Stopping Financial Conflict of Interests

Stop­ping a $17 Bil­lion Con­flict of Interest

A new U.S. Labor Depart­ment rule pro­poses that bro­ker deal­ers, insur­ance agents, wealth man­agers and other finan­cial plan­ners put their clients’ inter­ests ahead of their own. Doing the exact oppo­site for decades by putting their inter­ests ahead of clients earns Wall Street and Insur­ance  com­pa­nies $17 Bil­lion annu­ally. If you have your nest egg invested with these peo­ple you remain very impor­tant to them. They are going to fight to keep you by claim­ing that invest­ing is too con­fus­ing for you and that reveal­ing the true amounts of money charged to you will be a denial of services.

The pur­pose of the reg­u­la­tion is to pre­vent sales­peo­ple and bro­kers from steer­ing unknow­ing con­sumers in high-cost poor-performing inap­pro­pri­ate invest­ments. By call­ing these prod­ucts “suit­able” the indus­try can avoid the ques­tion, “is this an hon­or­able, fair deal?” Of course, they are suit­able for the com­pany whose legal depart­ment wrote that con­tract you signed, but per­haps not so good for you. DOL’s pro­posed change requires a “fidu­ciary” rela­tion­ship between the prod­uct pur­vey­ors and clients. Dis­clo­sure of all the costs and thereby obvi­ous con­flicts of inter­est must be disclosed.

Who doesn’t like this? The broker-dealers, insur­ance com­pa­nies, and other finan­cial inter­me­di­aries who may stand to lose com­mis­sions earned from con­flicted advice. Con­flicted refers to the con­flict of inter­est when sales are made for the ben­e­fit of the finan­cial and insur­ance com­pany reps, not to the client. They won’t tell you all the costs today, and they don’t want to tomorrow.

Pres­i­dent Obama and Eliz­a­beth War­ren took the podium last week to chal­lenge mutual fund back­door pay­ments made with­out your knowl­edge, while sell­ing you low-performing prod­ucts. It’s easy to find out if this means you. Look at your last state­ment. If you cashed out last years’ per­for­mance today, what was your gain last year?  What is the total cost of the ser­vices you receive?

The Cham­ber of Com­merce and finan­cial group lob­by­ists will com­plain that trans­parency will con­fuse investors, limit edu­ca­tion, tram­ple on choices for low and middle-income Amer­i­cans, upend their busi­ness mod­els, and drowned every­body in fine print.

What may get lost in the brouhaha is that there are two exist­ing fidu­ciary resources which pro­vide guid­ance and edu­ca­tion, paid on an hourly basis, elim­i­nat­ing the need for those shady indi­rect pay­ments which con­tinue every year and often with each trans­ac­tion. Pay­ing for advice out-of-pocket is sim­i­lar to pur­chas­ing time from a CPA or plumber. Don’t sign on for costs that last the dura­tion of your sav­ings plan. Finally some­one in Wash­ing­ton is pay­ing atten­tion to indus­try rip-offs.

Ref­er­ences for fur­ther reading

Here’s how the DOL’s new fidu­ciary rule could impact insur­ance agents:

LAUSD’s 457(b) over­sight com­mit­tee never need DOL rules. We sim­ply demanded that the 457(b) TPA dis­close all fees to all LAUSD employ­ees at all enroll­ment pre­sen­ta­tions. For­mer L.A. Times Finan­cial Reporter, Kathy Kristof, was on hand at this tumul­tuous meet­ing and wrote an arti­cle about our bold move years before the DOL made trans­parency pro­pos­als:

How to Make Sure Your Retire­ment Adviser Is On Your Team:

Sheryl Gar­rett of the fee only fidu­ciary net­work of finan­cial advis­ers was acknowl­edged by Pres­i­dent Obama at the rolling out of the new DOL pro­pos­als. Gar­rett Plan­ning Net­work is a per­fect exam­ple of what the pro­posed new rules requir­ing all finan­cial advis­ers to do:

Obama wants bro­ker kick­backs to dis­ap­pear. YEAH!!!! We AGREE!!!!–01-26/obama-wants-broker-kickbacks-to-disappear-from-wall-street

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John Bogle says.…

John Bogle is in the news and quoted often for a damn good rea­son. It’s time to find out what the index­ing giant has been doing while cel­e­brat­ing his 85th birth­day. Below are links to four recents arti­cles about this great man and the com­pany he founded in 1975, Van­guard Group. His story and com­ments about the mas­sively pop­u­lar index­ing strat­egy has begun to rev­o­lu­tion­ize invest­ing for the ordi­nary chap.

