Are Savvy Educator 403(b) Investors Invisible?

Are Savvy Educator 403(b) Investors Invisible?

Teachers Helping Teachers

403(b) Reform Through Word-of-Mouth—Our Mouths


By Steve Schullo*

Have you ever been excited about sharing great news or valuable piece of information? Of course. In the 403b world, however, shrewd and astute educators are less inclined to share their investing knowledge with colleagues. This blog post is for both savvy teacher investors who want to help their less savvy colleagues, but don’t know how, and for those who want 403(b) help, but don’t know who to ask. For starters, in every school in America, one or two teachers understand investing–seek them out. Whether you are savvy or not, the rest of this blog provides a ton of objective information so you can either help your colleagues or begin the discovery yourself.

The 403b is a potentially powerful retirement plan if one knows how to manage your choices. If you invest in no-load mutual funds offered by Fidelity, TIAA CREF or Vanguard, consider yourself extremely fortunate. Our employers and the teacher’s unions have done nothing to help. Sadly, unions usually have their own agendas. If there is no help from the educational establishment, what can we do? We educators have to learn investing on our own.

Even state insurance laws do not look out for our best financial interests. California’s insurance code is especially egregious. It has rigged the 403(b) plan into favoring insurance agents and their Tax-sheltered Annuities (TSAs). Most of these retirement plans are designed by lawyers for insurance companies and sold by an aggressive sales force which supplies a steady stream of commission-laden contracts paid for by, you guessed it, us educators. Since 1994 over 30 reports and online news articles condemned the 403(b)’s high costs in public K-12 school districts and low-performing products across the board (For citations of these published articles). What I write here on this blog is backed up by years of published reports–keep your money away from annuities.

Fortunately a few teachers have read the above published articles. Equipped with the knowledge from those reports, they know better than to put their hard-earned money into high price, low performing annuities. These educators have discovered a better performing and lower cost mutual fund option, but the majority of their less-savvy peers have not. Thus, runaway sales of expensive TSA products have been unstoppable since 1961. The majority of our colleagues need help. They need to stop and think before falling for seductive and misleading sale-pitch “guarantees” and “bonuses”. The good news is a reform movement exists to stop this half century rip off. Unfortunately, the movement is small and we need your help to inform our less savvy colleagues (At the bottom are two additional websites devoted to this reform).

Together we can break this silence. The Pre-K-12 cultural silence and reluctance to discuss the 403(b) is deafening and dangerous to our financial well-being. When we don’t discuss these plans among ourselves, we are vulnerable to the sales force. And they are everywhere. Sales folks enter our classrooms, parking lots, cafeterias, union halls, professional development seminars, and district administration offices. The sales force is a permanent fixture in our professional culture, as reliable as students. With so much occupational power and 100% access to helpless teachers, who have nobody to talk to, the insurance industry and their minions are laughing all the way to the bank.

A Heartfelt, Unexpected Example of Help

The documentary movie Pride provides an excellent metaphor about helping. A brief synopsis: London gays and lesbian activists experienced in providing support used their skills in 1984 to help striking Bristish miners. Both groups shared common foes in Prime Minister Margaret Thatcher, the police and the conservative press. Even with LGBT help, the miners eventually lost their battle with the British conservative government. However there was a surprise happy ending. Months later, the London Gay Pride parade organizers were predictably burdened with police strictures. As the parade began, everyone turned to look at a line of buses rolling up. “What’s going on?” they wondered. To the celebrants’ astonishment, the miners and their kin clambered out with supportive signs: “Miners Support Gays.”

What can Educators Do to Reform the 403(b)?

A Call-to-Action: begin a conversation with our less savvy educational colleagues who were taken by the annuity industry’s sales pitches

I have a challenge and a call-to-action for those savvy investors who are also educators. We know annuities are terrible retirement plans. My suggestion is to initiate a simple discussion about allowing insurance agents to make financial decisions about their 403(b).  Since you and I are not a financial advisers, we are free to share what we do. This entire blog is about sharing. These small conversations could go a long way into enlightening a lot more colleagues in the educational culture to stop surrendering to the annuity sales force and their expensive, self-servicing and inappropriate TSAs.

Our alternative for 403(b) investors is to forgo complicated contracts and those stale doughnuts in the cafeteria. Instead, seek out available low-cost mutual funds which provide inexpensive diversification – with genuine, long-term investments in domestic and international stock and bond markets. All teacher pension plans invest in the stock and bond markets, never, and I repeat, never in annuities. Why do 80% of educators settle for low-performing annuity contracts written by lawyers with conflicting interests? (Read my 4-part series on stock and bond market investing). Tell your union to do a better job, and write letters to your board of education to broaden choices to include low-cost investments with higher returns. Take “pride” in sharing your investment acumen of the 403(b).


There are three websites to connect for continued information and sharing experiences with other 403(b) educator activists:

1.Congratulations for finding this website and my blog. To stay informed, register for my blog, Late Bloomer Wealth, run by two married and retired educators, Steve Schullo and Dan Roberston (Dan died suddenly last month. I will continue making blog posts to educate my colleagues about the 403b. Read my tribute to Dan and the wonderful responses). To get the complete history of the forever corrupted and conflicted 403b in public K-12, download my FREE PDF ebook: Fighting Powerful Interests. Click directly on the book to subscribe to this blog and download the book.

Fighting Powerful Interests Front Cover

It’s my instructional story about how Los Angeles Teachers implemented a 457(b) plan and ending up winning an award in 2014. You will discover how to get out of an annuity and start investing in genuine investments with low-cost mutual funds. But most of all you will have the confidence to manage your money without an adviser, OR recognize a genuine fiduciary financial advisor that looks after your interests which you pay out-of-pocket by the hour.

2.Log on to the oldest website devoted to 403(b) reform and share what you have been doing at your school site, district or union. Run by former teacher Dan Otter. This site is a major hub where teachers and educators gather to share ideas and information to help our colleagues.

3. Run by Scott Dauenhauer, a fee-only fiduciary financial adviser and a CalSTRS (California Teachers’ Pension Plan) consultant. Scott is the brains behind the legendary low-cost 403(b) Pension 2. If you are a California teacher who invests in Pension 2, share this with your colleagues.

*Steve’s bio: Stephen A. Schullo, Ph.D. (UCLA ’96) taught in the Los Angeles Unified School District (LAUSD) for 24 years and UCLA Extension. He retired in 2008 and became an author of investing strategies. The first generation Italian-American, ex-Marine, Vietnam vet wrote investment articles for United Teachers-Los Angeles’ union newspaper (circ. 40,000) for 11 years. A four time featured volunteer retirement plan advocate, twice in the Los Angeles Times and once in U.S. News and World Report and most recently on PBS Frontline: The Retirement Gamble. He started an investor self-help group for LAUSD colleagues and wrote 4,500 posts in three investment forums since 1997. He is a regular presenter at the United Teachers Los Angeles investment workshops twice a year and is available for your school site upon request.  Frequently quoted and interviewed by the media, testified at state legislative hearings, honored by the 40,000 member Los Angeles teachers’ union for his retirement investing advocacy and currently serves on LAUSD’s Investment Advisory Committee for the past seven years as Member-at-Large and former co-chair. The committee oversees 457b/403b plans for 55,000 former and current LAUSD employees, assets of $2.1 billion. He is not a financial adviser, but shares what he has done to discover investing while trying to reform the 403(b).

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