I remember the first time I helped a colleague of Tony’s switch out of a horrible 403(b). Tony had come to me aghast over what he had seen; an annuity with 4% in fees and longstanding surrender fees. We had no idea that this was not the exception to the rule; nor did we realize that this would become our full-time obsession.
Here was an educated, savvy woman who had absolutely no idea how badly she was being ripped off. It turns out that there were many more teachers, just like her, who had listened to recommendations from esteemed (but ignorant) colleagues. One-by-one they formed a chain of the blind leading the blind and, in spite of their intelligence,they all went right over the same cliff.
Secretly I wondered if I could have been one of these people, if I didn’t know what I knew. The answer is probably.
Let’s face it, most people would rather not spend their free time researching where they should squirrel away funds for a rainy day some decades into the future. If someone smart and confident gives a seal of approval on an investment choice, it would be like getting the Cliffs Notes to a torturous read.
Teachers, of all people, know there is no short-cut to learning something well and no substitution for diligence. After all, a semester cannot be learned in a day. And one must be well aware of the quality of the sources, to prevent propaganda from being mistaken for fact.
Because there is no curriculum to follow or tests along the way to measure retention, aptitude and mastery, many are unaware of just how ignorant they really are.
If I issued a final exam on their retirement plans, many teachers would end up in summer school – as students!
Why does this topic elude so many? The math involved is nothing complex – it’s actually basic elementary school level. From my experience these attitudes and perceptions are what handicap so many teachers:
- Complacency. “I have my pension, so I don’t have to contribute to my 403(b).” I hear this all the time, and the data backs it up; only 30% of teachers participate in their plan. This is a very damaging mindset. Retirement can last 35 years or more and, in that time, the dollar amount of the pension will remain unchanged while inflation will make everything – food, living expenses, and health care – more expensive.
- Intelligence with Ignorance. I have encountered teachers with multiple advanced degrees who are unaware of what they pay for their investments, how the advisor is paid and why they own what they own. But, because they are successful and accomplished professionals in their line of work, they think this intellect translates into areas where they are out-matched by a “nice” salesman telling them they pay nothing for their investments. (Spoiler alert: advisors are not working for free). Being “smart” also means knowing what you don’t know. If you haven’t taken the time to learn something, then your smartness is limited only to those areas of your expertise. Tony is a very bright guy, but if I asked him to rewire the house, he would burn it to the ground. What makes him particulary smart is that he would call my brothers and ask them for their very knowledgeable opinion and then hire a contractor they would recommend. A Masters or PhD in education does not a savvy investor make; unless, of course, hard work has been put in to learn about investing.
- Fear. Maybe after years of threatening students with a trip to the principal’s office, a phone call home or “permanently marking” a transcript, teachers feel the need to walk the line and not cause trouble. (Note to teachers – this is how nefarious regimes have risen to power, just ask the history teachers you work with.) Sometimes in order to avoid a crappy fate, you have to make some noise and shake some trees. Yet, when we point out how bad their options are, and tell them to approach their union or business office to ask for better options in their plan we are frequently told:
- “I don’t want to start trouble;”
- “I don’t have tenure yet;” or, my personal favorite
- “The high ranking school official’s son/daughter/niece/nephew sells annuities in my school and I feel pressured to work with them.”
So, the answer is to look away and allow predators to take advantage, uncontested? This is not an inspiring mindset; and certainly not good behavior for our children to model.
Luckily, we also have encountered teachers who are hungry to learn more and have become motivated vigilantes. Once they understand the common problems, such as high fees, conflicts of interests, and unnecessarily owning annuities, they dive into their own accounts and research what they have. They do not accept ridiculous answers like, “You are paying nothing.” They get to work demanding better options for their school district. They get their investments out of the shoddy choices. They tell others. They operate from a place of empowerment by:
- Getting informed. There has been no shortage of articles exposing the treacheries in the 403(b) arena and the importance of the fiduciary standard. Reading these articles raises their awareness of the landmines under foot and inspires them to research their own set of circumstances. They never like what they find.
- Using their outrage as motivation. Rather than feel helpless or fearful, these teachers get angry and do not delay in standing up and taking swift action. If a company has exploited their ignorance, they take away every cent as soon as possible. They do not tolerate being taken advantage of.
- Speaking out. Teachers have told their colleagues what to look out for (and have expressed frustration at some of their co-workers’ inaction and apathy). They have invited us in to their schools on their own time to educate and inform others.
So for those teachers who wish not to “go quietly into the night,” we’re here to help show you how to protect your best interests; because if there’s one thing I’m certain of, the insurance rep isn’t cutting it.
Becoming informed would be an intelligent first step, for those smart enough to realize it.