The asset size of Van­guard Group grew from 180 bil­lion, almost 20 years ago to 1.25 tril­lion in 2008 to a now mas­sive 3.1 tril­lion. That’s a lot of money out of Wall Street bro­ker­age houses and big banks’ greedy bonuses and exces­sively high fees. We pay .13% cost for our port­fo­lio, all of our money is in Vanguard.

The Stock Mar­ket seems to be ignor­ing the big risks. Excerpt: John Bogle, founder of the Van­guard group, spots risks of a severe set­back in the stock mar­ket, but encour­ages investors to stay the course even if the ride gets bumpy.

Gold­man Sachs Loses Lus­ter Com­par­i­son Mutual Fund Per­for­mance. Excerpt: A slew of money man­agers and academics—Robert Arnott of Research Affil­i­ates, for exam­ple, and Andrew Lo at AlphaSimplexGroup—say they’re build­ing on what Bogle cre­ated. As they offer new cat­e­gories of pas­sive invest­ment prod­ucts, Bogle mostly grum­bles. Like­wise, as estab­lished money man­age­ment giants such as Black­Rock cut fees on some funds and expand their index offer­ings, he remains skep­ti­cal that they embrace his world view.

Street Talk about Buf­fett and Bogle by Jonathan Clements Excerpt: It’s a long-running debate: Should you trust your retire­ment sav­ings to an actively man­aged mutual fund that pays fees to a man­ager who hopes to beat the mar­ket. Or, is it bet­ter to pick a more pas­sive invest­ment strat­egy with lower fees? You’re prob­a­bly well aware of War­ren Buf­fet and John Bogle’s affin­ity for index invest­ment funds. Buf­fett, of course, is CEO of Berk­shire Hath­away, and Bogle is the founder of Van­guard Group. Wall Street Jour­nal colum­nist Jonathan Clements shares that affin­ity. He adds an inter­est­ing point to the dis­cus­sion: index funds, pro­mote good investor behavior. 

John (Jack) Bogle decries fat, dumb asset man­agers. Excerpt: When it comes to thought lead­ers in the invest­ment world, Van­guard founder Jack Bogle (85) ranks up there with the one year younger War­ren Buf­fett. Bogle fought tire­lessly to intro­duce the world to index track­ing pas­sive invest­ments, now more widely known as Exchange Traded Funds. His efforts ush­ered in a mas­sive new indus­try that today attracts the lion’s share of sav­ings in devel­oped mar­kets – and a grow­ing slice in devel­op­ing coun­tries like South Africa. In this superb piece to be pub­lished in next month’s Bloomberg Busi­ness, Bogle shows there’s plenty of fight left in this par­tic­u­lar old dog.

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CBS Money Watch’s “Report Card:” Teachers Earn an “A” on Investing!


CBS Money Watch Inter­viewed Dan and I about invest­ing and teach­ers. The fol­low­ing arti­cles are not just for teach­ers, but for ALL investors. 

CBS Money Watch finan­cial reporter, Kathy Kristof, pub­lished her arti­cle here based on data from this web­site Open­fo­lio.

Here is another arti­cle, “Why Teach­ers Make Good Investors,” for more infor­ma­tion about teach­ers and their remark­able invest­ment acu­men. But is it all that remark­able? Nope. It’s based on sim­ple and com­mon sense invest­ing behav­ior that we have heard before and will hear again. These three strate­gies used by teach­ers are avail­able to all:

1. Invest in stocks (equi­ties). Why? Money Mar­kets and sav­ings accounts can hurt you, long term, by inflation.
2. Don’t trade excessively.
3. Diver­sify.

The point is that teach­ers don’t have the time or the com­pet­i­tive desire to trade for the pur­poses of try­ing to beat the mar­ket. Dan and I loathe trad­ing. We have a Van­guard low cost, diver­si­fied plan with 35% of our port­fo­lio invested in stock indexes that are broadly diver­si­fied. We spend our retire­ment doing valu­able things for our com­mu­nity and travel.

