Wise Cracks

Teaching Kids About You Know What

2010-06-21T22:27:36Z

I totally get that it's not comfortable to talk about. As a parent, it's even more difficult. But if we truly want to ensure a bright future for our kids, it's critical that they do not repeat our mistakes. And it's critical that we speak frankly with them, no matter how uncomfortable it makes us. I am, of course, talking about the rampant unprotected financial transactions far too many children engage in and will continue to engage in. And where did they learn this risky behavior? Us. You know what I'm talking about: the one-night stands (property flipping), the orgies (of debt), and the multiple (credit card) partners.

In all seriousness, if the Great Recession has taught us anything, it's that we are not a very financially literate society. Part of it, I believe, has to do with the fundamental shift in retirement management responsibility from the employer (via pension plans) to the employee (via 401(k) and 403(b) type investments). In effect, the individual is being asked to shoulder the burden of not only choosing the correct retirement plan investments, but ensuring these assets last until death. That's no small task; especially when most of us lack the financial acumen to do so.

While researching the history of financial education in the United States, I learned that personal finance curriculum began to exit the schools shortly after the launch of the Soviet satellite Sputnik I in 1957. This perceived national security threat led to a dramatic shift in educational priorities away from so-called "life skills" classes and to math and science. The result? We don't know much about money. But at least we rock at math and science. Err, maybe not. But that's another discussion.

The good news is that a host of well meaning folks from the government to local legislatures have been encouraging and mandating the teaching of financial literacy. To date, 44 states have developed personal finance standards; 34 require these standards to be implemented; and 13 states require students to take a specific personal finance course, according to the Council for Economic Education (CEE).

The bad news is that we don't seem to be involving classroom teachers in this effort. Why might that be a problem? Research is pretty clear that the single biggest factor on student success is the classroom teacher. Research also suggests a link between effective policy implementation and classroom teacher involvement in this effort. Teacher attitude and belief about a policy seems particularly important to its success. With this in mind I teamed with the California Teachers' Retirement System (CalSTRS), an organization that provides benefits and services to public school and community college teachers in California, to conduct a survey on teacher attitudes and beliefs about teaching financial literacy. Thanks to CalSTRS's generous help, I was able to survey more than 2,700 classroom teachers. The results were encouraging (strong support for the teaching of financial literacy in the K-12 curriculum), discouraging (teachers don't believe time exists in the crowded school day to effectively teach financial literacy), and surprising (teachers believe financial literacy should begin in kindergarten). Read Teacher Attitudes and Beliefs About Teaching Financial Literacy: A Survey of California Teachers

Teaching the Teachers
The California study along with my doctoral dissertation showed support for professional development that in addition to teaching strategies for teaching financial literacy sought to improve teacher financial literacy. This notion (combing learning how to teach financial literacy with improving teacher financial literacy) is the impetus behind my new initiative Pollinate, the Teacher Financial Literacy Project. The goal is to fund workshops that bring teachers together to improve teacher financial literacy and the teaching of personal finance concepts. To learn more check out Pollinate, the Teacher Financial Literacy Project.

403(b)wise Turns 10; Joe Biden Weighs In

2010-03-29T19:02:11Z

Wow! Ten years ago this month (April 2000) fellow educator John Moore and myself launched 403(b)wise. Here's what we wrote about that moment on our first year anniversary:

Just over a year ago, with the flick of a key, 403(b)wise was launched. We distinctly remember staring into the glowing screen wondering, "Good, God, what have we done?"

And just what have we done in the past decade? Not that much. But together with the legions of 403(b) advocates and Discussion Board posters -- Steve Schullo, Scott Dauenhauer, Ted Leber, Joe MacDonald, Judy S., "tony", Michael Devault et. al -- and the countless emailers, site visitors and purchasers of Teach and Retire Rich who have educated their co-workers, I think that together we have done a hell of a lot. Consider, prior to 403(b)wise, the Boston Red Sox had gone decades without winning a World Series and the idea of the New Orleans winning a Super Bowl was as crazy as the notion that some Toyotas were less than safe. Coincidence? I don't think so.

In all seriousness, I truly believe that collectively, we have made a difference in raising awareness about the myriad of 403(b) abuses, and by providing a source of consumer focused information. We are particularly proud of our reform efforts in California. Shortly after the launch of 403(b)wise, an effort was made to alter California insurance legislation (770.3) which basically said that if an employer offered one insurance company's 403(b) product, it had to allow other insurance companies to offer 403(b) products. This led to absurdly long vendor lists (100 plus "choices") that were often toxic to investors (read: mostly high-fee high-commission annuity products). The goal of legislative changes was to give employers more say over whose products were offered. The insurance industry -- surprise, surprise -- fought these proposed efforts with sometimes unseemly tactics, often aimed at 403(b)wise. At one point the industry was running two websites denouncing efforts to alter 770.3. No surprise there. But what was a surprise was the urls of these sites: www.403bwise.net and www.403bwise.org. Today we own these domain names and 403(b)wise is a legally registered trademark. But even more importantly, while we didn't win legislatively, reform efforts led to the creation of 403bcompare a site that allows participants to finally get fee information in a simple, transparent way (note: I along with planner Scott Dauenhauer, and advocate Steve Schullo served as consultants on the creation of 403(b)compare). The beauty of 403(b)compare is that it doesn't matter where you live, you can still use the site. And since California is so large, there's a good chance that products sold in say Maine, are registered on 403(b)compare.

