Its been three years since PBS Frontline Retirement Gamble was broadcasted. Dan and I were in NY. We had the great pleasure of having lunch with Rain Media researchers, writers and producers who made The Retirement Gamble for PBS Frontline possible. Martin Smith is standing behind Dan and me. From left is Ryan (researcher), Dan, Martin, myself, Marcela (producer and writer) and Nesa (associate producer).
Dan and I were thrilled we had the opportunity to contribute our small part in this historic documentary. This didn’t happen by chance. I have been advocating lower cost 403b plans for over 20 years. I know many people in the profession who are genuine fiduciaries and in the media. Never the less, the best evidence that something extraordinary was accomplished is by the critics who had nothing good to say about The Retirement Gamble. Instead of looking at the facts and the data that was so well articulated throughout the broadcast with John Bogle’s 2% fee simple math equation, the naysayers had to find very creative and clever distractions to keep people thinking about the fees and investing in low cost index funds.
Genuine Fiduciaries liked the broadcast.
Fee Only Financial Advisers with GENUINE fiduciary responsibility welcomed and praised this broadcast: DCIIA (Defined Contributions Institutional Investment Association) and 403bwise Forum run by Dan Otter were great examples. We could not believe how shallow and inept the JB Morgan and Prudential executives were about retirement plan costs.
National Association of Professional Financial Advisers (NAPFA has members who are genuine fiduciaries, fee-only and is cited in our book “Late Bloomer Millionaires) calls film ‘wake-up call’ for legislators. NAPFA is not threatened by this report. Here is NAPFA press release. NAPFA GETS IT!
ARY ROSENBAUM, Ary’s statement: click here. Email: ary@therosenbaumlawfirm.com
The Rosenbaum Law Firm P.C.
734 Franklin Avenue, Suite 302
Garden City, NY 11530
516-594-1557, fax 516-368-3780
The New York Times Carl Richards liked the broadcast. Carl quote Dan and I: “Please accept that you have a responsibility to do the hard work of learning to understand this stuff before it’s too late. Like the two retired teachers in “The Retirement Gamble” say:
We never planned on learning about investments, until we got slammed in the gut.
Getting slammed in the gut seems like something we all want to avoid.” Click here for full article.
Genuine fiduciaries should be happy and grateful because the Retirement Gamble helped them turn thousands of clients from the rip-off insurance company annuities, the huge banks, retirement plan consultants who think they are fiduciaries and brokerage firms to a professional who truly looks out for their best interests.
Other Positive Reviews
Bogleheads Followers of John Bogle’s work liked the broadcast for giving a lot of time to Mr. Bogle and his legacy of looking out for the individual investor by paying close attention to fees (35,000 registered members of the best and the largest investment forum on the Internet). Other posts reflected on what the broadcast left out: don’t condemn an entire industry, with financial education people can work the current system for their best interests. It’s that simple. If your adviser likes The Retirement Gamble, you are lucky to have him or her.
If your adviser says anything negative, WATCH OUT! They don’t want you to know what you are paying. Here are the negatives:
Plan Sponsor Had nothing good to say about the report. I wonder why…. Responding to John Bogle’s absolute fact that 2% drains a portfolio by 2/3 after 50 years: “But that 2% assumption is overstated, according to Robert Hiltonsmith, whose research was featured in the documentary. Hiltonsmith is a policy analyst at Demos, a public policy organization in New York. Most funds do not charge 2%, but trading costs drive up expenses. “We don’t have a good estimate of what trading costs are because we don’t have that data,” Hiltonsmith told PLANSPONSOR. “It’s either proprietary or it’s not collected.” (2% is NOT overstated. In fact, its low. Plan Sponsor did not deny Hiltonsmith response that trading costs are not transparent and are part of the costs. I might add that TPA costs should be added in 401k plans as well).
