Wise Cracks tag:403bwise.com,2009-08-28:/wisecracks//1 2011-01-06T16:33:30Z Movable Type 4.31-en BIG Doings in 2011 tag:403bwise.com,2011:/wisecracks//1.10 2011-01-05T16:23:13Z 2011-01-06T16:33:30Z Without a doubt, 2010 was a terrific year for me, 403(b)wise and my financial literacy initiative Pollinate, the Teacher Financial Literacy Project. Quick review: I formally earned my doctorate in May; thanks to the generous support of TIAA-CREF and CalSTRS,... admin Without a doubt, 2010 was a terrific year for me, 403(b)wise and my financial literacy initiative Pollinate, the Teacher Financial Literacy Project. Quick review: I formally earned my doctorate in May; thanks to the generous support of TIAA-CREF and CalSTRS, I hosted my first Pollinate Workshop in November; and in December I met Vanguard founder and investor advocate John Bogle.

As good as all this was, I think it will only get better in 2011, particularly for participants. We are especially proud of the following site updates and news which should make it even easier for participants and employers to get wise about the 403(b) and the 457(b).

  1. We recently redesigned the way we present 403(b) content. Instead of a laundry list of FAQs, 403(b) information is now grouped by category: 403(b) Basics, Contribution Limits; Products and Vendors; Cost to Invest in a 403(b); Modifying Contributions; Accessing 403(b) Savings; Making Other Changes to Your 403(b); and Buying Service Credit.
  2. We have added comprehensive 457(b) information to the Participant section.
  3. We are building a mobile site that is scheduled for a February launch.
  4. An updated version of Teach and Retire Rich will be available at the end of January.
  5. We have been busy developing a plan education Portal for CalSTRS that will allow thousands of school employees to get customized information about their particular 403(b) and 457(b) plan. The Portal will be similar to one we operate for Montgomery County Public Schools but on a much larger scale. We will be releasing screen shots from our work to date shortly.
  6. I am busy working on a new book with the working title: Financial Literacy. Simplified.

As I have said before, this site is only as good as the thousands of participants and advocates who access it. Which means, it's pretty good. We will continue to work to make it better.

]]> How the Grinch Stole the 403(b) tag:403bwise.com,2010:/wisecracks//1.9 2010-12-23T02:56:02Z 2010-12-23T02:59:40Z Every 403(b) investor liked low-cost mutual funds a lot... But the Grinch, Who served as benefits director, Did NOT! The Grinch hated low-cost mutual funds! To him they amounted to treason! Now please don't ask us why. No one... admin

Every 403(b) investor liked low-cost mutual funds a lot...

But the Grinch,

Who served as benefits director,

Did NOT!

The Grinch hated low-cost mutual funds! To him they amounted to treason!

Now please don't ask us why. No one quite knows the reason.

It could be his head wasn't screwed on just right.

It could be perhaps, that his shoes were too tight.

But we think that the most likely reason of all

May have been that his brain was two sizes too small.

But,

Whatever the reason,

His shoes or his brain,

It was 403(b) investors who were feeling the pain.

Most of whom were stuck with an awful annuity,

And as financial experts will tell you, these are pretty pooey.

Even most variable annuities really aren't great.

They are chock full of fees and wrapped up in an insurance crate.

Of concern to the Grinch, however, was the growing reform movement.

403(b) investors were finally demanding improvement.

This turn of events was nothing short of stunning.

Said the Grinch with a snicker: "I must find some way to stop low-cost mutual funds from coming."

Then he got an idea!

An awful idea!

THE GRINCH GOT A WONDERFUL, AWFUL IDEA!

He would blame the new regulations for lack of low-cost choices

Surely that would stifle the reform voices.

"Pooh-Pooh to 403(b) investors," he was grinch-ish-ly humming.

"They are finding out now that low-cost mutual funds aren't coming."

"They are just waking up! I know just what they will do!

"Their mouths will hang open for a minute or two,

"Then the 403(b) investors will all cry BOO-HOO!

"That's a noise," grinned the Grinch,

"That I simply must hear!"

So he paused. And the Grinch put his hand to his ear...

But wouldn't you know it? He wasn't right.

Many 403(b) investors went to the web, and found a Wise site.

They also formed 403(b) clubs and learned from one another.