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Looking for a GREAT Employer-Sponsored Retirement Plan?

kidsatschoolImage cour­tesy of deb­spoons at

NEAThe edu­ca­tional lead­er­ship is begin­ning to look out for your best inter­ests. In case you missed it, Click here for my ear­lier post about the Los Ange­les Uni­fied School District’s 457(b), 2nd largest school dis­trict receiv­ing a “Plan Design” award. In this blog post, I am thrilled to dis­cuss another great plan, the NEA’s 401(k) plan. The Los Ange­les Uni­fied and the National Edu­ca­tion Asso­ci­a­tion, two of the biggest PreK-12 edu­ca­tion giants, avoided the his­tor­i­cally trou­ble­some Tax-sheltered Annu­ity TSA/403(b) and opted for the 457(b) and the 401(k), respectively.

403(b), 457(b) and 401(k) plans offered by pub­lic and pri­vate employ­ers defer income taxes and are poten­tially pow­er­ful vehi­cles for retire­ment sav­ings. But not all plans are equal. I will elab­o­rate the nec­es­sary con­di­tions which look out for our best finan­cial plan inter­ests as teach­ers, edu­ca­tors, welders, assem­bly line work­ers, sec­re­taries, MDs. attor­neys, all employ­ees. This requires the employer to hire finan­cial con­sul­tants and make avail­able invest­ment com­pa­nies in which both the con­sul­tants and com­pa­nies exer­cise fidu­ciary duty to the employees.

A great plan must have two com­po­nents: Con­tinue read­ing

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Rebalancing Our Retirement Portfolio and Our 40-Year Relationship

  From Fight­ing Over Money Issues: Twowomenarguing menargue arguingstaightcoupleTo Work­ing Together: BenHurHorsesWe think we have some­thing valu­able to say about cou­ple dis­agree­ments as we cel­e­brate our 40th anniver­sary this year. We believe our expe­ri­ence with finan­cial deci­sions will encour­age and inspire all cou­ples, whether les­bian, gay or straight, to see how we worked together despite some inher­ent money-related dif­fer­ences. Money prob­lems can be one of the most per­ni­cious dif­fer­ences among couples!

For almost a decade, we stayed with a 30%/70% stock/bond split. In our book, Late Bloomer Mil­lion­aires, we explain how we selected this allo­ca­tion. It was based on our age, the expected rate of return with mod­er­ate risk. Van­guard has a detailed arti­cle on the entire rebal­anc­ing ratio­nale and we urge you to read it to bet­ter under­stand how this works for your port­fo­lio (click here). Our cho­sen stock/bond split would pro­duce an aver­age annual return of 7.3%, which was good for our retire­ment needs and enough safety to with­stand a pro­longed bear mar­ket. Plus, a 7.3% return would meet or beat the infla­tion rate (See this table from Van­guard).
Dur­ing the last year, our split has shifted from a 30%/70% to 47% stocks/53% bonds. This off bal­ance allo­ca­tion of increased stocks and fewer bond hold­ings takes us off our plan.

The fol­low­ing events trig­gered this shift:

• The equity allo­ca­tion of our port­fo­lio has grown as the stock mar­ket hit record highs (Stock mar­ket growth).
• We sold a bun­dle of bonds to pur­chase the Tesla (our deci­sion).
• Dan trans­ferred his $125,000 Roth IRA into Van­guard Welling­ton which has 60% in Stocks and 40% in bonds (Dan’s decision).

All three events shifted our port­fo­lio into a more aggres­sive allo­ca­tion. We need to shift back to our orig­i­nal 30/70 stock/bond split.

Get­ting off bal­ance and find­ing our way back to our orig­i­nal plan.

Dan Writes: Steve and I have been con­tent with the 70% bond 30% stock split — until now. Sev­eral fac­tors have led to a small change in my think­ing which resulted in mov­ing my Roth bond money to Van­guard Welling­ton. This has con­tributed to some upset in our per­cent­age plan and led to con­ster­na­tion with Steve. Con­tinue read­ing

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How Does Irony Explain the 403(b)/TSA “Safe” Money “Guarantees”?


Tax-sheltered Annuity’s (TSA) Long and Sor­did History



For 54 years the Tax-sheltered Annu­ity (TSA) retire­ment plan has had run­away sales in the bil­lions of dol­lars to a very spe­cific clien­tele: PreKindergarten-12th grade edu­ca­tors. School employ­ees are famil­iar with the “TSA” label, which has been per­ma­nently estab­lished in the edu­ca­tional cul­ture as books and pen­cils are to stu­dents. Why has the sale of this one inap­pro­pri­ate and costly prod­uct been so successful?

