K-12 Story: Sold a High-Fee 403(b) Twice (!!) and Then Got Wise
by Nancy Bachety, Public School Teacher
It began in October, 2003, one month after I was hired to teach in a public school on Long Island, in NY. I was a career-changer, like many other teachers in schools today. As such, I was behind in my retirement savings and in debt from graduate school and raising four children on one salary for 12 years.
That didn’t matter to me - I was determined to take advantage of saving pre-tax in a 403(b) like my family members were doing. My husband had a 457(b) through his local government job and I wanted something like that too. I figured I was fortunate to even have a pension, but chances were slim that I would be able to get 30 years of service. I’d be lucky to get 20. Either way, I wanted to be able to choose my retirement date and a 403(b) seemed like a great vehicle to get me there.
Into my classroom on a prep period walked the AXA sales rep, a.k.a. "advisor". He was in the school because Human Resources allowed him to be there. I needed a fingerprint clearance, a background check, references, certificates, and degrees. He must be fine, I thought.
I wish now this story had a different ending.
I remember being so lost in our family’s budget, so behind in college savings, so overwhelmed with teaching and juggling life in the trenches. How happy was I to have a consistent paycheck from which I could invest in our future. I’d always have bills, and maybe our children could get scholarships and loans; I was all-in with AXA. I actually maxed out my contributions for a few years.
Fast forward a few years. The AXA sales rep I signed up with was long gone; my finances were in control; and then I met an Ameriprise sales rep. He was quick to point out the problems with AXA. I started to get wise, but apparently, not wise enough.
I couldn’t yet move my AXA money because of, low and behold, ridiculous surrender fees. The fees were considered high, but I justified it as paying for a service. At this point, I was paying the excessive AXA Mortality and Expense (M&E) charges, and expensive fund costs. And at Ameriprise, I was paying expensive front-loaded fund fees but now I wasn’t getting a "service".
When I found out we could contribute to a 457(b) account, my Ameriprise advisor discouraged it. He didn’t seem to know too much about it so I continued investing in a 403(b) with him. I even opened Roth IRA’s for each of my children through Ameriprise when they turned 16 and got summer jobs. I wanted very much to teach them to be smart, early investors.
I finally got 403b-wise when I came across the website 403(b)wise. I learned about the impact of fees and I learned how others had been duped. I came across a really helpful community on the 403(b)wise Discussion Board. I soon opened a 457(b) and selected low-cost Vanguard and Fidelity funds. I severed my relationship with Ameriprise. I transferred all of my kid’s Roth IRA’s into Vanguard. No longer were they paying $50 each in annual fees, loads, etc. Now, they invest in low-cost index funds. Plus, Vanguard waives their $20 annual fee if you use electronic communication.
Today, I advocate in my district for better options. I researched alternative vendors, connected with Aspire (brokerage window allowing access to low-cost mutual funds), contacted our TPA, and requested the addition of Aspire. My district’s business office personnel are completing that process and by September I will be able to put an end to this saga by transferring my AXA and Ameriprise accounts into my empty-but-waiting Vanguard 403(b) account. And I’ll continue to advocate.
Nancy teaches computer literacy and family and consumer sciences to 6th and 7th graders in Long Island, NY.