And things started to happen, and did they, oh, brother.

Articles were written in more than one magazine,

exposing the status quo as just obscene.

Every Wise 403(b) investor, the tall and the small,

were demanding change to benefit all.

The Grinch hadn't stopped change from coming.

He had to face facts it was up and running.

Folks are now realizing that low-cost investments make sense.

We are happy to report that 403(b) mutual fund investment is up by a healthy

percent.

Is everything now perfect? Of course it is not.

There is more to be done; yes quite a lot.

To the Grinches out there who haven't Wised up yet:

changes are coming on that you can bet.

]]> Cracks in Fee Armor tag:403bwise.com,2010:/wisecracks//1.8 2010-08-02T14:50:00Z 2010-08-02T14:49:53Z admin

Since the inception of 403(b)wise we have been railing against exorbitantly expensive investment offerings that are all too common in public 403(b) plans. Benefits officials have often defended this state of affairs by pointing out that no legal requirement exists for fee vetting. A Southern California official once trumpeted this reality by telling me that he only cared about plan compliance and could "care less" about plan fees. Less than what I did not ask. Disappointingly, new 403(b) regulations fail to require cost oversight. Recent developments, however, suggest that the ground may be shifting on this issue.

Not long ago the National Education Association was sued for its endorsement of a 403(b) product judged by some as too expensive. The suit charged that the NEA Valuebuilder program lost money for participants because "the investment options selected had 'excessive' fees, which ate into participants' potential returns." The NEA ultimately prevailed in court.

A confluence of stock market losses, underfunded pension plans, and investor access to information is exposing high-fee plans for what they are: egregious. And the courts are noticing. Just recently a judge ruled that the fees in Edison International's 401(k) plan did "substantial" harm to employees. Labor Department statistics cited in a Los Angeles Times story on the case estimate that an extra one percent in fees can reduce account value by 28 percent. Think about that for a moment. Instead of $100,000, a participant has $72,000. Instead of $200,000, a participant has $144,000.

I get that unlike public 403(b) plans, 401(k) plans are subject to more stringent ERISA (Employee Retirement Income Securities Act) fiduciary requirements. According to the Department of Labor the primary responsibility of fiduciaries is to operate the plan "solely in the interests of participants." What is the primary responsibility of administrators of public plans? Is it really limited to compliance? Would courts turn a blind eye to investment products charging high fees? A wise plan administrator I know once said that the second best answer an official can give when questioned about high fees is: "We used to have high fee products." The best answer, of course, is: "We never had high fee products."

Perhaps at a minimum we could get sponsors of high fees plans to include the following warning label on statements: "High fee plans may be hazardous to your retirement health." I am sure that would shield them from liability. I mean, it worked for the tobacco industry; for a while, anyway.

 

 

]]> Teaching Kids About You Know What tag:403bwise.com,2010:/wisecracks//1.7 2010-06-21T22:27:36Z 2010-06-24T13:48:08Z 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... admin  
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 tag:403bwise.com,2010:/wisecracks//1.6 2010-03-29T19:02:11Z 2010-03-29T19:48:09Z admin  
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) tag:403bwise.com,2009:/wisecracks//1.5 2009-12-30T17:13:31Z 2009-12-30T17:31:27Z 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?... admin  
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 tag:403bwise.com,2009:/wisecracks//1.4 2009-10-14T15:32:12Z 2009-10-14T15:37:17Z 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 —... admin  
Read the first installment of this series »]]> California Stars: CalSTRS and Scott Dauenhauer tag:403bwise.com,2009:/wisecracks//1.3 2009-09-21T00:40:44Z 2009-09-21T02:07:28Z 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... admin

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 tag:403bwise.com,2009:/wisecracks//1.2 2009-08-28T19:42:27Z 2009-09-08T15:49:33Z Normal.dotm 0 0 1 446 2543 Threespot Media, LLC 21 5 3122 12.0 0 false 18 pt 18 pt 0 0 false false false /* Style Definitions */ table.MsoNormalTable {mso-style-name:"Table Normal"; mso-tstyle-rowband-size:0; mso-tstyle-colband-size:0; mso-style-noshow:yes; mso-style-parent:""; mso-padding-alt:0in 5.4pt 0in 5.4pt;... admin

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:

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