K-12 Story: Missteps at First; Now Comfortably Retired
by Tony Antonnicola
My journey into the world of investing started soon after finishing college and struggling to find my first teaching job. After sending out 100 applications and getting no response during a difficult employment economy, I realized I would have to make due until a teaching job opened up. I spent the next five years working multiple low paying jobs while living at home and saving every penny I could. It was at this time that my interest in investing first developed. After reading some financial magazines, I decided to begin saving in a Fidelity balanced stock-bond fund instead of saving in a low interest savings account (this was a non-retirement plan taxable account). When I finally landed a job in a nearby university town, I moved to an apartment and was very excited to start my career. In my very first year of teaching at the high school, I met my wife who was also teaching there. Within a year we were married and purchased our first home, where we still live (now mortgage free).
Smooth Talking Salesman
Soon we discovered the wonderful world of 403(b) investing by finding “stuff” in our mailboxes encouraging us to start a 403(b). While our school district offered many choices at the time, every one was an insurance product in which I saw little difference among them. Still, we wanted to start a supplemental retirement plan, and not knowing any better, we fell for a charming, well-dressed, smooth-talking salesman with American Express Financial Advisors. He had something called a Certified Financial Advisor designation, which sounded impressive to me at the time (note: the Certified Financial Planner CFP® is the preferred designation. It doesn’t guarantee competence but a CFP must take a fiduciary oath, pledging to put your interests above his or hers).
After five years of saving 30 percent plus of our combined income, we started wondering why our 403(b) savings was not growing as well as the money I had saved outside of my 403(b) in my taxable balanced fund. I asked the “advisor” for clarification. He offered to rearrange my investments and convinced me to sell my taxable balanced bond stock fund and move it to a very aggressive trendy micro-small cap mutual fund. Within a few years, that move resulted in my investment losing more than half its value. I started to wonder if this guy knew any more about investing than I did.
Through research and reading the fine print and the prospectus (something I should have of done in the first place), I discovered that not only was I paying over a 2 percent annually in fees in the 403(b) plan, this “investment” contained onerous surrender charges. Also my taxable account went from a low cost balanced fund (which I had picked on my own) to an expensive aggressive growth fund with a 1.45% expense ratio and a 1% management fee! Not once, did the “advisor” mention a thing about fees. No wonder our accounts where not showing much growth. I was systematically being robbed! My outrage led me to move away from American Express and to another company’s 403(b) plan (after paying surrender charges). But it was just more of the same poor service, poor performance, high fees, and little transparency. It was time to get wise.
It was about this time my curiosity about money and investing led me to the Internet where I ran into 403bwise.com. I learned about fees, and how I was sold an annuity. Everything I was reading on this site made sense to me. It felt like finding a guardian angel. I remember going to the discussion board and reading posts by teacher Steve Schullo and others ranting against high fees and annuities. These folks got my attention as did Dan Otter’s book Teach and Retire Rich which I purchased.
403bwise was the encouragement I needed to push for better choices in a district menu loaded with insurance products. I sent e-mails to teachers telling them their annuities were costing them their retirement savings and that there were better ways to save for retirement. Some resented the interference. I talked to all the central office folks, too. Some of my comments fell on deaf ears at first. However, through perseverance I was able to get the school system to add Vanguard (a company known for very low cost investments). What an achievement! Unfortunately, the new 403(b) regulations took Vanguard away from us. I was not going to let all my hard work go for naught. I pressed on. I then read and researched and found other suitable alternatives. With the support of the personnel director at the time (who just happened to have a degree in finance), we were able to add Aspire (a brokerage window which allows investment into mutual funds). In fact, Aspire makes available Vanguard through their self-directed option. Not long afterwards I also begin investing in our state 457(b) plan which rivals Vanguard in terms of offering low cost index funds and target date funds. I saw my money grow exponentially once I quit the insurance annuity scene. There is no doubt in my mind that getting out of insurance annuities saved my retirement.
Retired with No Money Worries
I started saving at the age of 24. As a result, my wife, also a teacher was able to retire recently at age 52. I just retired at 61. Today I have no money worries. I am debt free. Had I not started saving at a young age, I would not have the retirement money I have now. Had I stayed away from insurance annuity products in the first place, I would have kept even more. I won’t need to take Social Security until I am 70. I have a retirement pension and so does my wife. Regardless of the pension, I also saved religiously because year after year there was talk that our pensions may be eliminated, reduced, or changed. That was scary stuff to hear during the “Great Recession.” So, I covered all my bases because one never knows what could happen in the future. There are no guarantees in life. Even with the mistakes I made dealing with annuity sharks (a.k.a. “Advisors”), the fact that I made them early in my life, took it upon myself to learn about investing, took the initiative to push for changes and reverse course, saved me from possible retirement disaster.
My advice to all is if you have bad choices in your 403(b), you must be the change maker in your little corner of the retirement investing world. Don’t expect others to do it. Learn all you can about investing and then push your school system for low cost non-annuity choices in a professional business like manner. Adopt a frugal lifestyle. Save all you can. Don't give up. Don't be intimidated. Continue to press on spreading the faith. Don't give in to naysayers and don't be too trusting of experts with fancy titles after their names. Many are just commissioned salesman not much different than the stereotypical used car salesmen. Trust your instincts. Do your own reading and research and continue your quest for better investing choices armed with the facts. You can do this. You can teach and retire rich. I did.
Tony, who taught high school marketing and personal finance, is now retired and lives in Harrisonburg, Virginia. He is a frequent and valued contributor to the 403bwise discussion board.