  1. From 1961 to 1974, the TSA was the only prod­uct avail­able. Since 1974 low-cost mutual funds have been avail­able, but few edu­ca­tors know about them. Even in 2015, annu­ities of all kinds (indexed, fixed and vari­able) are often pre­sented by insur­ance agents as the only prod­uct available.
  1. Over the decades, the TSA sales force has been every­where and has made friends with tens of thou­sands of teach­ers, cafe­te­ria work­ers, office man­agers, union offi­cers, cus­to­di­ans and principals.

Con­tinue read­ing

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Welcome UTLA Members

UTLA WELCOME!My name is Steve Schullo, retired LAUSD ele­men­tary teacher and for­mer UTLA mem­ber. Dan Robert­son, also a retired edu­ca­tor, and I cre­ated this blog to start a con­ver­sa­tion about retire­ment plan­ning using our district’s vol­un­teer retire­ment sav­ings plans. This topic is rarely talked about in edu­ca­tional cir­cles. Far too many of our col­leagues have no idea what annu­ities are and the costs asso­ci­ated with those “guar­an­tees.” The district’s vol­un­teer sup­ple­men­tal 403(b) and the 457(b) plans can be a sig­nif­i­cant addi­tion to our retire­ment nest egg, if we know more about them.

We use this blog to share our per­sonal finance expe­ri­ences and dis­cov­er­ies over decades of plan­ning. We aren’t finan­cial pro­fes­sion­als. We share what we’ve learned from our invest­ing mis­takes and suc­cesses. We all want bal­anced and secure retire­ment nest eggs.

LAUSD’s 457(b) Won a “Plan Design” award!

Did you know that LAUSD won a “Plan Design” Award? Click here to see Dr. Sandy Keaton, Miriam Hiron­imus, Ben­e­fits Man­ager and myself (Steve) talk about how this award came to fruition in a 7 minute video taped inter­view from the pro­fes­sional orga­ni­za­tion that granted the award (Click here for invest­ment options).

Our long­time com­padre Dr. Sandy Keaton, for­mer Chair of the UTLA Pre­Re­tire­ment Issues Com­mit­tee has been work­ing together for years to encour­age UTLA mem­bers to exam­ine the 403(b) plans and to con­sider using the dis­tricts lower-cost 457(b) plan instead. Sandy and I (Steve) are vot­ing mem­bers of LAUSD’s advi­sory com­mit­tee, which mon­i­tors the plan. I also pub­lish committee’s agen­das and minutes.UTLA Workshop

MARK YOUR CALENDARS! This work­shop will be another all day event with sev­eral speak­ers on Sat­ur­day, April 25, 2015. To reg­is­ter, fill out the form: click here or call Evy Vaughn UTLA Con­fer­ence Sec­re­tary (213) 487‑5560. A detailed agenda of each pre­sen­ter and the top­ics cov­ered will be avail­able on this blog in a week.

Dan and I will be pre­sent­ing our story: how a cou­ple of edu­ca­tors, know­ing very lit­tle, learned how to invest despite mak­ing costly mis­takes and sur­vived two of the biggest stock mar­ket crashes in Amer­i­can his­tory. We retired early with a com­fort­able nest egg. It’s not too late to plan and the best place to start is to attend Sandy’s work­shop! Do your­self a huge favor and attend this workshop–years from now, you will thank yourself.

The work­shops will focus on invest­ing basics and know­ing about the district’s 403(b) and the 457(b). These plans can be pow­er­ful sav­ings pro­grams. Cal­STRS is a fine pen­sion, but no pen­sion was cre­ated to sup­port our retire­ment 100%. Only a few lucky LAUSD employ­ees can work for 38 or more years get almost 100% of their salary, with­out risks to one’s health or other unpre­dictable life chal­lenges. How many of us want to work with all of that stress for that long? Dan and I didn’t. I worked for 24 years for LAUSD and retired at 61 with only 49% of my salary from my Cal­STRS pen­sion. Dan retired at 59 years old. The secrete of our good fortune–which really is NOT secre­tive or difficult–is that we both saved a bun­dle in our 403(b)s.

JointhediscussionIf you want to read future blog arti­cles, and down­load “Fight­ing Pow­er­ful Inter­ests,” fill out the sub­scrip­tion form. All blog posts and infor­ma­tion are free and you can post responses or ask ques­tions. This is an oppor­tu­nity to con­tinue your edu­ca­tion. You can opt out at any time.

