Presentation

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I'm a classified employee and California Ed Code designates the third full week in May as Classified School Employee Week. As a part of this we have a professional development flex day where I get the chance to highlight 403b and 457 plans. I was thinking about giving my colleagues all the answers up front without any background first:

  1. Create a 403(b) account with Fidelity using the district plan id #
  2. Configure elections for your contributions to go 100% into a target-date index fund (choose the year closest to when you'll retire)
  3. Contribute a minimum of $20/mo. to that account automatically no matter what
  4. Contact me in 30 years and let me know if this was a good decision

How do you all think that would go over? I kind of want to highlight that this can be extremely hands-off and you don't need any knowledge of stocks, bonds, markets, crypto, beanie babies, etc. to get (most likely positive) market returns. It's seems like an low cost ticket to experience the show.

I have an hour to work with. The rest could be Q&A or data that supports the argument. It's an opportunity for interaction, so I could get some of the people who've been utilizing the plans to share experiences or ask, "tell me why I shouldn't put money in a 403(b)?"

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1 minute ago, krow36 said:

I wonder if you should start off with an explanation of how fees effect the balance over time. That would allow you to show the amazing growth due to compound interest when the fees are low. That's the motivator. Some slides could show what this explains:  https://403bwise.org/education#fee-impact

👍 I'll include that in the presentation, great suggestion. 

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I'm not sure how you work it into a 1 hour presentation, buy this calculator is fantastic for showing the effect of fees over time:  https://www.360financialliteracy.org/Calculators/403-b-Savings-Calculator3  from the American Society of CPAs, or the same calculator from bankrate.com:                             https://www.bankrate.com/retirement/calculators/403-b-calculator/  

You have to run it twice, once with AXA's 2.0% fee, and again with Fidelity's 0.1% fee. Subtract the 2 balances and you get $100,000s difference over not that many years!

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Getting employees to go through the trouble of establishing the system is hard enough... I think we have like a 25% participation rate among all groups, 37% among classified staff. It's unfamiliar, so right now I'm thinking baby steps and low-effort/risk introductions to the experience.

The calculator might make it all seem to complex, but I do like the chart that summarizes the "annuity, mutual fund, index fund" picture.

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Kudos to you for doing this, Scott!  I've sat through many a Flex day presentation and never once was the topic of retirement planning on the menu.

I think your approach of presenting a simple solution-- open the account, choose Fidelity and a target date fund, etc.--is great.  I think people are easily overwhelmed by the options, figures and claims attached to 403b accounts and it becomes all too easy for them to do nothing for fear of a "wrong" decision.  So saying "here's exactly what to do, it's both simple and financially sound, you don't need to pay attention to all that other noise" is great.  

What I would add to your four point plan is a description of WHY they should open a 403b at all.  Maybe that should come first?  Perhaps some basic info about how much income a typical pension (+ social security, if that applies) will replace. As I recall, Calstrs has some kind of pie chart about the share of retirement income from pension and supplemented by a 403b--that might be something you could adapt.

I'd also vote for some brief demonstration (light on the math) of the value of compounding over time, so your audience sees the advantage of starting now, not later.  

Personally, I'd advocate for larger contributions.  Yes, they can get started by contributing ten or twenty dollars per pay period, but as you know, the amount contributed makes a huge difference in the eventual result--it's the most important single factor.  Maybe mention the idea of directing future raises into the 403b? 

Anyway, hats off to you for providing this service to your colleagues.

 

 

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