As far as the 403(b) market goes, I am convinced it is only going to get better for investors. True, some employers have recently dropped low-cost choices in favor of higher cost products often sold by insurance companies. However, I believe this phenomenon is temporary (five years or so) as employees continue to ask hard questions (Why am I paying so much for my 403(b)? Why does the NEA endorse a firm that charges loads?), and low-cost providers like Fidelity (a new site sponsor), 403basp (current site sponsor) and TIAA-CREF (past site sponsor) aggressively go after market share.

So what is on tap for the next 10 years? I am currently a huge fan of Marble Brewery's red ale so that's what I'm drinking at home. But as far as the website goes, we will continue to make 403(b)wise the best site for 403(b) information on the web. We recently made our popular FAQ section available in Spanish and are looking at ways to add more Spanish content. We currently operate a retirement plan information portal for employees of Montgomery County Public Schools and are in conversations with other entities to create more of these education portals. I am working on a financial literacy book (still torn between two title ideas: Financial Literacy Simplified or Financial Literacy for Those Tired of Being Shit On -- the latter title will either be of enormous benefit or enormous detriment in my efforts to reach young people). Finally, I recently launched a financial literacy initiative Pollinate: The Teacher Financial Literacy Project that seeks to improve both teacher financial literacy and the teaching of financial literacy. I will be writing more about that effort soon. In the meantime, I'm going to go eat some cake. As far as birthday gifts go, we want what all 10-year-olds want: a new bike!

I'll close with a sampling of some of the birthday greetings we have received:

"This is a big F-ing deal! - Joe Biden
"Go F-yourself!" - A. Nnuity Salesperson
"May you never make it to 11!" - Val U. Builder

The Doctor Is In (Reluctantly)

2009-12-30T17:13:31Z

Some of you may know that I have been working on my doctorate for the past four years. On Friday, December 4, 2009 at 3:21 pm Mountain Time, I got the following words from my committee, "Congratulations, Dr. Otter." Who? Come again? While proud of my accomplishment, I am simply not all that comfortable with the Doctor moniker. My brother-in-law who delivers babies is a Doctor. The physician who recently told me I was in great shape for a 44-year-old, but that it's all down hill after age 50 is a Doctor. A frank one, for certain.

Anyway, titles aside I am proud of my work at the University of New Mexico, much of which I see as an extension of my 403(b) advocacy work. Encouraged by my superb committee chair, Dr. Penny Pence, I focused on financial literacy, a topic we both see as one of the core social justice issues of our time. In looking at recent efforts to improve student financial literacy, it seemed to me we were omitting a key ingredient to success: the classroom teacher, which research suggests is central to both student achievement and policy implementation success. Much of the effort to improve financial literacy has been pushed by the financial service industry and elected officials with minimal input from the classroom teacher. And much of these efforts are well intentioned, particularly the work of the Jump$tart Coalition for Personal Financial Literacy. I wanted to learn teacher attitudes and beliefs about financial literacy instruction. After all, who is better suited to identifying both barriers to successful implementation, and opportunities for successful implementation? My survey of 181 classroom teachers revealed some unsurprising findings (teacher strongly support the inclusion of financial literacy instruction in the curriculum) and some surprising findings (teachers believe personal finance instruction should begin in elementary school with the grade most chosen to begin being kindergarten). Lack of suitable curriculum, lack of classroom materials, lack of classroom instruction time, and lack of teacher subject matter knowledge were identified as barriers to successful personal finance instruction. Similar results were found in a modified survey of more than 2,400 California classroom teachers I recently conducted in conjunction with the California State Teachers Retirement System (CalSTRS). You can read my dissertation here: Teaching Financial Literacy in K-12 Schools: Teacher Attitudes and Understandings (note: paper has yet to undergo final proofing). I will be writing about the findings from my CalSTRS investigation in the next few months.

So what's next? Good question, Mom and Dad and all my relatives who think it is high time I did something tangible. My research also revealed that teachers' preferred format for personal finance professional development is a workshop that also increases their own financial literacy. To that end I am developing a professional development initiative that does just that: instructs teachers on methods for teaching personal finance concepts and improves teacher financial literacy. Called "Pollinate: The Teacher Financial Literacy Project," you can learn more here. Feedback on this concept would be appreciated.