I have been writ­ing about invest­ment top­ics for 20 years because our col­leagues, you, deserve the infor­ma­tion. You might recall my United Teacher news­pa­per invest­ment arti­cles in the 1990s and 2000s. The theme was to help col­leagues pay more atten­tion to the 403(b), get out of high-cost insur­ance prod­ucts and into low-cost, non-commissioned mutual funds.


  • LAUSD Roth Option? Join the move­ment to get LAUSD to offer a Roth: click here for Hamil­ton High Teacher Larry Sholam explain­ing the Roth advan­tage. His spe­cial email: He is orga­niz­ing a cam­paign and needs support.
  • UTLA mem­bers rated the recent UTLA Invest­ment work­shop, Novem­ber 15, 2014. They loved it! Read their responses: click here. Do NOT miss the next one, April 25th, 2015.
  • Recent National News FLASH. The White House and the Supreme Court Chime in on Wall Street’s, Big Banks and Insur­ance Company’s Con­flicts of Inter­est. Click here and find out what LAUSD’s Retire­ment Invest­ment Advi­sory Com­mit­tee has already done to address what the Pres­i­dent and the Jus­tices are com­plain­ing about.
  • LAUSD 403(b) ven­dors are linked to Cal­STRS for objec­tive finan­cial infor­ma­tion: click here. If you have a 403(b) annu­ity, check out the insur­ance company.

403(b) Ven­dors are pro­hib­ited from mak­ing pre­sen­ta­tions on Campuses


  • Sell­ing 403(b) prod­ucts on dis­trict prop­erty is PROHIBITED! LAUSD’s BUL-6178.0, click here. Read  Arlene Inouye’s, UTLA Trea­surer and Sandy Keaton’s, Chair of UTLA Pre­Re­tire­ment Com­mit­tee, arti­cle in the UT, click here or read com­mit­tee mem­ber Brad Rumble’s arti­cle, click here. There are reports that 403(b) annu­ity ven­dors are still pre­sent­ing at meet­ings and pro­fes­sional devel­op­ment. This is against dis­trict pol­icy. Ask them to leave or report to school police.
  • Is an Insur­ance Prod­uct an Invest­ment? NO! Here’s why: click here.

SandyrickdansteveDan and I hope you find this blog post infor­ma­tional and encour­ag­ing.  If you have any ques­tions or want spe­cific infor­ma­tion, just email us at Or bet­ter yet, post your ques­tion here so every­body gets to see the ques­tions and answers.

Best of fortunes,

Steve Schullo and Dan Robertson

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Book Review: Author did the job for her client’s best interests, now is the time us K-12 educators to demand ours!

Sec­tion 403(b) Com­pli­ance Guide for Pub­lic Edu­ca­tion Employ­ers
by Ellie Low­der
Book Review and an Edi­to­r­ial by Steve Schullo


As a retired teacher serv­ing on my district’s 403(b)/457(b) Retire­ment Invest­ment Advi­sory Com­mit­tee, I read this book with great inter­est. While it’s a com­pli­ance guide writ­ten for dis­trict employ­ers and their ben­e­fit admin­is­tra­tors, every pub­lic edu­ca­tion employee should read this review. Ms. Low­der omit­ted the impor­tant con­se­quences for teach­ers of this often times expen­sive and inap­pro­pri­ate retire­ment sav­ings plan. My pur­pose is to spark the inter­est of my col­leagues to dis­cover and either reform this ancient 403(b) or replace it with the 457(b) plan.
Both plans are offered for our nation’s PreK-12 pub­lic school edu­ca­tors. The older 403(b) plan has not always been in the educator’s best inter­est. Ms. Low­der has been the 403(b) con­sul­tant for school busi­ness offi­cials and insur­ance indus­try pro­fes­sional orga­ni­za­tions as evi­denced by three pre­vi­ous edi­tions of this book aimed at Pub­lic Edu­ca­tion Employ­ers and the fol­low­ing connections:

• Her book’s co-publisher, the Asso­ci­a­tion of School Busi­ness Offi­cials Inter­na­tional (ASBO Inter­na­tional). Coin­ci­dently, the author and the book’s intended audi­ence appear well-connected.
• Ms. Low­der has many addi­tional con­nec­tions with a long career in the insur­ance indus­try. The industry’s best-selling prod­uct, the Tax-sheltered Annu­ity (TSA), has dom­i­nated PreK-12 mar­ket since 1961. The TSA is a hard­ened and known brand name that is as famil­iar to the major­ity of pub­lic school employ­ees as books and pen­cils are with stu­dents.
• She is the co-author of “The Source: 403(b) and 457(b) Plans (NTSAA-ASPPA)”, National Tax Shel­ter Accounts Asso­ci­a­tion (new name, National Tax-deferred Sav­ings Asso­ci­a­tion (NTSA) and Amer­i­can Soci­ety of Pen­sion Pro­fes­sion­als & Actu­ar­ies.
• The NTSA his­tor­i­cally rep­re­sents annu­ity sales­peo­ple, spe­cific to PreK-12 school dis­trict mar­kets across the coun­try.
NTSA, ASPPA (and Wall Street) have opposed fidu­ciary reforms ini­ti­ated by the Fed­eral government’s Depart­ment of Labor. They have twice suc­cess­fully stopped our state 403(b) reforms efforts to update our insur­ance code, 770.3. Cur­rently, the ASPPA is gear­ing up their oppo­si­tion to the lat­est DOL fidu­ciary efforts by writ­ing a notice to mem­bers. Chris DeGrassi – NTSA Exec­u­tive Direc­tor wrote: Fidu­ciary Pro­posal Expected in State of the Union; Coali­tion Steps up Effort, Jan­u­ary 16, 2015. The rhetoric clearly indi­cates that the core of the issue tar­gets IRA rollovers and the insur­ance indus­try.   It’s not just the Pres­i­dent and the DOL, Supreme Court jus­tices are also chim­ing in on fidu­ciary issues dur­ing ini­tial oral argu­ments in the Edi­son Inter­na­tional case (Click here for addi­tional infor­ma­tion).
• The author served as national sales direc­tor for qual­i­fied annu­ities at Transamer­ica Life & Annu­ity Com­pany and was the chief mar­ket­ing offi­cer for Delta Life & Annu­ity, ear­lier in her career.

Her insur­ance indus­try career and pro­fes­sional con­nec­tions speak for them­selves about her posi­tion sup­port­ing the pro­duc­tion, sell­ing and mar­ket­ing of insur­ance prod­ucts. Her long and col­or­ful career makes her a major force and an indus­try ringer for the 54 year-old, sta­tus quo, high-cost, low per­form­ing TSA/403(b) in PreK-12 school dis­tricts. She has served the indus­try and their con­stituents well.
This fourth edi­tion updates the 2007 Inter­nal Rev­enue Ser­vice (IRS) new reg­u­la­tions. These new require­ments are momen­tous to school dis­tricts as the IRS requires school dis­tricts to be respon­si­ble. This book shows dis­trict ben­e­fits admin­is­tra­tors how to com­ply with the new reg­u­la­tions and to clear up mis­in­for­ma­tion. For the record, the IRS new regs did not reform the 403(b) as I will elab­o­rate in my review and edi­to­r­ial.
Lowder’s guide con­tains 19 chap­ters. Out­side the occa­sional legalese expected in a com­pli­ance guide, the 103-page book is an easy read. While not a pro­fes­sional ben­e­fits admin­is­tra­tor, I am famil­iar with the jar­gon and many of the laws as a knowl­edge­able and expe­ri­enced con­sumer of 403(b) prod­ucts. My quib­ble with the writ­ing style is her fre­quent use of par­en­thet­i­cal and “how­ever” phrases, which dis­tract rather than add to the con­ver­sa­tion. She ends the book with a com­pli­ance check­list for the 403(b) and the 457(b) and rec­om­mended forms from ASBO Inter­na­tional resources.

The Author Did Her Job

The author did exactly what any impor­tant con­sul­tant would do for clients. If no sus­tain­able teacher com­plaints nor a demand for fidu­ciary, trans­parency, eth­i­cal or objec­tive infor­ma­tion mate­ri­al­ize, pub­lic edu­ca­tion offi­cials will be in legal com­pli­ance with the IRS new 403(b) reg­u­la­tions.
What a won­der­ful oppor­tu­nity for lit­tle old me to offer the educator’s view. Noth­ing wrong with bal­ance between the cus­tomer and the indus­try. Together we can improve and reform the 403(b) so that it best serves every­one.
As a 20-year advo­cate, just because 403(b) legal sta­tus is jus­ti­fied, that doesn’t auto­mat­i­cally mean it also has an eth­i­cal sta­tus. With a higher eth­i­cal stan­dard, every­one ben­e­fits. Cur­rently, the 403(b) does not pass the smell test, until the 403(b) is dis­cussed, dis­closed and debated pub­licly by the peo­ple who pay the costs, the teach­ers. The good news is that there is plenty of room for a higher eth­i­cal stan­dard within the cur­rent reg­u­la­tions. Plus, we have a huge prece­dent with the country’s sec­ond largest school district–LAUSD’s Award Win­ning 457(b) plan! I will be dis­cussing this legal and eth­i­cal exam­ple shortly.

Thank You Ms. Low­der for Pro­vid­ing a forum for My Review

I am grate­ful the author wrote this book as it pro­vides the oppor­tu­nity to elab­o­rate in detail on the eth­i­cal short­falls of this mys­te­ri­ous, sur­real sys­tem. Spe­cific 403(b) books for PreK-12 edu­ca­tors are rare. I enthu­si­as­ti­cally agree with her com­mu­ni­ca­tion rec­om­men­da­tions with edu­ca­tors. I dis­agree with a few of the author’s per­cep­tions about how the 403(b) man­i­fests in the real world. Thus, I am using this extra­or­di­nary oppor­tu­nity as a call-to-action for whole­sale reform, so that the 403(b) sys­tem ben­e­fits all stake­hold­ers, not only the insur­ance indus­try and dis­trict ben­e­fits admin­is­tra­tion. Reform starts from active and informed class­room teach­ers and coura­geous ben­e­fit admin­is­tra­tors. I remain hope­ful that union pol­icy mak­ers will also take notice. By the time you fin­ish read­ing this review and edi­to­r­ial, you will be con­fi­dent enough to ini­ti­ate a much-needed dis­cus­sion at your dis­trict, union or ben­e­fits office.

Huge Omis­sion!

Con­tinue read­ing

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What Does the White House, Supreme Court and Los Angeles Unified School District have in Common?

HeadlineWe are Steve Schullo and Dan Robert­son, retired teach­ers who wrote a cou­ple of books about per­sonal finance. Wel­come to our blog. Our pur­pose is to encour­age every­body to learn the basics of do-it-yourself retire­ment plan­ning, at least until many in the finan­cial pro­fes­sion cleans itself up. Looks like they are get­ting a boot in the ass right now from two most unlikely places. We love this news from D.C.!

WhitehousePres­i­dent Obama and the Supreme Court are on the same page when it comes to retire­ment invest­ing. They ques­tion the wis­dom of invest­ment advice from Wall Street, big banks, insur­ance agents and other non-fiduciary advis­ers. These advis­ers are cur­rently guided by the “suit­abil­ity” invest­ment rule. You may have been sold the idea that invest­ment advice and the invest­ment choice(s) are suit­able for you, but are they? Both the Admin­is­tra­tion and the Supreme Court say NO! We agree.

Flanked by Eliz­a­beth War­ren the Pres­i­dent sug­gests replac­ing the “suit­abil­ity” stan­dard with “fidu­ciary” guide­lines. Fidu­ciary is a term which means “put the client’s inter­est first.” This would apply to any finan­cial pro­fes­sion­als who have employ­ers and indi­vid­ual investors as clients. Pres­i­dent Obama’s pri­mary point is to reduce “con­flicted advice” and stop “bilk­ing” Amer­i­can work­ers with exces­sive fees. Con­flicts of inter­est arise because many invest­ments are not nec­es­sar­ily suit­able for you, the investor, because of added costs in the plan. Charges at the front or back of an invest­ment as well as ongo­ing costs would make the plan “suit­able” for the adviser, mutual fund or insur­ance com­pany rather than for you. These added expenses eat away at your opti­mal return, to the tune of $17 Bil­lion per year for future retirees — nation­ally. The PBS Frontline’s The Retire­ment Gam­ble reports up to 50% of your nest egg is skimmed off the top over a typ­i­cal American’s work­ing career!

Most of us sim­ply want a fair mar­ket return, not some con­vo­luted con­tract writ­ten by insur­ance lawyers and sold to us as if they were writ­ten to pro­tect us. Stud­ies show that lower cost­ing index funds pro­vide bet­ter returns than the major­ity of com­pany retire­ment offer­ings (401k, 403b or 457b).

SupremecourtThe Supreme Court also got right to work dur­ing ini­tial oral argu­ments in the Edi­son Inter­na­tional case. Talk about tim­ing with the Administration’s announce­ment! They chas­tened the Edi­son Inter­na­tional attor­neys for com­plain­ing about “extreme dis­rup­tion,” if employ­ers were told to “scour the mar­ket for cheaper invest­ment options”. Thank good­ness some jus­tices took the fidu­ciary view, which states that the inter­est of the worker must guide the retire­ment options avail­able rather than tra­di­tion, or turn­ing the choices over to a third party.

LAUSDBeaudry(Click here to watch a seven minute inter­view about our story behind the Award Win­ning Plan. It was a bat­tle to lower costs. Also, for LAUSD’s Press Release on the Award, click here)
The free pdf book, Fight­ing Pow­er­ful Inter­ests, pro­vides the Pres­i­dent and the Supreme Court, employ­ees and employ­ers every­where an exam­ple of how a retire­ment com­mit­tee of teach­ers has already done this chore. We did due dili­gence work by low­er­ing costs and demon­strat­ing trans­parency long before the 2010 the Dodd/Frank bill came to fruition.

Our com­mit­tee has worked since 2006 to do what the Pres­i­dent and the Supreme Court are now upset about. Don’t take our word, take a look at what a for­mer L.A. Times finan­cial reporter, Kathy Kristof, wrote in her arti­cle (LAUSD Firm forced to dis­close fees). The district’s part­ner­ship of union, man­age­ment, teach­ers, and con­sul­tants put together a model plan (457) which does this now — a boon for lucky LAUSD employ­ees. The LAUSD com­mit­tee found lower cost funds eas­ily. It didn’t take MBAs nor was it a “dis­rup­tion” to apply the fidu­ciary standard.

If teach­ers with­out finan­cial back­grounds can find low cost funds, one would think that finan­cial pro­fes­sion­als with all of their ana­lytic train­ing from Ivy League Uni­ver­si­ties could too. But find­ing low cost funds is not in the industry’s inter­est nor is there any bind­ing reg­u­la­tion that requires it either. That’s why 53 mil­lion pre-retirement Amer­i­cans need legal protection.

In the mean­time, we can get involved right now. Go to your HR depart­ment and start ask­ing ques­tions. Ask for a list of invest­ments and start your edu­ca­tion. Ask if you can join an over­sight com­mit­tee. If your employer doesn’t have one, ask them to get one started and be the first vol­un­teer! You do NOT have to be a pro­fes­sional in finance to serve your own and other edu­ca­tors’ best interests.

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205 Ways to Find Money to Invest

House car investment costsDan and I are retired edu­ca­tors who did not earn exor­bi­tant salaries! Yet, we man­aged to invest in our 403(b) con­stantly for decades. How?  We dis­cov­ered how to con­trol three of the most expen­sive con­sumer purchases:

1. House. When we bought our first house 35 years ago, we rented out the third bed­room and bath to help with the pay­ments and lived in a 1200 square foot house. Amer­i­cans pur­chases houses way too big and costly!

2. Cars. I never bought in new car dur­ing my entire work­ing life. I couldn’t afford a new car pay­ment and invest in my 403(b). I was lucky in that a new, flashy car was never an exten­sion of my ego, but that build­ing a last­ing finan­cial future was.

3. Invest­ment Costs. After you have accu­mu­lated a retire­ment nest egg, many peo­ple pay too much for advice and the invest­ment prod­uct. NEVER PAY LOADS! A “Fron­tend load” is a com­mis­sion and a “Back­end load” is what you pay to get your money out of an account! What!? Those costs are not just absurd and unnec­es­sary, but are RIPOFFS! We saved so much in invest­ment costs by invest­ing in NO-LOAD Index Funds in the last ten years we were now able to pur­chase a Tesla in retire­ment! Click here.

You can down­load the attached 205-ways-to-save. It shows how to con­trol home, car and invest­ment costs but also con­tains 205 com­mon sense choices we make every­day. If we thought for just a moment, we could keep expenses low in many other con­sumer choices too. Impul­sive buy­ing is to be avoided!

For exam­ples,

  • Gro­cery shop­ping after a meal, not while hungry. 
  • Never use a bank–Use a credit union.

Mr. Money Mus­tache (MMM)

I have already writ­ten about MMM before. He is worth repeat­ing. You have to visit America’s favorite mas­ter of fru­gal liv­ing, Mr. Money Mus­tache! This guy is hilar­i­ous! Take a look at my ear­lier post about this amaz­ing char­ac­ter. (click here)

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