Why Are You Paying More to Get Less?!
By: David Gourley, CSLP®
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Have you ever thought to yourself… “I would love to spend more but get less”?
Do you ever walk into a store, look at the prices, and try to find the highest price item, hoping that it will very likely fall apart in the near future?!
NO WAY!
But what’s crazy is that hundreds of thousands of teachers are doing this all across the country.
You might be saying to yourself, “That’s impossible… teachers always look for the best deal!”.
And while this is usually true, we let absolutely awful companies “compete” for our 403(b)-investment money.
Let me walk you through a very normal scenario:
You get finished with a long day of teaching, sit at your desk, and start preparing for the next day.
Someone peeks their head in from the hallway and says something like, “Good afternoon, Ms. Newteacher, do you care about your financial future?”
Well, who doesn’t…
At this point some insurance salesperson has made his/her way into your room and is telling you about the benefits of their variable annuity product.
Here’s the problem with this scenario…
What this insurance rep isn’t telling you is that you are going to end up paying significantly more than buying a mutual fund product and will almost always receive much less service.
These insurance salespeople can have upwards of 800-1000 clients!!!
Their job is to get you set up, get your money flowing, and then move on to their next target…
And they are very good at doing just that.
The 403(b) world is like the wild-west of investments.
In the 401(k) world, there are investment fiduciaries who are required to work in your best interest to provide value in their product offering.
This falls under what is called ERISA (Employee Retirement Income Security Act).
Here’s where it gets crazy… 403(b)’s don’t have to follow any of the ERISA rules!
No one has to look out for your best interests, companies/sales reps can charge insane prices, and they don’t have a certain standard of service that they must provide.
What if we could do something different?
Our goal at Teach Plan Retire is to take down these high-cost vendors and replace them with a single low-cost option.
Then, and this is crazy, provide a retirement specialist that works in the district day-to-day to work with teachers on understanding their retirement options, get enrolled in the 403(b)/457(b) products, and give presentations on topics that teachers need and want to understand.
All INCLUDED in the low-cost plan!
That might be a way down the line, but there are things you can do today!
- Look at your school district’s 403(b) vendor list.
- Understand which vendors are low-fee vs which vendors are high-fee. (Insurance companies are high fee!)
- Talk with your union rep/district office and demand better options.
- Finally, bring us into the conversation with your district to explain how this can work
The 403(b) is a benefit that every district provides to their employees.
Let’s make sure that it is actually a benefit and not a disadvantage!
As always, You Teach, We’ll Plan, You Retire
David Gourley
Financial Planner
Action Item: Look up your district 403(b) vendor list. Feel free to reply back to this email if you want to discuss what you have found!
David Gourley, CSLP® is a Financial Planner with Teach Plan Retire, an independent financial planning firm specializing in finance for teachers. He served for eight years as a high school mathematics teacher before transitioning into the financial services industry. He joined Teach Plan Retire in 2022 and his passion for serving as a fiduciary for teachers and a student loan planning expert runs deep, as his wife and several other family members have served as educators for years. He's a proud member of the Financial Planning Association of Greater Kansas City.