Plan Sponsor goes on: “Regulations like 408(b)(2) and 404(a)(5) have made fees more transparent and easier for plan sponsors to understand. Fee regulations have helped everybody fulfill that fiduciary role,” Ready said. “Given that first line of defense, the [fee] information is important to know and understand, but it shouldn’t be a key driver in the decision-making process.”
My comment: So it’s a bunch of numbers and codes that “fulfilled the fiduciary role?” That’s hilarious! Why does it take a regulation to force the industry to fulfill a fiduciary role? All the industry has to do is explain ALL FEES! You know, sit down and actually talk to clients FTF and at least try to pretend that clients are real people who can understand more than they think instead of checking off a compliance rule in the regulation book.
Our oversight committee at LAUSD demanded demanded transparency of fees, especially the dreaded revenue sharing costs of our 457b TPA way, way back in 2006 and our TPA fought it tooth and nail. If fees are not so important why does the industry raise a HUGE fuss whenever it’s brought up. PBS Frontline should be commended for taking on an entire industry and support John Bogle. Why? Fees are the key driver in the decision making process and the key driver for diminished nest egg leaving many retiree’s impoverished). Genuine Fiduciaries UNDERSTAND THIS!
LinkedIn 401k Group More balanced critique, at least the author said that some good points were made — the financial industry has to be more transparent about fees. Negative comments are the usual comments about leaving out people who were interviewed that pointed out that fees should not be the sole consideration of planning for retirement. They also say that people will be afraid to plan for their retirement after viewing the scare tactics. (My comment: people are scared because of the 2008 stock market crash, not because of this broadcast. GIVE ME A BREAK!).
Real people expressed their views on the 403bwise forum and Bogleheads forum. Genuine fiduciaries have nothing to fear about this broadcast and nothing to fear from us regular folks who liked this broadcast. If you are looking for a finance adviser, ask him or her this question: What is your opinion of PBS Frontline’s The Retirement Gamble and John Bogle? If their face turns pale, leave. Find a genuine fiduciary financial adviser or better yet, read up on investing and do it yourself.
The Retirement Gamble took a significant risk by exposing fees for what they are, EXCESSIVE, and what Mr. Bogle has been reporting for many years. Contrary to industry reps who took issue with the broadcast focused only on the negative, PBS Frontline did offer a positive solution to the Retirement Gamble and that is to watch fees closely, used low cost index funds and stay the course.
Dan and I were featured in the broadcast. Crystal Mendez, the other teacher, took it to another level. She outdid everyone who participated with saving $115,000 and only 32 years old! Holy cow! Dan and I had nothing saved at age 32. One viewer commented that it was the three teachers who knew what they were doing compared to the others in the broadcast. Sure, but do people have to write a book and go through what we had to go through to learn to find the right plan? Remember, we couldn’t trust any professional for years. Crystal, Dan and I had to do this ourselves.
What PBS Frontline left out from our two-hour interview was that after the tech bubble crash in which we found ourselves in financial shambles, we changed course ten years ago. We started investing in TIAA CREF and Vanguard, exactly what the program suggested as a solution. WE DID IT. And we made our million back by using low cost index funds, had a fixed income allocation according to our age, rebalanced and saved about $150,000 in fees in the last ten years (See figure 40 below: hypothetical 1.95% annual fee to what we actually paid, .35%. The dark black bar is what we actually paid from 2004-2011 in our portfolio). Had we paid 1.95% in fees we would have had our portfolio diminished by $150,000. Facts on fees don’t lie and don’t let anybody tell you differently.
Best of fortunes, Steve and Dan
(Note: Click on the graph for a clearer image)
Near the end of the Retirement Gamble broadcast, Dan and I were filmed strolling around our neighborhood. Some people commented on the message on my shirt. Below is the message of this famous shirt, in case you missed it. I wear this shirt to annuity conferences and was nearly kicked out of a hotel by security.
The Retirement Gamble
A Breath of Fresh Air- and a Complete Smoke Screen
This will not endear me to those extolling the value of the PBS special on 401(k) fees. I am not indicating that the fees are not relevant- of course they are. But the video is indicative of the almost complete failure of consumers, the incompetency and corruption of the industry and regulators, and a piece of (essentially) fluff by PBS that did not address the true risks of investing.
