The Wise Cracks Blog by Dan Otter



Breaking 403(b)ad: The Real Reason Walter White Went Heisenberg

By now many Americans know AMC's hit series Breaking Bad as the story of high school chemistry teacher Walter White gone bad. Diagnosed with inoperable lung cancer and given six months to live, he hooks up with a former student to cook methamphetamine. The reason? Walter has lousy health insurance, and worse, he has nothing saved to leave his family. He needs the money. Series creator Vince Gilligan describes the show as: Mr. Chips becomes Scarface.

As a teacher, and someone very familiar with teacher retirement plans, I am pretty sure that Mr. White had a terrible 403(b). Chances are his plan was limited to high-fee variable annuity products pitched by commission-based sales people (average charge 2.25%). Super-bright Walter White surely realized that the fees would kill his 403(b) return, so he most likely avoided participation all together, something most teachers do. Imagine if Walter had been able to participate in the product yielding the return on the right? Not only would he have had a healthy nest egg to leave his family, but 403(b) rules would have allowed him to tap his plan for medical expenses that exceed 7.5% of his adjusted gross income. Spoiler alert: I bet brother-in-law, Hank, wishes Walter had gone that route.

High-fee vendors and third-party administrators pitching product and recommending high-fee providers, or as I like to refer to them: The Tucos of the World, may think their products are "tight, tight, tight, yeah!" myself and many others believe they leave Heisenberg-like destruction. While the battle for 403(b) reform has been frustrating slow, my advice to the 403(b) Tucos out there: tread lightly.