Keeping retirement weird, part deux. The retirement investment rip-off.


The New York Times has been running a very informative series of articles on teacher retirement investments and 403(b)s.

The thrust of the stories is that 403(b)s suck. They have higher fees and have smaller returns than even 401(k)s.

Accounts of this type, which are like 401(k)’s for nonprofit employees, educators and many hospital workers, often come with high fees and problematic investments, as Tara Siegel Bernard and I documented in our Public Sacrifice series last year.

In his column Your Money in today’s Times, Ron Lieber writes:

We have essentially forced some of the people who do the most good in the world to turn themselves into part-time plan administrators who do annuity and mutual fund prospectus-reading on the side. Or at least that’s what they need to be if they want something better for themselves.

The law needs to be changed in order for teachers to have better choices. And our unions and employers should stop aiding and abetting retirement theft.

And the system has tried to turn people like me into pimps for the investment industry.

Let me explain briefly.

Before I retired and was an unpaid, no-release time local union leader, I would receive requests from the union and annuity companies to arrange lunch-time visits for annuity sales people. These companies had made deals with the union in order to be recommended to members.

No way was I doing this. I told them they could contact the district administration and arrange for a time to come. But it was not my job.

Thinking back, I wish I had known more. I would have been more pro-active.

And by the way, the district itself had also only approved annuitant companies. I wonder how that worked.

But as the Times articles point out, these companies which push 403(b) plans clearly represent only the interest of the investment companies and not the teachers.

They wanted me to schedule a time, round up teachers, put up posters and put flyers in teachers’ boxes.

Pimp for them.

I told them no.

They told me it was my responsibility as a union president.

I won’t tell you what I said in return.

Download podcast Hitting Left with the Klonsky Brothers #5 with guest Karen Lewis.

6 Replies to “Keeping retirement weird, part deux. The retirement investment rip-off.”

  1. I think it’s the limited choices typically offered that is the problem, not the concept. While I was participating in SURS, I was able to continue investing in a previous TIAA-CREF account, which was not an option in lieu of SURS. Both have been good to me in retirement. However, if the only options are high-fee investments that may well have provided some “benefit” to those who chose them for the investors, then the strategy becomes questionable.
    And, of course, Trump’s efforts to dump the Fiduciary Rule is another attack on retirement security.

  2. It’s the trustees not doing their work!!
    Why are you looking for gov’t guardians?
    Take freaking responsibility, it’s your money!!!

    You obviously do NOT understand that stupid fiduciary rule.
    It would limit choices and make it even more expensive for the plans because of additional exposure to stupid f’ing rules.

    Just last week an investment house through out a bunch (thousands) of accounts (IRS’s etc.) because they did not want to deal with them.

    Now that’s progress, right Fred?

  3. I have read about this for many years. Someone in CA wrote about the high fees in 403b accounts a long time ago. There may have even been changes in how teachers could select their investment funds in CA as a result. I got out of the funds that CPS chose as soon as I retired and rolled them over into mutual funds with lower fees and higher returns. But I still have not seen anyone investigate how school districts like CPS select the funds they make available to their employees. I have always assumed that there are significant kickbacks for the school districts from the selected funds. Does anyone know?

  4. Thanks Fred.
    Mary once entered into a 403b via a contact arranged through her district.
    The returns were disappointing and we pulled out. I always wondered how the district chose this particular broker.

  5. Why is this issue still open for debate? It’s settled science. Here’s a negative Forbes article from ’05:

    The 403(b) plan is an insurance product loaded with hidden fees which is why the insurance industry loves it so much.
    The Vanguard 500 index fund (plus your pick of Vanguard small, mid-cap, and bond index funds if you want to diversify) is the way to go – for retirees AND pension funds. It’s been proven that (with rare exceptions -Warren Buffet?) money managers cannot beat the market, so you get the returns (or losses) of a broad big cap market PLUS dividends, MINUS huge hidden management fees – what’s not to like?
    Why is there not a Vanguard fund option? Why won’t the “capitalists” allow the “market” decide where it wants to invest its retirement dollars?

    Years ago, I read a good book – got it from CPL – about 401(k) investing which has an entire chapter on what a rip-off the 403(b) is:

    “The Smartest 401(k) Book You’ll Ever Read” by Daniel R. Solin

    This little book perfectly explains simplified common sense investing:
    “The Little Book of Common Sense Investing: The Only Way to Guarantee Your Fair Share of Stock Market Returns” by John Bogle.

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