The piece leaves the impression that the real evil in 401k plans are the fees. No, they are not. It is the continuing level of incompetence by the regulators and other officials in getting adequate knowledge and capability to the ‘advisors’ so that the advisors can educate the consumers on the risks of investing. Not just some sophomoric commentary on returns by a software package that compares what happened from 1929 or 1940 or 1969 et al that will be THE guide for the foreseeable future. I mean real life identification of what the products can do, what the risk of loss potentially could be and what to do when another economic impasse occurs.
Let’s first review some of the PBS players. The two industry retiree specialists interviewed (Prudential and JP Morgan) were so far out to lunch it was ludicrous. No idea of how the difference in fees worked over time; trying to differentiate fiduciary versus suitability. These two are paid hundreds of thousands of dollars in salaries (commissions???) and have the ethical and moral content of a gnat.
Teresa Ghilarducci, author of Why the 401(k) is a “Failed Experiment” has some good criticisms of the 401k plans. But she notes this in her article, …”Talk to Chuck” was a campaign that referred to a world in which you could actually have a partner and a trusted adviser for your financial products, just like you had a trusted teacher that helped you through your education or through your career. ”
This is where this gets moronic- but is something the industry has the industry has imbedded into the best of the researchers- that of inherent competency. Since the issue comes up repeatedly in all industry and organizational rhetoric, let’s first explore the knowledge base of a broker versus a fiduciary (RIA). Obviously there must be a major difference between the capability of the two since the fiduciary is required to only do the best for the client. Right?? Why???
First, the fundamentals of investing have never been taught to a broker. I taught many, many financial courses to a very diverse group of students- those for securities, real estate and insurance licenses; continuing education courses for same and including CPAs, attorneys et al. (As of this writing, I have the only two courses approved for Continuing Education of the California Bar (or any other state) for attorneys on the subjects of investments and insurance and annuities.) There is no instruction on correlation, standard deviation (if taught at all, it is universally wrong), diversification, risk etc. Never has been, is nothing now, and in view of the current regulatory focus, there will be nothing in the future. I have written (fought) with FINRA, SEC, NASAA, Mary Shapiro and more for almost 20 years to step up licensing education and that for arbitrators, etc. It has universally been that the industry would never allow it since it would reduce sales (true then and now). At an absolute minimum (addressed below) is that every investor know their potential Risk of Loss. But that is NOT possible since no broker has to know how money works. Nor do RIAs. (If you do not know how to use a personal financial calculator in the investment, insurance and annuities business, you cannot be a fiduciary. You cannot be a professional. You can be a fry cook at Denny’s- just don’t deal with financial products.)
That is a real problem with Roper, Ghilarducci, Smith and PBS and on and on- they actually believe that a fiduciary has some mandatory knowledge of products and applications. No there isn’t and never has been. Registered Investment Advisers have generally taken the inefficient Series 7 “knowledge” and used it to validate becoming an RIA.
Generally, the focus competency is towards a designation- CFP or similar. And a CFP is what? Effectively one semester on money. Not a semester in investments, a semester on insurance et al. Just one semester on money. What about strictly fee planners? Say NAPFA. What about them? Many RIAs call themselves ‘financial whatevers’ and journalists fall all over themselves extolling their virtues- just as the fee planners do themselves. Touting some moral high ground without competency in no way validates what happened in 2000 and 2008. It is mandatory to understand risk causation- and that involves local, national and international economics. But the insight to such material is not going to happen with one semester of effort.
Note the comment about teachers above. Look, a teacher at least has a degree (generally) in teaching. (The traditional educational route to teaching at the elementary, kindergarten, middle or secondary school level is to earn a bachelor’s degree from an approved teacher education program.) So what do our fiduciaries have? A Registered Investment Advisor is merely a registration with the SEC or state. It addresses ONLY investments. It is not retirement planning, insurance knowledge or much of anything else. There are many, many planners with a degree in planning. Use one with at least 10 years of experience and that has a life insurance license (the only way to stay current on life insurance and annuities.) This is not a panacea for success. However having at least 8 semesters of learning beats just one.
Consumer Federation of America’s Roper- people claiming to offer advice are really salespeople with no such best interest obligation…..
EFM- True. But it is also true that fee planners are also selling themselves. It is still marketing. And how does one have the best interest without mandatory knowledge?
“It is a scandal that this situation has been allowed to develop – a scandal that can be laid directly at the feet of securities regulators who allowed brokers to rebrand themselves as advisers without regulating them accordingly.
EFM-Partly true- It is not the regulation initially. It is that the SEC and every state regulatory agency is allowing a series 7’s worth of ‘knowledge” to pass as something valuable.
In doing so, the agents feel- and the lack of regulatory oversight and effort engenders- that they can pass themselves off as having the right to offer highly detailed reviews of products and situations where they do not have a clue.
“One thing that struck me as I was watching, however, is how ineffectively we appear to be enforcing the fiduciary duty where it does exist. We spend, and the show spends, a lot of time on the issue of fiduciary duty for advice to individuals, but the show also highlights how poor the investment offerings often are within retirement plans. “But management of retirement plans is supposed to come with a clear fiduciary obligation. Why isn’t it resulting in better plan options?
EFM- What did you expect? You do not have a valid knowledge base. Never have had. And it will not become available until the requisite competency exists.
Not going to happen. A fine example was this. I sent my book, Financial Planning, Fiduciary Standards under Dodd Frank to Labor Secretary Hilda Solis. Couple months later two staff attorneys called, said it was a breath of fresh air, yada, yada. But after a few more minutes of cursory talk, I asked what are you going to do about increasing education to the industry. They merely replied that if “fiduciary” was implemented, they would just wait for the law suits to happen and that would send a message to the industry. Well, there was a couple more years of my life wasted.
Sent one to Borzi as well- never heard a word.
I admit that the industry does not like what I wrote. Probably worse is that I doubt that any of the regulatory entities that received the book read it- or if they did try- were incapable of understanding it.
Roper got one. Did not hear a word. One reason is that she- as well as most journalists- are closet acceptors/violators of fiduciary rules anyway.
The issue- find a fee planner in California who is legal? I dare you.
From a post in 2001 (not me) – “Fee-Only Planners that have chosen not to follow CA L&D regulations: I understand their position to ignore this rule…………..But currently, the CDI’s position is clear: you are not following CA state regulations and should be subject to prosecution. It is unethical for you to chose what regulations you are not following without adequate disclosure. Anything less is hypocrisy. Do two wrongs make a right?
NAPFA, CFP and FPA Boards: Your lack of backbone on this is issue is even more hypocritical. Perhaps as part of Practice Standards, Planners should have to disclose what regulations they chose not to follow.
……….. if one was to do the research on this issue, I do not know how anyone can come away with another feeling.”
Twelve years later with every valid journalist and financial magazine aware of said violations and nary a one cared. It’s not just California. It covers about 35 states.
Probably most can say they were unaware. Just like the PBS heavy hitters. The “not knowing” is called ‘strategic ignorance’. You can validate anything you want by moral egoism/situational ethics. It is very easy to rationalize being illegal, stupid et al. As long as it is OK for you, then it must be OK.
Lastly we have the consumers. The PBS teacher noted that she was now on a path that might help her for retirement- she understood the risks she was taking.
No she didn’t. She couldn’t. There is effectively NOTHING offered anywhere that defines what risk actually is- meaning conservative, moderate, aggressive, etc. If anything was needed for consumers, this is step one. Risk is how much you can lose. Not that you CAN lose but how MUCH you can lose.
Every single 401k employee in the United States should have this number for the portfolios they are using. Will they get it? No. None of the brokers masquerading as advisors has any specific ability with a financial calculator. RIAs are the same. CFPs, CPAs, ChFCs, CFAs do but it is limited. Excluding CFAs and CPAs not acting directly as 401k advisors, and you still have no designations with a clue to how to address the real potential risk of loss.
The full description is too detailed here- do some homework at my site (need to know how to use a power function). But the essence is that one can do a few keystrokes on a personal financial calculator (there are no calculators on the web to do this) and determine (hypothetically) how much money might be left in a portfolio after a hiccup in the economy/market (they are not the same).
For example:
If, after 10 years a major bad economy/market should occur, it may show that the portfolio would only have 60% of total assets left. Not 60% of any gain. 60% of the total holdings.
A different portfolio allocation might show 40% left. And so on.
Maybe having 80% left might be considered a conservative portfolio overall (there are NO set guidelines anyplace so the words themselves have no meaning- or mean something different for each person.)
60% left is moderate
40% left is aggressive
and so on.
This is mandatory for every investor worldwide (not just 401k accounts)- otherwise no one truly understands what risks they are actually taking. Almost every unique portfolio allocation can be compared to another. And another. And another. And no matter who does the calculation, they are all using pretty standard statistical inputs (i.e. standard deviation) from the likes of Morningstar. No more guessing, no more lies, no more confusion. (Yes there are caveats but are not addressed here.)
So there you have almost the first key element to 401k investing. That a fund may be cheaper than another is valid- but it is the allocation of the various cheap funds that determines what the financial exposure is to the employee.
Simple, useful, effective.
So, will this work by itself over time in reducing extensive losses?
Probably not unless by luck.
The effort describes the potential magnitude of the LOSS but NOT the risks that can CAUSE the loss (causation).
And here is where the PBS special did a dirty disservice to its viewers. John Bogle made clear statements that with the fees in line, the only thing that investors needed to do was buy and hold a basket of index funds through thick and thin, ups and downs.
WRONG. (Admittedly he usually suggests a move to bonds as one gets older. OK- tell me what bond funds are viable now?)
It is how much money you will have available when you retire.
The losses of 2000 and 2008 have devastated retirements that will never recover. Such economic upheavals were known before the recessions hit via the inverted yield curve. The inverted curve has been a 100% correct indicator of an upcoming recession. It does not say when it will happen (average about 13 months), how long it will last nor how bad it will be. Recessionary losses (500 index) average 40%+. Losses in 2000 were 44%; losses sustained in 2008 were 57% top to bottom. So why did not advisors notify 401k employees of the potential hazard? Is that not a duty of a fiduciary? Or is to stand around and watch Rome burn??
I estimated that there was an 85% chance of a recession in this decade and a 50% chance of two recessions. Bogle recently stated that he anticipated two 50% losses in the stock market in the next decade.
That, I believe, is not a good investment. Try to tell that to younger investors- you put money into this account/portfolio/allocation I recommend but be aware there is a pretty good chance that you are going to lose 50% of all monies invested twice every decade. And when it happens, I am just going to tell you to sit there.
I don’t think so bunky.
Of course the naysayers would say that is market timing with the potential to get out at the top and in at the bottom. No, it is risk melioration. All investing, I submit, starts with how much risk is being taken for every dollar anticipated. Admittedly the 1990s buried any thought of risk since everything went up. I disagreed when teaching and told students what would they do when the market did/might change similar to 1973/1974. Of course that was heresy. But at least I tried.
But while real life sunk into some, advisors are not doing the homework to do better. At best is the use of all types of products that supposedly will hinder/control/stop another market loss. I disagree in that correlations will still go to one. Further, many of these new hedging products are untested. In essence, more investors are scared of the market- and rightfully so if the advisors are not doing the reading necessary to be professionals.
So to all that either liked or dislike the PBS special, so what? It is the losses to be sustained on a woefully financially literate public (see research by Lusardi). The next recession will further destroy retirement planning because the consumer will now just hunker down further. Considering the added incapability of Washington with a budget, saving or investment, I don’t really blame them
It is possible to teach risk to 410k participants. You don’t need a millions charts and futuristic returns like the Congressional Budget Office that shows no recessions for a decade. It is possible to address the causation but the depth of the analysis is beyond consumers. The problem is that it is unquestionably beyond the supposed ‘fiduciary’ that has a series 7 or just one semester on money.
NOTHING IN ALL THE WORLD IS MORE DANGEROUS THAN SINCERE IGNORANCE AND CONSCIENTIOUS STUPIDITY
Martin Luther King Jr.
Is there a product that can produce a return at an acceptable risk even in view of the market drops precipitously? Yes- it is called an indexed annuity. Are they available? Yes. Should you use one. Not a chance. The industry has layered them with fees and contractual elements that are so bizarre and confusing that it is impossible to figure out “who’s on first’.
Yet, properly developed, they could be used by most corporations, governmental agencies et al as the defacto investment- perhaps controlling them similar to a defined benefit pension. Not perfect- but what we are doing now sucks.
Of course the mere thought of this is major heresy to the industry since it would kill sales of stocks and mutual funds by the billions. And I have no idea who would take on the effort to produce a low fee product. However it would solve a majority of the retirement issues looking forward. And it would allow workers to get on with their lives- albeit still with financial illiteracy. But they were screwed anyway and at least this gives them a chance.
The focus on fees, ipso facto, was a waste of PBS film.
Errold F. Moody Jr.
PhD MSFP MBA LLB BSCE
Life and Disability Insurance Analyst
Registered Investment Adviser
EFMoody.com
Author: Financial Planning Fiduciary Standards under Dodd Frank (2012)
The Failure of Securities Arbitrations (2013
Errold,
Here we go again. It took all of this work to say that fees are important, but not THAT important. From a clients POV, fees increase risk, return no value, reduce returns and nest egg over long periods of time. That’s enough for me.
I love simplicity with broad diversification with low cost indexes and a diversified bond allocation based on my age. Does this illuminate risk? Not in the least. The way to learn risk is watching your portfolio lose value and hang on tight and watch it come back. It always comes back, we don’t know when or how, but it does. The only thing you trust is that the broad economies will grow over time by investing in all publically traded companies, all 13,000 world wide. This strategy illuminates the conspiracy theories that have existed between institutions since time immoral: the politics, regulations, academia, Wall Street, never trust anybody, any one idea, any one investment/security nor any one gem and insurance product that is “sure bet” to make you rich. Bogle would agree to not trust him, he is that great a man.
Bogle understands that investors need to take equity risk by investing in all companies. Companies have boards who only want to grow. Have you heard of a corporation that is traded on the exchanges whose board says that we will plan on NOT growing next year?! I don’t think so. Those kinds of statements are never spoken. I believe that with people working and companies growing with products that give people a better world to live in is worth my trust.
If there is Armageddon, then we are all doomed. I shutter to think the price some people are paying because they hold themselves up in a fortress in the mountains waiting for that financial Armageddon. Will it happen? Who knows. What is curious about your post is that many claim that the PBS broadcast will scare people away from planning with their 401. Hmm…you clearly are making a case that something else is going on. Sure, its uncertainty. You could not have helped me explain it better than you did.
Need to read our book, we talk about risk and uncertainty. Nothing will get rid of uncertainty, NOTHING! Risk will always be there. The regs, financial education, SEC, government, corruption, corporations, sales people, insurance companies, brokers and even that diversified portfolio with low cost indexes will not illuminate risk and uncertainty! Even those people held up in their fortress, they quality of life is lowered to survival. What kind of life is that, preparing for something that will not happen.
Let me give you another hint, if you think todays world is rabid with uncertainty and chaos because everybody is corrupt, try living in the dark ages. By comparison, we live in a relative boring planet. Yes, there are lots of problems with hunger, starvation, wars, etc, but civilization has come a long way baby and despite humans enormous foibles.
Ok, So humans are pitiful and weak, but what is the alternative? Personally, I am so grateful of living in the 21 century. My grandparents had a hard life, as tenant farmers in Italy and setting in northern Wisconsin at the turn of the 19-20 century. Despite getting wounded in Nam and getting cancer, my life is so much better than theirs and for that I am truly grateful.
People don’t care about my idea or yours. Getting mad will not get you anywhere. You have to keep trying and have a positive passion for what you do, not keep blaming others on their lack of intelligence, credentials, degrees, common sense and all of the dozens of reasons why people are so stupid.
I agree, regs will not change the industry one IODA.At LAUSD, we have a district policy that insurance agents are not permitted on school property to make presentations and talk to teachers, but they still do it in our faces. What will inform the industry and demand good quality plans is PBS broadcasts like this one.
I have know Crystal Mendez for almost a decade. She understands risk. Believe or not the three teachers in the show are the most successful investors. At age 32, she has $115,000 as a single women. Her story is the same as mine, she was sold a fixed annuity at age 22, as I was back in 1985, fixed annuities for our 403b plans. If annuities are acceptable, why don’t the pension plans use them? Answer, too costly.
We both got out and paid those horrific surrender fees, but its the same problem over 3 decades. She and her fiancé came to my informal information group that I started to help my colleagues stay away from the annuities and the sales force. She is now very successful. Dan and I and her fiancé are very proud of her. She was the featured teacher in a front page article on 403bs in the Los Angeles times series of retirement articles in 2006. She is quite famous.
At 32 years old, Dan and I had $0, zilch, nothing saved for retirement. Together, we had about $115,000 in our early forties, but we still came out find with our nest egg. That’s why our book is called Late Bloomer Millionaires. We are bona fide late bloomers. You should be proud that a couple of yaw-hoos learned the investing process with low cost indexes and broad diversification across all companies throughout the world and a mix of bonds. Which bonds you ask? A diversified list of high quality, intermediate term ibonds, TIPS, corporate bonds, investment grade, treasuries and our total portfolio is 30% equities and 70% bonds. YTD gain is 5%.
This allocation lost about 11% during 2008, and it came roaring back after 4.5 years of bull market growth, not because we are smart or knowledgeable, but because we took 30% equity risk with low cost indexes in Vanguard and the companies still keep on growing and developing.
Take care,
Steve
Any investment that can take 50% of an investment is the wrong, wrong, wrong. Shame on any organization or individual willing to tolerate this.
And that loss grows and grows the longer money stays in the high cost 403(b)/457/401K investment after retirement.
Consumers need to understand the potential loss to fees. Making this crystal clear is important. Now that’s a risk everyone should be able to get their arms around. And sooner is better than later. Mr. Moody makes many, many good points. Most of his points, however, I’m certain the average person just can not deal with. He was speaking to the wrong audience. The right audience apparently won’t listen to him. Too bad. They need to listen to him.
I’d like to suggest Mr. Moody come back to this forum and make some points that teachers can implement.
I believe that is what Steve is doing.
To most of what Mr. Moody said, as we used to say in the military, I think the response would be: “That’s way above my pay grade.” So, collectively our mission should be to get the message across to our local Pols, our unions, our school boards, our school administrators, and probably most importantly of all–to every teacher we know–that the impact of high fees of financial products.hawked in the school cafes will be detrimental to the wealth/health of teachers. It is past time for rid our schools of high fee products.
Years ago, the Federal Government devised their own version of the 403(b)/457/401K. Their plan is called Thrift Saving Plan (TSP). The fees associated with the TSP are less than 10 basis points (0.10%). Certainly if the Federal Government can devised a way to provide a 403(b)-like retirement plan, the individual school districts can figure out to join hands and provide something similar at the right cost.
In the meantime. anyone who wants to understand the impact of high fees should use this free website:
http://www.401Kfee.com/how-much-are-high-fees-costing-you
K-12 employees need to find alternatives to their high fees investments. There are options available. Bless anyone who will help them do that.
Press On,
Ted.