Los Angeles Unified School District and United Teachers Los Angeles All Day Financial Investment Seminar.

There is a lot of information in this one post! I tried to do the impossible: illustrate and discuss the investment seminar main points in one post. It’s impossible and will be overwhelming if you had not attended. My hope is that you will glance over this post to get an idea of what kind of information is presented and then take the time to attend the next financial seminar. It is jammed packed with great information about how to create a 403b or a 457b retirement plan with LAUSD that will not get anywhere else in our district. If you work with another employer, take the ideas presented here and ask your employer to offer a similar financial workshop about the company’s retirement plan.

For example, everybody should see The Retirement Gamble!

PBS Frontline “The Retirement Gamble” Crystal Mendez

Sandy Keaton, UTLA Retirement Issues Chair, who coördinated this event, and I showed the first 3 minutes of the PBS Frontline’s “The Retirement Gamble” first thing to set the mood about learning to invest with our 403b and 457b LAUSD plans. LAUSD elementary teacher Crystal Mendez was featured in this broadcast. She and her new hubby, Roman, stopped by to say a few words (got married last month). She encouraged our teacher colleagues to learn investing basics and revealed that her account had risen to an astonishing $160,000 from the Frontline report which said $115,000. Those that don’t know Crystal Mendez need to know her more, a lot more. She is an amazing young woman and her retirement plan is established well beyond most people twice her age, she is only 33.

How could an elementary teacher save that much money at such a young age? Simple she started young and she pays attention to her money. She did this herself and so she is an inspiration for teachers to get out of those horrible fixed indexed annuities and invest in genuine investments–low-cost 457b mutual funds. I urge you to watch the entire 50 minute episode, click here and learn more about Crystal and how she was the most successful featured person interviewed in the documentary.

Rick Rogers

Our main speaker was Rick Rogers. Rick is a Consultant, Vice President and Director at Innovest Portfolio Solutions. He did a great job illustrating how the stock market works and the long term consequences of its returns.

His basic points: Biggest problem is not setting goals and never having a budget, which leads to the third is not tracking your money. Here is his best chart was the “Risk of Stock Market loss over time,” 1926 to 2013. Rick Rogers Risk of Stock Market Loss Over Time

The returns were tracked by year, five-year average, and ten-year average. If an invest and kept your money in the market for at least five years, your chances of losing money go down significantly. There will always be a risk, but thinking long-term helps manage stock market risk.

Dan and I disagreed with Rick about the asset allocation for retirees. He suggests that retirees should have a 50%/50% stock-bond split. Most professional financial advisers want people to take more risk so that you can keep pace with inflation in retirement which is very important.

In our opinion, 50%/50% stock/bond split is too risky. In our situation Dan doesn’t have a pension, only SS and I will have a tiny SS benefit because of the offset, so essentially, we don’t have lucrative fixed accounts that provide a high retirement income. In fact, we are structuring our retirement lifestyle to reduce our spending on home and car energy (electric cars and solar energy). Energy costs are sure to risk over the years. We have no energy bill, no gasoline, no expensive car maintenance.

Rick showed a funny Candid Camera episode. It illustrated a “following the herd” mentality. The location was an elevator. The elevator showed the one “subject” doing exactly what everybody else was doing. Everybody else in the elevator was the Candid Camera crew. The crew did strange things in the elevator, such as taking their hat off and putting back on or facing various directions in the elevator, the subject followed through on everything! Here is the YouTube clip of the original Candid Camera show. It’s hilarious!

Rick was pointing out that people will panic, just like everyone else and sell when the market crashes. Educators too are famous for buying terrible retirement plans because many of their colleagues are also buying Indexed Annuities too. Hard for many people to say no to the aggressive annuity sales pitch.

Vanguard Investors Stay Put

One of the advantages of investing in Vanguard is their policy of not moving your money around from account to account until a certain amount of time has lapsed. Frequent trading in the index mutual funds is prohibited. Vanguard investors tend to stay put anyway during bear markets. We like the fact that Vanguard investors tend not “follow the herd.”

Scott Dauenhauer, Certified Financial Planner (CFP), CalSTRS Consultant and Fiduciary Adviser

Our other professional speaker was our long-time friend and CalSTRS consultant, Scott Dauenhauer. His topic was “Five things you need to know about working with financial advisers.”

1. Work with a fiduciary (Brokers and insurance agents are not fiduciaries).
2. Determine Compensation (Fee-only, Fee-Based and or Commissioned).
3. Establish Competency (Certified Financial Planner and Registered Investment adviser).
4. Perform Due Diligence (Go to FINRA and Brightscope to check backgrounds of potential advisers).
5. Request Disclosure (Conflict of Interest, Fees, Soft Dollars, Fiduciary oath in writing, services covered, Form ADV).

There are several ways a financial adviser gets paid and participants need to know all of them. The most frequently used compensation has been commissioned and assets under management (AUM). Getting paid by the hour is still not popular with clients, although it is one way to verify that the adviser is free of conflicts of interests. When he or she recommends an investment the decision is not solely based on a commission tied to the recommendation. His main point is to find out how much you are paying. The adviser should disclose all of the fees and answer all of your questions.

Below are two forms that Dan and I handed out to help the workshop participants evaluate an adviser. It’s our nonprofessionall approach to evaluating a financial adviser. We want to make it entertaining and informative so that you can protect yourself from the sharks that are everywhere.

Click here: Evaluation Financial Advisers

Click here for Fiduciary Oath. This oath is from the National Association of Personal Financial Advisers. Use it with a potential adviser. Click here for NAPFA website.

Dan and I

Dan and I presented at the end of the day. We started by simply saying that you heard the two professionals giving you all kinds of financial information, probably too overwhelming. We are going to present what happens when two regular folks actually use the information, learn investing, making mistakes and come up with a plan. We have never taken any finance course in our life, we are teachers too.

Some people commented to us that they like our candor especially when it came to our investing mistakes. Our main theme was the hardest for most people even experienced investors to grasp. DIVERSIFICATION by using all of the asset classes, small, MED, large cap, international and bonds. Rick had covered those asset classes in the morning, so we showed how we used them in our portfolio and what kind of returns we earned in the last ten years when we finally got it together.

All of the presenters come to the front to answer questions. We were impressed with most of the 40 participants stayed till 3:00 PM!

Next time your employer offers a financial workshop, you will never regret that you attended. 20 years from now, you will thank yourself. Don’t get caught saying in 20 years that “I wish somebody told me about this 20 years ago.” You are now officially informed to learn some of the basics and have fun too.

Below are LAUSD 457(b) Options:

 

Cookie Cutter Plans help get people started right away. Below are six choices in the 457(b) plan that are already diversified between stocks and bonds.

1. Vanguard Wellington
2. Vanguard Wellesley
3. 2020 BlackRock Target Date
4. 2030 BlackRock Target Date
5. 2040 BlackRock Target Date
6. 2050 BlackRock Target Date

Below is a work in progress. Information could change at any time. It lists all of the current LAUSD options. They are categorized as high-cost 403(b) plans (avoid), low-cost 403(b) plans and low-cost 457(b) plans. Take this form to your fee-only financial adviser to help you set up your long-term retirement plan.