Retirement Reality

2009-10-14T15:32:12Z

Many of you — visitors to 403(b)wise — are in the accumulation phase of retirement planning. Hopefully you are dutifully putting away money in low-cost, well-diversified investments (no such thing in many 403(b) plans, many of you are saying — a point we concede but a point we and many others are working to rectify). I purposefully used the adverb hope to start the last sentence. This is because at the accumulation stage, you (we) are relying on a whole lot of hope. We hope we are saving enough. We hope we are investing in the right type of assets. We hope we have enough to retire on. But what happens when retirement hope, becomes retirement reality? What happens when we actually have to live on the money we saved for retirement? Longtime teacher and 403(b) advocate, Dr. Steve Schullo, recently did just that. In July 2008, on the cusp of what is now being called The Great Recession, Steve joined his longtime partner in retirement. They share their retirement reality — warts and all — in a multi-part story for 403(b)wise. I think for those of us in the accumulation stage, much can be learned from those living the retirement reality. Steve writes in a refreshingly honest way that I think you will enjoy.

Read the first installment of this series »

California Stars: CalSTRS and Scott Dauenhauer

2009-09-21T00:40:44Z

Things are not so good in my former state: Record unemployment, rampant home foreclosures, huge budget deficits, huge cuts to education, raging wild fires, and the Los Angeles Clippers. Despite the grimness, California teachers and school employees have two reasons to be thankful: the California State Retirement System (CalSTRS), and 403(b) advocate and financial planner, Scott Dauenhauer, CFP (fans of the Lakers, of course, have three reasons to be thankful). I was reminded of this again from a Discussion Board post announcing vendor changes in the 403(b) plan CalSTRS operates in partnership with TIAA-CREF: CalSTRS Pension2.

A little history: some of you may know that 403(b)wise was started more than nine years ago when I was an elementary school teacher in Southern California. Together with teacher John Moore, we started the website because of the horrific 403(b) investment choices available in schools, and acute lack of participant-friendly plan information. Fast forward to 2009: California school employees are still plagued by too many poor 403(b) investment choices and lack of clear employer provided plan information. However, thanks to the Herculean efforts of very good people at CalSTRS, the state teacher pension fund, and plan consultant Scott Dauenhauer, many California school employees now have access to superb low-cost 403(b) investment choices from well-respected firms like DFA, TIAA-CREF, and Vanguard to name a few (see investment choices).

Real estate and social choice offerings, and a unique risk-weighted target date approach known as Easy-Choice, are also available in Pension2. Scott Dauenhauer estimates that about 80 percent of California school districts make the plan available. Two questions: (1) Why don't ALL districts make the plan available?; and (2) isn't Seattle looking for a basketball team?

403(b)wise Doings

If you haven't yet had a chance, please take a moment to participate in our short Visitor Feedback Survey. Your input will help us make 403(b)wise even better. Finally, I am thrilled to announce that original 403(b) advocate and now-retired educator, Dr. Steve Schullo, will be writing stories for the site about life in retirement. His insights and expertise should be a benefit to investors at all stages of the savings cycle. Look for Steve's first piece in a few weeks.

Why I Love Public School Employees + 403(b)wise Doings

2009-08-28T19:42:27Z

I had the distinct pleasure recently of speaking to more than 200 classroom teachers and school employees about the concepts from my book, Teach and Retire Rich.

The setting was the beautiful UCLA campus in Westwood, California. The event was part of the California Teachers Association's annual (CTA) Summer Institute for their member leaders. The union was kind enough to not only bring me out to speak to my favorite audience — public school employees — but also provide attendees with a copy of my book Teach and Retire Rich (a book I strongly believe every school employee should read).

Here is what always strikes me about school employees: As crappy as the climate is, and it's crappy in California (metaphorically speaking; we all know California weather is pretty damn nice), it is so uplifting to interact with those working in our schools. My talk took place about a week after the state announced $5.9 billion — yeah, BILLION — in cuts to public schools.

As some of you may know, I taught elementary school in Southern California (Corona-Norco Unified School District) for eight years. During this time, I was more than taxed by the enormous class sizes (34 in my fourth and fifth grade classrooms). I can only imagine what will happen to class sizes now (50 fifth graders, anyone?). Still, my audience at UCLA was upbeat and very appreciative of the ideas and concepts I shared. Which is really no surprise. My experience with teachers often leads me to the same conclusion: they are by and large greater good type folks we are so lucky to have.

403(b)wise Doings

Lots of things going on at 403(b)wise... We recently created a Visitor Feedback Survey to measure the 403(b)wise user experience. If you have not yet had a chance to answer our short 10-question survey, please do. Also, an updated version (fifth to date) of our popular book Teach and Retire Rich is now available.

Behind the scenes we are working on several new initiatives: (1) making selected content available in Spanish; and (2) a financial literacy initiative that will strive to both improve the financial literacy of teachers, and improve financial literacy instruction in the schools.

I recently was part of a conference call with representative Allyson Y. Schwartz (D-PA), a legislator interested in improving financial literacy. More details on our efforts will be forthcoming.

In an effort to help fund site improvements we have for the first time added a donate feature to the site (visible on interior pages). Interested parties can donate to the 403(b)wise mission of education and advocacy any amount they see fit via a safe and secure PayPal payment: