Teachers: what are your best personal finance tips?

Non-investing personal finance issues including insurance, credit, real estate, taxes, employment and legal issues such as trusts and wills
health teacher
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Re: Teachers: what are your best personal finance tips?

Post by health teacher » Sun Jun 04, 2017 7:49 am

donaldfair71 wrote: 5. Don't marry another teacher (I broke this rule)
When it's time to retire, you can both be on individual insurance plans and it'll save you big time. Many of the older teachers I work with can't retire because adding their spouse to their insurance costs around $700 a month. Who knows what the future holds though.


Another thing to consider right to work states. My union gets on my nerves sometimes, but there is no denying I have better working conditions than my wife.

sschullo
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Re: Teachers: what are your best personal finance tips?

Post by sschullo » Sun Jun 04, 2017 8:57 am

Welcome to the struggle. Some of us public k-12 teachers have written books, and have started websites. You know one of the most common cliche's in our profession when constructing lessons is to not reinvent the wheel. Below is a list of all that has been done, the websites, books, and almost 30 newspaper and online articles all saying the same thing for two decades, that the 403(b) for public k-12 is best described by either William Bernstein or a reporter: "[teachers] find themselves in one of the dankest, foulest-smelling cellars of the financial world--the 403(b) plan."

Newspaper and Online 403(b) Reports (1994-2017)
1. Where to invest a 403b: almost anywhere by Melynda Dovel Wilcox, Kiplinger’s Personal Finance, Feb. 1, 1994. (Note: This article discussed only transferring from an annuity or high fee vendor into a low-cost mutual fund).

2. Fighting for 403b funds: With Annuities, you’re stuck with extra fees by Kevin McCormally, Kiplinger’s September1997 (Note: I learned about this great article after Kathy Kristof’s article).

3. Protect Yourself from American’s Flawed Pension Plans. By Andrea Rock, December 1, 1997, MONEY Magazine.

4. The Fourth R: It’s Retirement, and for many teachers the arithmetic is narrow investment choices is unsatisfactory. If you are persistent you may be able to get your employer to broaden your choices. Kathy Kristof, Los Angeles Times, January 18, 1998.

5. For Teachers, Object Lessons From the 401(k) by Richard A. Oppel Jr. New York Times, June 13, 1999.

6. Public sector retirement savings plans often are accompanied by hefty fees that reduce returns by Helen Huntley. St. Petersburg Times Online Business, September 26, 1999.

7. 1st Step in Teacher’s Lesson Plan: Crash Course in Investing by Suzy Hagstrom. Los Angeles Times Makeover special, December 21st, 1999.

8. The Fleecing of 403b participants by CBSMarketWatch.com May 30, 2000.

9. Feds issue annuity warning by Marcy Gordon, Associated Press, published in the Daily News, June 6, 2000.

10. Special Report: Shark Attack! Investors in 403b plans, beware: You are especially vulnerable to predators by Don Kuehn, American Teacher. American Federation of Teachers (AFT) trade magazine, June 2000 (Details of this extraordinary article in Chapter 6).

11. Insurance Agents Weigh in on Column Taking Industry’s Bad Apples to Task by Liz Pulliam Weston, Sunday, June 18, 2000 Los Angeles Times. Ms. Weston’s response to a complaining insurance agent was brilliant.

12. Retirement plans come in various flavors—403bs can leave a bad taste by Paul J. Lim. US News and World Report (July 10, 2000).

13. Retirement Savings Plan Costs Teachers, Lawsuit say by Mary Doclar and Mike Lee. Fort Worth Star-Telegram, Sunday, September 17, 2000.

14. Savings Shock by Michele M. Capots. Education Week, Vol. 12, Issue 7, Page 9, April 2001.

15. Changes to 403b plans help teachers save by Sandra Block. Your Money, January, 2002 USA Today.

16. Teachers' 403b plan nonvirtues 'extolled', San Diego Union, 2004 by Lynn O'Shaughnessy.

17. Costly Lesson: Some of the biggest names in insurance peddle lousy retirement plans with high fees and low returns. One and a half million teachers blithely signed up for these dogs--often with their unions' blessing. Forbes Magazine by Neil Weinberg, 2005.

18. Teachers get harsh lesson on investing, Saving for retirement harder with 403b law, San Diego Union, by David Washburn (2005).

19. As Teachers Sock Money Into 403bs, Few Defenses Exist, The WSJ, Aug. 25, 2005 by Tom Lauricella.

20. Teachers investment plans flunk, 403b plans could hardly be worse: fees are outrageous, there’s no match and there’s no oversight, MSN Money, 2005, by Timothy Middleton.

21. Fleecing 403b plan participants, W. Scott Simon. This is an excellent eight part series of articles tearing the 403b system apart, from total lack of fiduciary responsibility, high costs and the insanity of nobody in the educational establishment looking after the teachers' best interest. Mr. Simon is a Morningstar Advisor contributor.
Fleecing 403b Plan Participants April 5, 2007
Fleecing 403b Plan Participants (Part 2) May 3, 2007
Fleecing 403b Plan Participants (Part 3) June 7, 2007
Fleecing 403b Plan Participants (Part 4) July 5, 2007
Fleecing 403b Plan Participants (Part 5) August2, 2007
Fleecing 403b Plan Participants (Part 6) October 4, 2007
Fleecing 403b Plan Participants (Part 7) November 11, 2007
Fleecing 403b Plan Participants (Part 8) June 5, 2008

22. Prepare for Changes in 403b Plans, Wall Street Journal, MarketWatch.com, 2007.

23. Fees take huge toll on 403b plans, Bankrate.com, by Leslie Hggin Geary, 2007.
24. How to avoid 403b pitfalls, Bankrate.com, by Leslie Haggin Geary, 2007
25. California teachers' supplemental pension plan is flawed, study finds. Los Angeles Times, by Walter Hamilton, March 2, 2011.

26. Teachers' 403b Plans See Big Changes, Wall Street Journal, January 4, 2012.
27. Law limits L.A. school district's efforts to simplify 403b plan, Pensions and Investments. By Robert Steyer, July 9, 2012

28. New York Times. Series of five articles on Public k-12 403(b) plans. October, 2016 (See Below for link to all five articles).

Websites devoted to 403(b) and its many problems.

#1 – Dan Otter is a teacher and LONG time crusader for better 403(b) plans and increased education among teachers about 403(b)’s. Dan has either been through or heard it all when it comes to 403(b) issues. As is the case with most teachers Dan was approached in his classroom early in his career by an insurance salesman pitching an expensive and inappropriate annuity-based retirement plan. Dan has a book and podcast on the topic of 403(b) and manages the forums at his website http://www.403bWise.com where teachers share and discuss their experiences with 403(b) retirement plans. The media frequently cites him for his experience and knowledge about teacher retirements.

#2 – Andrew Hallam writes at AndrewHallam.com and is a former teacher and long-time student of investing. Andrew amassed over $1 million before the age of 40 and wrote a book about it. He continues to write about investing and retirement at his website. Read my review of his book here: https://www.amazon.com/gp/customer-revi ... 0470830069

#3 – Steve Schullo is the webmaster of this blog http://www.latebloomerwealth.com, the author of two books and a retired Los Angeles Unified School District teacher who writes at LateBloomerWealth. Steve is frequently cited by media outlets for his experience and wisdom about the 403(b) situation facing teachers (high fees, low returns) and continues to be a staunch supporter of a better system for teacher retirement systems. Books: Late Bloomer Millionaire and Fighting Powerful Interests: Educators Challenge Tax-sheltered Annuities and WIN! (free pdf download from Steve’s blog).

Below are my latest quotes in Kiplinger and the massively comprehensive 403(b) report in the New York Times 5 Part series:

Kiplinger Magazinehttp://www.kiplinger.com/article/retire ... 401-k.html (January 2017).

2. New York Times (October 2016-November 2016): https://www.nytimes.com/2016/10/29/your ... .html?_r=0 Note: The NY Times published a series of five articles on the 403(b) with public k-12 school districts, not just the one I was quoted in the link here. Read them all. Links are below. You and your colleagues will understand and protect yourself from the hideous over-the-top aggressive sales pitch from annuity agents who have state insurance laws protecting them at the expensive of naive' teachers. The series ran from October 21, 2016 through November 5, 2016.

NY Times 403(b) Part 1: https://www.nytimes.com/2016/10/23/your ... pe=article
NY Times 403(b) Part 2: https://www.nytimes.com/2016/10/27/your ... pe=article
NY Times 403(b) Part 3: https://www.nytimes.com/2016/10/29/your ... ities.html
NY Times 403(b) Part 4: https://www.nytimes.com/2016/11/03/your ... plans.html
NY Times 403(b) Part 5: https://www.nytimes.com/2016/11/05/your ... -tips.html

#4 – Ed Mills is known as the “Millionaire Educator” and writes at writes at www.MillionaireEducator.com. Ed and his wife have amassed nearly $1 million at the time of this post…on a teacher’s salary. Ed and his wife have used an amazing technique for saving and investing as well as taught overseas for a few years to amass enough money that they could put a huge portion of their salaries directly into their retirement accounts. They now regularly transfer school districts to roll their 403(b)’s into IRA’s with Vanguard (who I heartily endorse).

#5 – Tony Isola is a former teacher and Certified Financial Planner (CFP) who writes at http://www.TonyIsola.com. Tony is a fired up advocate for teachers who is heated about the 403(b) options provided to most teachers. Tony knows both teaching and investing and provides a unique voice from someone working tirelessly on your behalf.

#6 – Dave Grant is also a Certified Financial Planner (CFP) who writes at http://www.FinanceforTeachers.com Dave is married to a teacher and shares a similar story about the 403(b) market available to teachers. Dave is a speaker and author as well as a trustworthy teacher advocate. Dave is experienced in dealing with a broad range of financial options for teachers and is available to come speak at schools in the Chicagoland area.

#7 – Scott Dauenhauer is another Certified Financial Planner (CFP) who writes his blog Teachers Advocate: http://teachersadvocate.blogspot.com/ He is one of the brains that created the best 403(b) in California under the guidance of the state’s teacher pension system: Pension2. He just released his 2nd book for financial advisors who want to work with k-12 public school teachers: Wild West: Providing Fiduciary Advice to Public School Employees

#8 - Ed LaFave early in his career as a software engineer he was taken advantage several times by financial institutions. Eventually, enough was enough and he learned how to invest on his own. He writes, "I’ve been paying it forward by spreading that knowledge ever since. His wife works for OCPS (Florida teacher) and we went through the nightmare of setting up her 403b in March of 2017. We’re now committed to preventing OCPS employees from being victimized by that same process." https://educatorsfightingforfairness.wo ... b-vendors/

Yet after all of this advocacy, nothing much has changed!!!! Even with the recent DOL changes that require some form of fiduciary standards for 401(K) plans, our 4 million teachers are not protected by the annuity sharks one iota! Unfortunately, another generation of teachers will fall prey to the annuity sharks that are everywhere, in classrooms during recess, cafeterias, union halls, every major school district professional development offering free lunches.

Once again, welcome to the struggle. I will pm you a message about the latest development that may come to fruition.
Steve
Last edited by sschullo on Sun Jun 04, 2017 11:22 am, edited 4 times in total.
Public School K-12 Educators: "Ask NOT what your annuity sales person can do for you, ask what you can do to be a Do-It-Yourselfer (DIY)."

DTSC
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Re: Teachers: what are your best personal finance tips?

Post by DTSC » Sun Jun 04, 2017 9:04 am

I'm not a teacher, but heard a great interview of the author of this website. http://www.millionaireeducator.com/

livesoft
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Re: Teachers: what are your best personal finance tips?

Post by livesoft » Sun Jun 04, 2017 9:06 am

@sshullo, thanks for the comprehensive summary of all these other sources of information.

But with this massive amount of info, why is it still a struggle?

After all, TIAA-CREF has been around since the 1950's and higher education places have used TIAA-CREF for ages and ages. I've been a participant in a TIAA-CREF 403(b) since the 1980s, so it's not like all 403(b)'s are terrible.

Are school administrators and union officials so corrupt and being bought off that nothing happens? You know we don't want to blame the victim, but I can't help myself.
This signature message sponsored by sscritic: Learn to fish.

sschullo
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Re: Teachers: what are your best personal finance tips?

Post by sschullo » Sun Jun 04, 2017 9:29 am

livesoft wrote:@sshullo, thanks for the comprehensive summary of all these other sources of information.

But with this massive amount of info, why is it still a struggle?

After all, TIAA-CREF has been around since the 1950's and higher education places have used TIAA-CREF for ages and ages. I've been a participant in a TIAA-CREF 403(b) since the 1980s, so it's not like all 403(b)'s are terrible.

Are school administrators and union officials so corrupt and being bought off that nothing happens? You know we don't want to blame the victim, but I can't help myself.
The teachers' unions absolutely hate TIAA CREF. And TIAA made mistakes too by releasing a flawed study making pension plans look bad. Thats a huge no, no. But it's more than that, TIAA never understood the huge cultural differences between k-12 and higher education, you have to put reps in front of k-12 teachers. The annuity monopoly understands the public k-12 world 100%. But TIAA never did. They were our TPA in LAUSD and had two reps to cover 700 schools. The annuity industry had hundreds.

I still like TIAA as I have a portion of my fixed 403b account in their 3.0% Traditional Annuity (TIAA annuities have never charged surrender costs, liquid, and principle is guaranteed).

The knee-jerk reactions is that school district people and unions are corrupt. No, they're not, its the 403(b) system controlled by state insurance commissions that are 100% corrupt. We have tried twice to change our insurance code by were beaten back massively by both the industry and our state teachers union, CTA. We wanted to modify it so that 403b vendors are competitively bid like all other district procurements, computers, desks, books. But not 403b vendors. If a vendor complies with the IRS and information sharing agreements, the high-cost vendor must be made available. Our advisory committee cannot do anything to make the 403b more transparent or limit those hideous high costs. THATS THE CORRUPTION with the 403b(b). There is no protection from the ERISA. (CTA apparently released a 403b plan, but little is known about it except on 403bcompare.com).

Why aren't teachers complaining? That's a huge mystery to all of us on the advocacy side. In all of my presentations, my colleagues are so in the dark with these plans, many do not know what a stock is, and these are the folks that want to know more!!!! Just think of the 70% who will never save or are interested.

There is no infrastructure to continue the conversation. When they come to a workshop, I can tell they had little prior discussion with anybody. And when they leave a workshop, the conversation stops. Very few come to my blog or the 17-year-old 403bwise.com. The educational profession does not talk about money, and there is a long history about that. Teachers need to focus on students, not on economic issues. This sad situation makes the annuity people laugh all the way to the bank. They thrive in a nontransparency, nondiscussion environment.

HOWEVER, there are many investment savvy teachers everywhere. I think at least one is in every school in America, but they remain silent. If 10% of them spoke up, the system might be changed overnight.

I think it's also the pension plan. Just by the behavior, or lack thereof, 70% of teachers across the nation are relying on their pension plan by not saving, while just 30% are saving in annuities or high-cost mutual funds. There are about 20% investing in mutual funds, but most of those are high-cost advisory firms.

Stay tuned. We have secured another advocate. We have to keep pressing no matter what.
Last edited by sschullo on Sun Jun 04, 2017 10:09 am, edited 1 time in total.
Public School K-12 Educators: "Ask NOT what your annuity sales person can do for you, ask what you can do to be a Do-It-Yourselfer (DIY)."

Ron Ronnerson
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Re: Teachers: what are your best personal finance tips?

Post by Ron Ronnerson » Sun Jun 04, 2017 9:46 am

chipperd wrote:
Ron Ronnerson wrote:I'm an elementary school teacher in the Bay Area. My wife works 30 hours a week for a small business. We're both 42. I earn $100k per year and she earns about $45k. This is middle class as I teach in Silicon Valley and the median home price around these parts is in the seven figures. We've got about $400k in savings & investments. Our retirement expenses should largely be covered by pension and social security. We save about $40k/year in retirement accounts - basically my wife's salary.

One thing that I realized early on was that watching how much we spent on expenses produced a greater bang for the buck than earning more money. In my specific situation, the following would happen to each additional dollar I earned: 25% would go to federal tax, 10.25% would go toward a pension, 8% would go to state tax, 5% would be gone due to being in the phaseout for the child tax credit, and 1.45% would go to medicare. This adds up to 49.7%.

So, instead, we've set things up a little differently. After taking itemized deductions and exemptions into account, we put enough into retirement accounts that our AGI stays at $110k. This means we get the full child tax credit and also happen to stay in the 15% tax bracket. I don't teach summer school or tutor. My wife works no more than 30 hours a week - enough to get health insurance benefits for our family as the school district I work for doesn't provide these benefits. We don't want to work any more since we're already saving plenty and any additional income would be taxed relatively heavily.

Our family of 3 lives in a four bedroom/four bathroom townhouse in an area with excellent schools. Our approach has been to focus more on spending than earning. It has worked really well as my wife and I are able to spend a lot of time with each other and our 3-year-old daughter and still live very comfortably.

We're on a trajectory to be able to retire in our late 50s. However, I really love my job and may continue to do it for longer than that. I look forward to going to work on most days. Though, to be honest, I don't mind that summer break is fast approaching as I could use it to recharge the tank at this point.
School social worker here. I didn't read all the way through, but became alarmed when you said that part of your retirement expenses will be paid by social security. In our state, (and in yours per quick google search) teachers don't pay into and receive social security. Is this your situation?
I don't pay into social security but wife does. She isn't a teacher. Also, I have over 40 quarters so will get some social security, though it won't be much. Between my pension and wife's social security, we should be in decent shape. To be on the safe side, we're also putting about $42k/year into retirement accounts - invested in a simple three-fund portfolio at low cost.

indexonlyplease
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Re: Teachers: what are your best personal finance tips?

Post by indexonlyplease » Sun Jun 04, 2017 9:51 am

So true teachers are underpaid. I just don't know how teachers can survive with their pay and in South Florida. My wife is a teacher.

The best financial advise is to do what my wife did. Marry someone who makes triple the money she does.

Then max your deferrd compensation plan and Roth IRA.

Ron Ronnerson
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Re: Teachers: what are your best personal finance tips?

Post by Ron Ronnerson » Sun Jun 04, 2017 9:55 am

Needtoknow wrote:
Ron Ronnerson wrote:
anonenigma wrote:
Ron Ronnerson wrote:
We're on a trajectory to be able to retire in our late 50s. However, I really love my job and may continue to do it for longer than that.
Your CalSTRS pension at 58 will have an age factor of 1.8. At age 61.5 (assuming 30 years), the age factor maxes at 2.4. Huge difference.
Yes, it is interesting how the pension numbers can change quite a bit by moving the retirement age just slightly. I played with the CalSTRS pension calculator and assumed the highest salary on the schedule when I retire will be the same as it is today (just for a crude estimate). Here are the monthly pension numbers that come out for my particular case by age (this is for 100% option so that my wife continues to receive the pension if I predecease her):

58: $4600
58.5: $4800
59: $5600 (I get a boost here for having 30 years in the system)
59.5: $5800
60: $6000
60.5: $6300
61: $6500
61.5: $6800
62: $6900
62.5: 7000

If I'm enjoying myself then as I am now, I'll probably keep working into my 60s. However, we're saving $40k/year in Roth IRAs, a 457b, a 403b, and a SEP-IRA so hopefully can retire around 59 if I want to do so.


I am not sure if there is a pension boost just because you get to 30 years. You have to get to age 61.5 and have at least 30 years of service credits. The age factor is extremely important. You have to get that 2.4 age factor to realize that boost.
From the CalSTRS website: "For members under CalSTRS 2% at 60, a career factor (I added the bold) of 0.2 percent will be added to your age factor if you retire with at least 30 years of earned service credit, up to a maximum age factor of 2.4 percent."

So for those hired before 2013, there is a 0.2% increase once 30 years of service is reached. You have to get to age 61.5 to get the maximum 2.4% age factor, but the 0.2% career factor is added even before you reach that age as long as you've got 30 years. So you CAN get the 0.2% increase before reaching 61.5; you just wouldn't be at the maximum age factor. If you look at the numbers I ran, the biggest boost in my case comes between age 58.5 and 59 because I reach 30 years of service at that time. This jump is due to the career factor.

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CyclingDuo
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Re: Teachers: what are your best personal finance tips?

Post by CyclingDuo » Sun Jun 04, 2017 10:24 am

sschullo wrote:Welcome to the struggle. Some of us public k-12 teachers have written books, and have started websites. You know one of the most common cliche's in our profession when constructing lessons is to not reinvent the wheel. Below is a list of all that has been done, the websites, books, and almost 30 newspaper and online articles all saying the same thing for two decades, that the 403(b) for public k-12 is best described by either William Bernstein or a reporter: "[teachers] find themselves in one of the dankest, foulest-smelling cellars of the financial world--the 403(b) plan."

Newspaper and Online 403(b) Reports (1994-2017)
1. Where to invest a 403b: almost anywhere by Melynda Dovel Wilcox, Kiplinger’s Personal Finance, Feb. 1, 1994. (Note: This article discussed only transferring from an annuity or high fee vendor into a low-cost mutual fund).

2. Fighting for 403b funds: With Annuities, you’re stuck with extra fees by Kevin McCormally, Kiplinger’s September1997 (Note: I learned about this great article after Kathy Kristof’s article).

3. Protect Yourself from American’s Flawed Pension Plans. By Andrea Rock, December 1, 1997, MONEY Magazine.

4. The Fourth R: It’s Retirement, and for many teachers the arithmetic is narrow investment choices is unsatisfactory. If you are persistent you may be able to get your employer to broaden your choices. Kathy Kristof, Los Angeles Times, January 18, 1998.

5. For Teachers, Object Lessons From the 401(k) by Richard A. Oppel Jr. New York Times, June 13, 1999.

6. Public sector retirement savings plans often are accompanied by hefty fees that reduce returns by Helen Huntley. St. Petersburg Times Online Business, September 26, 1999.

7. 1st Step in Teacher’s Lesson Plan: Crash Course in Investing by Suzy Hagstrom. Los Angeles Times Makeover special, December 21st, 1999.

8. The Fleecing of 403b participants by CBSMarketWatch.com May 30, 2000.

9. Feds issue annuity warning by Marcy Gordon, Associated Press, published in the Daily News, June 6, 2000.

10. Special Report: Shark Attack! Investors in 403b plans, beware: You are especially vulnerable to predators by Don Kuehn, American Teacher. American Federation of Teachers (AFT) trade magazine, June 2000 (Details of this extraordinary article in Chapter 6).

11. Insurance Agents Weigh in on Column Taking Industry’s Bad Apples to Task by Liz Pulliam Weston, Sunday, June 18, 2000 Los Angeles Times. Ms. Weston’s response to a complaining insurance agent was brilliant.

12. Retirement plans come in various flavors—403bs can leave a bad taste by Paul J. Lim. US News and World Report (July 10, 2000).

13. Retirement Savings Plan Costs Teachers, Lawsuit say by Mary Doclar and Mike Lee. Fort Worth Star-Telegram, Sunday, September 17, 2000.

14. Savings Shock by Michele M. Capots. Education Week, Vol. 12, Issue 7, Page 9, April 2001.

15. Changes to 403b plans help teachers save by Sandra Block. Your Money, January, 2002 USA Today.

16. Teachers' 403b plan nonvirtues 'extolled', San Diego Union, 2004 by Lynn O'Shaughnessy.

17. Costly Lesson: Some of the biggest names in insurance peddle lousy retirement plans with high fees and low returns. One and a half million teachers blithely signed up for these dogs--often with their unions' blessing. Forbes Magazine by Neil Weinberg, 2005.

18. Teachers get harsh lesson on investing, Saving for retirement harder with 403b law, San Diego Union, by David Washburn (2005).

19. As Teachers Sock Money Into 403bs, Few Defenses Exist, The WSJ, Aug. 25, 2005 by Tom Lauricella.

20. Teachers investment plans flunk, 403b plans could hardly be worse: fees are outrageous, there’s no match and there’s no oversight, MSN Money, 2005, by Timothy Middleton.

21. Fleecing 403b plan participants, W. Scott Simon. This is an excellent eight part series of articles tearing the 403b system apart, from total lack of fiduciary responsibility, high costs and the insanity of nobody in the educational establishment looking after the teachers' best interest. Mr. Simon is a Morningstar Advisor contributor.
Fleecing 403b Plan Participants April 5, 2007
Fleecing 403b Plan Participants (Part 2) May 3, 2007
Fleecing 403b Plan Participants (Part 3) June 7, 2007
Fleecing 403b Plan Participants (Part 4) July 5, 2007
Fleecing 403b Plan Participants (Part 5) August2, 2007
Fleecing 403b Plan Participants (Part 6) October 4, 2007
Fleecing 403b Plan Participants (Part 7) November 11, 2007
Fleecing 403b Plan Participants (Part 8) June 5, 2008

22. Prepare for Changes in 403b Plans, Wall Street Journal, MarketWatch.com, 2007.

23. Fees take huge toll on 403b plans, Bankrate.com, by Leslie Hggin Geary, 2007.
24. How to avoid 403b pitfalls, Bankrate.com, by Leslie Haggin Geary, 2007
25. California teachers' supplemental pension plan is flawed, study finds. Los Angeles Times, by Walter Hamilton, March 2, 2011.

26. Teachers' 403b Plans See Big Changes, Wall Street Journal, January 4, 2012.
27. Law limits L.A. school district's efforts to simplify 403b plan, Pensions and Investments. By Robert Steyer, July 9, 2012

28. New York Times. Series of five articles on Public k-12 403(b) plans. October, 2016 (See Below for link to all five articles).

Websites devoted to 403(b) and its many problems.

#1 – Dan Otter is a teacher and LONG time crusader for better 403(b) plans and increased education among teachers about 403(b)’s. Dan has either been through or heard it all when it comes to 403(b) issues. As is the case with most teachers Dan was approached in his classroom early in his career by an insurance salesman pitching an expensive and inappropriate annuity-based retirement plan. Dan has a book and podcast on the topic of 403(b) and manages the forums at his website 403bWise.com where teachers share and discuss their experiences with 403(b) retirement plans. The media frequently cites him for his experience and knowledge about teacher retirements.

#2 – Andrew Hallam writes at AndrewHallam.com and is a former teacher and long-time student of investing. Andrew amassed over $1 million before the age of 40 and wrote a book about it. He continues to write about investing and retirement at his website.

#3 – Steve Schullo is the webmaster of this blog http://www.latebloomerwealth.com, the author of two books and a retired Los Angeles Unified School District teacher who writes at LateBloomerWealth. Steve is frequently cited by media outlets for his experience and wisdom about the 403(b) situation facing teachers (high fees, low returns) and continues to be a staunch supporter of a better system for teacher retirement systems. Books: Late Bloomer Millionaire and Fighting Powerful Interests: Educators Challenge Tax-sheltered Annuities and WIN! (free pdf download from Steve’s blog).

Below are my latest quotes in Kiplinger and the massively comprehensive 403(b) report in the New York Times 5 Part series:

Kiplinger Magazinehttp://www.kiplinger.com/article/retire ... 401-k.html (January 2017).
2. New York Times (October 2016-November 2016): https://www.nytimes.com/2016/10/29/your ... .html?_r=0 Note: The NY Times published a series of five articles on the 403(b) with public k-12 school districts, not just the one I was quoted in the link here. Read them all. Links are below. You and your colleagues will understand and protect yourself from the hideous over-the-top aggressive sales pitch from annuity agents who have state insurance laws protecting them at the expensive of naive' teachers. The series ran from October 21, 2016 through November 5, 2016.

NY Times 403(b) Part 1: https://www.nytimes.com/2016/10/23/your ... pe=article
NY Times 403(b) Part 2: https://www.nytimes.com/2016/10/27/your ... pe=article
NY Times 403(b) Part 3: https://www.nytimes.com/2016/10/29/your ... ities.html
NY Times 403(b) Part 4: https://www.nytimes.com/2016/11/03/your ... plans.html
NY Times 403(b) Part 5: https://www.nytimes.com/2016/11/05/your ... -tips.html
#4 – Ed Mills is known as the “Millionaire Educator” and writes at writes at MillionaireEducator.com. Ed and his wife have amassed nearly $1 million at the time of this post…on a teacher’s salary. Ed and his wife have used an amazing technique for saving and investing as well as taught overseas for a few years to amass enough money that they could put a huge portion of their salaries directly into their retirement accounts. They now regularly transfer school districts to roll their 403(b)’s into IRA’s with Vanguard (who I heartily endorse).

#5 – Tony Isola is a former teacher and Certified Financial Planner (CFP) who writes at TonyIsola.com. Tony is a fired up advocate for teachers who is heated about the 403(b) options provided to most teachers. Tony knows both teaching and investing and provides a unique voice from someone working tirelessly on your behalf.

#6 – Dave Grant is also a Certified Financial Planner (CFP) who writes at FinanceforTeachers.com Dave is married to a teacher and shares a similar story about the 403(b) market available to teachers. Dave is a speaker and author as well as a trustworthy teacher advocate. Dave is experienced in dealing with a broad range of financial options for teachers and is available to come speak at schools in the Chicagoland area.

#7 – Scott Dauenhauer is another Certified Financial Planner (CFP) who writes his blog Teachers Advocate: http://teachersadvocate.blogspot.com/ He is one of the brains that created the best 403(b) in California under the guidance of the state’s teacher pension system: Pension2. He just released his 2nd book for financial advisors who want to work with k-12 public school teachers: Wild West: Providing Fiduciary Advice to Public School Employees

#8 - Ed LaFave early in his career as a software engineer he was taken advantage several times by financial institutions. Eventually, enough was enough and he learned how to invest on his own. He writes, "I’ve been paying it forward by spreading that knowledge ever since. His wife works for OCPS (Florida teacher) and we went through the nightmare of setting up her 403b in March of 2017. We’re now committed to preventing OCPS employees from being victimized by that same process." https://educatorsfightingforfairness.wo ... b-vendors/

Yet after all of this advocacy, nothing much has changed!!!! Even with the recent DOL changes that require some form of fiduciary standards for 401(K) plans, our 4 million teachers are not protected by the annuity sharks one iota! Unfortunately, another generation of teachers will fall prey to the annuity sharks that are everywhere, in classrooms during recess, cafeterias, union halls, every major school district professional development offering free lunches.

Once again, welcome to the struggle. I will pm you a message about the latest development that may come to fruition.
Steve
Steve - Boom-ba-da-BOOM!

Great post and resources.

Pitchforks, clubs, and torches to beat up on the 403b industry and having the states and HR departments grow a pair to negotiate with them. We are a combined household (one in higher education, one in public K-12 education). Some of the usual suspects (TIAA, Voya, VALIC, Mass Mutual, Horace Mann, state pension, etc...). Our state has done a pretty decent job of negotiating with the 403b companies (at least the wrap ER fee is down to .17 - .20 depending on which company, and they all offer enough low cost Vanguard funds to get a decent 2, 3, or 4 fund portfolio at the Institutional or Admiral ER fee level). Those are voluntary plans over and above the mandatory state pension (for the K-12vers). However, there are plenty of fund choices peppered with over 1% ER fees as well that continually has us banging our heads wondering when the industry is going to wake up and stop fleecing those in education.

Enough ranting, for now. Your post(s) are excellent and cover it quite well. I have many colleagues in higher education who don't even know what an ER fee is. Hmmm.....if that doesn't open a door for fleecing, I don't know what does?

The two of us survive on being a dual income household living in an area that is not a high cost of living. We bought a house within our means. We only pay cash for cars. We've saved for 30 years. We sent our kids to college and they have no debt/student loans.We've reached some important financial milestones - all on more meager salaries. Luckily, our state is not one that excludes teachers from getting SS - so we are fortunate compared to those who live and teach in states that do.

For the OP: the simple 50/20/30 rule should be pounded into teacher's psyche. Or the simple rule of starting in your early to mid-20's, save the equivalent of one hours wage each and every day of your life.

That being said - don't forget the perk: Summers are off! 8-) 8-) :D

EdLaFave
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Re: Teachers: what are your best personal finance tips?

Post by EdLaFave » Sun Jun 04, 2017 10:28 am

livesoft wrote:with this massive amount of info, why is it still a struggle?

After all, TIAA-CREF has been around since the 1950's...You know we don't want to blame the victim, but I can't help myself.
First of all, let's not hold TIAA up as model citizens. The cheapest quality portfolio you can build costs 0.63%, which consumes more than a quarter of real profits over 30 years (assumes 6% returns, 3% inflation). On top of that they offer funds that charge as much as 2.5% so for the less than savvy investor things can get a lot worse. I wrote about my experience with TIAA at OCPS here https://educatorsfightingforfairness.wo ... plans/tiaa

Secondly, the culture of victim blaming has got to stop. It only gives cover to these financial predators because it creates a culture where people are afraid to ask for help or speak out...within a culture where money is already taboo. Plus the school systems and financial institutions have rigged a very clever trap specifically targeted at educators. I wrote about that here https://educatorsfightingforfairness.wo ... d-not-you/

...we could sit here and wag our fingers at "foolish" teachers and chide them for not doing a "simple" google search but we'd be ignoring human nature and societal forces. We'd be the foolish ones.

gvsucavie03
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Re: Teachers: what are your best personal finance tips?

Post by gvsucavie03 » Sun Jun 04, 2017 10:33 am

Goinganontoday wrote:I love this idea and I have actually toyed around with a similar idea in the past. As teachers, we do not accept it when students say that they just can't understand something. We keep working with that student until he/she gets it. However, all too often, I hear teachers say that they just don't understand finances/retirement planning/medical options, etc., and then they shrug it off and say "oh well." Can you imagine what would happen if we allowed our students to get away with that attitude?!
I completely agree. My colleague I work closely with is the stereotypical "ostrich" who doesn't want to learn anything about insurance or retirement and is scared to death of the stock market.
In my opinion, teachers need to do the same thing that other people do. Create a budget and stick to it. Live below their means. Save for retirement (not just rely on underfunded pensions). Don't give the government an interest free loan throughout the year (fix their tax withholdings periodically). Don't give their district an interest free loan throughout the summer (take the summer paychecks as a lump sum rather than letting the district hold onto teachers' money for longer than necessary).
Another area of frustration for me - tax withholding and our culture celebrating large refunds. I do take my money in 26 pays because it has automated discipline and prevents me from doing something I'll later regret, but that was a conscious decision.
My school district pays pretty well, but I'm constantly hearing from colleagues about how they have no money. It's frustrating since most of them are paid more than I am (I'm a newer teacher). Based on my experience and observations, teachers often believe that they are in some unique financial situation when really they are not. They aren't the top paid profession, but in many areas of the country, they also aren't the worst paid.
Don't forget, we are sold some pretty awful financial products and are aggressively marketed to through NEA and our state/local unions. Lots of teacher friends drive brand new cars, live in expensive 30-year mortgaged houses, and have terrible 403(b) and other investment/insurance options sold to them and they are oblivious to how awful these decisions are for their overall financial health.

gvsucavie03
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Re: Teachers: what are your best personal finance tips?

Post by gvsucavie03 » Sun Jun 04, 2017 10:37 am

indexonlyplease wrote: The best financial advise is to do what my wife did. Marry someone who makes triple the money she does.

Then max your deferrd compensation plan and Roth IRA.
LOL. Tough to get ahead financially on a single-teacher income (my situation in a nutshell). Newbies - MARRY UP!! :dollar

gvsucavie03
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Re: Teachers: what are your best personal finance tips?

Post by gvsucavie03 » Sun Jun 04, 2017 10:41 am

livesoft wrote: Are school administrators and union officials so corrupt and being bought off that nothing happens? You know we don't want to blame the victim, but I can't help myself.
We are struggling with our local EA in explaining to them why we need to get out of our state's union-married, horribly expensive health insurance plan. An identical plan (same national insurance brand, too) is about $250 cheaper PER CHECK from a local, independent financial group, but the rest of the membership is so married to the union brand because of the security blanket (and marketing) factors that they can't rationally see how badly we are being ripped off.

pretzelfisch
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Re: Teachers: what are your best personal finance tips?

Post by pretzelfisch » Sun Jun 04, 2017 11:11 am

Needtoknow wrote:
pretzelfisch wrote:
anonenigma wrote:Do these numbers also include the additional years worked between 58 and 62?

Remember, also, that the longer you stay in, the more likely that there might be pay increases.

If you started out as a sub or worked a partial year, look into whether you can purchase service credit for that time.
The last three years are important, if you have 30 years of service they highest wage within this time span is used to calculate your pension payout. So if you can pickup extra services that bump your salary it will pay dividends for as long as your pension lasts

In California's system, once you get to 25 years of service they look at your one highest year of salary to calculate your pension and not your three consecutive highest paying years.
highest year's salary of your last three years of service right?

livesoft
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Re: Teachers: what are your best personal finance tips?

Post by livesoft » Sun Jun 04, 2017 12:18 pm

EdLaFave wrote:First of all, let's not hold TIAA up as model citizens.
[...]
...we could sit here and wag our fingers at "foolish" teachers and chide them for not doing a "simple" google search but we'd be ignoring human nature and societal forces. We'd be the foolish ones.
I read your web published stuff a few weeks ago when you announced it on the forum. It's all good stuff. Much like the NYTimes series of articles, the folks who really need to get their eyeballs on it probably won't.

In my neck of the woods, the local paper publishes a nice "column" by the Edward Jones office. It is pretty clear that corporate Edward Jones has a strategic marketing plan to provide articles for the local office to try to get published in local papers. That's pure marketing.

Also probably because our ages, my spouse and I get about 5 plate-licker flyers in the mail every week. I was just thinking that any place that had to bribe people with a free meal is not a place to do one's financial business with. In other words, how many flyers have you received in the mail from Vanguard offering a free meal at a local restaurant to tell you about Vanguard products?

So how to get the word out? Well, one way seems to be that if you are married and both working, then at least the couple can compare their employers' plans. That's probably how my spouse could tell that her 401(k) plans were craptacular until most recently.

But if not google, what else is there?
This signature message sponsored by sscritic: Learn to fish.

Needtoknow
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Re: Teachers: what are your best personal finance tips?

Post by Needtoknow » Sun Jun 04, 2017 2:35 pm

pretzelfisch wrote:
Needtoknow wrote:
pretzelfisch wrote:
anonenigma wrote:Do these numbers also include the additional years worked between 58 and 62?

Remember, also, that the longer you stay in, the more likely that there might be pay increases.

If you started out as a sub or worked a partial year, look into whether you can purchase service credit for that time.
The last three years are important, if you have 30 years of service they highest wage within this time span is used to calculate your pension payout. So if you can pickup extra services that bump your salary it will pay dividends for as long as your pension lasts

In California's system, once you get to 25 years of service they look at your one highest year of salary to calculate your pension and not your three consecutive highest paying years.
highest year's salary of your last three years of service right?
The information below is directly from the Calstrs handbook.

If you retire with 25 or more years of service credit under the 2% at 60 benefit structure, CalSTRS uses your highest average annual compensation earnable during any 12 consecutive months as the final compensation component in your retirement calculation, which for most people is one school year. Unused sick leave in excess of two-tenths of one year, nonqualified service credit and retirement incentive credit cannot be used to qualify for the 25 years.

songman52
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Re: Teachers: what are your best personal finance tips?

Post by songman52 » Sun Jun 04, 2017 9:02 pm

One piece of information: If you work in a school system that pays into both SS and TRS, and you have at least thirty years of coverage on the same wages, then you are not subject to the WEP. By same wages I mean that you pay into SS and the retirement system on the same earnings (salary, wages, paycheck - however you might want to word it.) There are still some school districts in some states that pay into both.

Ron Ronnerson
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Re: Teachers: what are your best personal finance tips?

Post by Ron Ronnerson » Mon Jun 05, 2017 9:13 pm

sweeden22 wrote:
Ron Ronnerson wrote: Yes, it is interesting how the pension numbers can change quite a bit by moving the retirement age just slightly. I played with the CalSTRS pension calculator and assumed the highest salary on the schedule when I retire will be the same as it is today (just for a crude estimate). Here are the monthly pension numbers that come out for my particular case by age (this is for 100% option so that my wife continues to receive the pension if I predecease her):

58: $4600
58.5: $4800
59: $5600 (I get a boost here for having 30 years in the system)
59.5: $5800
60: $6000
60.5: $6300
61: $6500
61.5: $6800
62: $6900
62.5: 7000
.

Hi Ron, sorry if you know this already. The calculator at CalSTRS works as if you name the option beneficiary at the time of retirement (you mentioned it is your wife).

If you elect your person at age 55, you get a much better option factor. You can look at the CALSTRS handbook for the "option factor tables." Find you and your wife age when you hit 55 (first eligible for retirement) and then at the upper end when you turn 63. You get to keep more of your money by electing at 55. I guess there are risks in doing that early, but if you are almost 100 percent sure your wife will be your option, it makes sense to do it then, I think.

Hi Sweeden,

While I did realize that the option factor is better if you elect at 55, I didn't realize the calculator at CalSTRS worked as if you chose the option beneficiary at the time of retirement. I'm aware that there are risks for doing it early but think that it would make sense to elect my wife at 55. I looked up the option factor on the table in the CalSTRS Handbook as you suggested. Based on our ages, it looks like the pension will be a couple hundred dollars higher if the option beneficiary is selected at 55 rather than at retirement. This is good news. Thanks for the helpful tip!

Needtoknow
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Re: Teachers: what are your best personal finance tips?

Post by Needtoknow » Tue Jun 06, 2017 2:39 am

Ron Ronnerson wrote:
sweeden22 wrote:
Ron Ronnerson wrote: Yes, it is interesting how the pension numbers can change quite a bit by moving the retirement age just slightly. I played with the CalSTRS pension calculator and assumed the highest salary on the schedule when I retire will be the same as it is today (just for a crude estimate). Here are the monthly pension numbers that come out for my particular case by age (this is for 100% option so that my wife continues to receive the pension if I predecease her):

58: $4600
58.5: $4800
59: $5600 (I get a boost here for having 30 years in the system)
59.5: $5800
60: $6000
60.5: $6300
61: $6500
61.5: $6800
62: $6900
62.5: 7000
.

Hi Ron, sorry if you know this already. The calculator at CalSTRS works as if you name the option beneficiary at the time of retirement (you mentioned it is your wife).

If you elect your person at age 55, you get a much better option factor. You can look at the CALSTRS handbook for the "option factor tables." Find you and your wife age when you hit 55 (first eligible for retirement) and then at the upper end when you turn 63. You get to keep more of your money by electing at 55. I guess there are risks in doing that early, but if you are almost 100 percent sure your wife will be your option, it makes sense to do it then, I think.
Yes. It does make sense if you know you're going to place your wife on it. If you go to the Calstrs office for one of their seminars, they will provide you with the exact numbers for the factor. My turned out to be a little over $500 per month difference.


Hi Sweeden,

While I did realize that the option factor is better if you elect at 55, I didn't realize the calculator at CalSTRS worked as if you chose the option beneficiary at the time of retirement. I'm aware that there are risks for doing it early but think that it would make sense to elect my wife at 55. I looked up the option factor on the table in the CalSTRS Handbook as you suggested. Based on our ages, it looks like the pension will be a couple hundred dollars higher if the option beneficiary is selected at 55 rather than at retirement. This is good news. Thanks for the helpful tip!

gr7070
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Re: Teachers: what are your best personal finance tips?

Post by gr7070 » Tue Jun 06, 2017 10:23 am

If you elect your person at age 55, you get a much better option factor. ... You get to keep more of your money by electing at 55.
Can someone explain the reasoning behind this?

I can't see a reason to give someone more for doing so at 55. Or is it a case of penalizing those who wait? I can't think of a good reason to penalize either.

Thanks.

songman52
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Re: Teachers: what are your best personal finance tips?

Post by songman52 » Tue Jun 06, 2017 10:46 am

I find this interesting that one would choose a retirement benefit possibly years before retiring.
In Texas when I "retired" (went to work in a neighboring state) I met the formula of "the rule of 80" in effect at the time. When the years of service plus one's age equaled 80 or more, then one could take the pension/annuity. The total years of service credit was multiplied by 2.3. Then the average salary of the three highest years out of the previous five was calculated. This figure was multiplied by the service factor to arrive at the annuity. For instance, if one had 30 years of service (times 2.3) then the factor was 69, or 69%. Let's use $55,000 as the average salary of the highest three of the previous five years. Then the annuity would be $37,950, or .69 times 55,000.

The pension formula has changed for the younger employees, those under 50 years old on August 31, 2005.

One reason I "retired" in Texas and went to work out of state was because of the options I had at the time. I did take a 13% pay cut with the new job. But with my Texas TRS pension I was able to choose a lump sum equal to either 12, 24, or 36 months of annuity payments with a correlated reduction in the monthly annuity, or a straight (higher) monthly amount. I took the maximum, 36 months, lump sum and rolled it over to an IRA with Vanguard. (It was shortly after this that I found Bogleheads.) I made this move in 2009, and rolled over my 403(b) at the same time into the IRA. We also opened a spousal IRA at the time.

So in 2009, with the Dow around 9000, we opened the IRAs with about 135K. Today with the Dow over 20,000 and maximizing our IRA contributions over the past seven years, including an HSA for the last five years, we are in better shape than I could have imagined eight years ago. Yes, we made good decisions, but much of it was serendipity: I had 33 years of service in Texas, the last 15 as a counselor (higher pay); I had finished my Masters degree in 1978, early in my career; I received an offer to take the same type of job out of state (albeit with a pay cut) and therefore start receiving my pension early; I was able to roll over a lump sum into the market when I believed it was heading up :D ; and we were able to live on the reduced salary while hugely ramping up our savings and investing with the monthly pension.

So my tip to teachers would be to open the door when opportunity knocks. My highest earning years were more than seven years ago and I'm still under 60K. But with saving, LBYM, and making good choices when presented with them, we are doing fine for a family on one teacher's salary in a relatively low-paying region. Also, I'm joining the retirement class of 2017 at the end of this month. :)

And my greatest thanks for having found the BH community and all of the excellent discussions! :sharebeer

whyme
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Re: Teachers: what are your best personal finance tips?

Post by whyme » Tue Jun 06, 2017 11:07 am

I must disagree with several of these bullet points.
donaldfair71 wrote: 1. Don't buy a house that costs more than twice your household income.
2. Don't buy new cars. Or finance any of them.
3. Don't trust your pension will be there.
4. Don't pass up savings on top of pension.
5. Don't marry another teacher (I broke this rule)
6. If you get #1 and #2 right, you really have to try to screw it up.
1. In many parts of the US and Canada, this is to say "never buy a house." I think that is bad advice. In many coastal areas and cities, there are NO houses available at or below twice a teacher's likely household income. I live in Los Angeles--a simple 1200 sq ft house in a modest area (nowhere near the coast) is likely to cost $700,000 or more. Almost nothing is available sub-$500,000 (maybe some small condos). If you're looking for housing for $250,000, forget it. Handled responsibly and with a good down payment, a low-interest 30-year mortgage can help teachers (or anyone) to build wealth and control costs, not to mention the other benefits of home ownership, for both the individual and the community.

2. The idea of frugality with regard to cars is a good one, but if one gets a good price on a new car and drives it for twelve or fifteen years, they're doing fine. I'm not at all sure that buying used every four or six years is better financially than buying new and holding the car for twelve. I agree about avoiding financing, especially if you have other debt or if the only way you can afford the car is to borrow.
(But if your credit is well controlled and you can take advantage of a super-low interest loan and invest the money elsewhere at a higher rate of return, it might make sense.)

3. I'm in California; the CALSTRS funding issues have been addressed and are being remedied with substantially higher contributions from all sides (teachers, districts, state). The pension benefit is guaranteed by the state constitution. So, I think it is appropriate to make plans based on California's pensions, unless you think the state will collapse and void all of its obligations. Likewise, for those who qualify, I think Social Security benefits will continue more-or-less intact. Private pensions are much more shaky, other state pensions may also be less stable. My advice here would be to look into your pension--both in terms of what to expect (e.g. the formula used to calculate the benefit) and in terms of the security of your pension plan.

4. Agreed! Take advantage of all retirement savings options! Now! And save more!

5. I think this is intended as a joke, so no comment.

6. Maybe we can agree that "live below your means" is a key concept. But the specifics of #1 (especially) and 2 don't apply to everyone.
Last edited by whyme on Tue Jun 06, 2017 12:38 pm, edited 1 time in total.

EdLaFave
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Re: Teachers: what are your best personal finance tips?

Post by EdLaFave » Tue Jun 06, 2017 12:37 pm

Just my two cents:

1. The decision to buy a home depends on many factors, you're suggesting to only consider one of them. I disagree.

2. I'd recommend financing EVERYTHING if you can get a rate at or below inflation. It can be strongly argued that you should finance above inflation as well. Many people have a negative emotional reaction towards debt that isn't justified by math.

3. I think there are very few things you should trust 100% but I also think it has become trendy to say things like "social security/pension/medicare/etc won't be there for me when I retire" and I don't think the data supports the level of confidence those statements are often made with.

4. Agree, 100%!

5. lol, it can work but marrying a billionaire sure would make life easier right?

6. When people first started telling me about their finances I was amazed by how they found ways to blow huge amounts of money on a host of smaller ticket items. I think they were amazed as well. I think simple ignorance and inattention to detail can screw things up royally too.

Ron Ronnerson
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Re: Teachers: what are your best personal finance tips?

Post by Ron Ronnerson » Tue Jun 06, 2017 3:02 pm

donaldfair71 wrote: 1. Don't buy a house that costs more than twice your household income.
2. Don't buy new cars. Or finance any of them.
3. Don't trust your pension will be there.
4. Don't pass up savings on top of pension.
5. Don't marry another teacher (I broke this rule)
6. If you get #1 and #2 right, you really have to try to screw it up.
I must respectfully disagree as well. As Whyme said, California is a bit different. I'm sure other areas are too.

I'm in the Bay Area. My home's value is $800k. I bought it in 2010 for $500k. Our gross income was about $120k at the time. I put down 3% but didn't have to pay PMI due to the terms of a teacher loan available at the time. We were paying an extra $800 a month on our mortgage as it was at a rate of 5.25%. We just kept other expenses down. A few years later, home prices increased as did my pay and we were able to refinance to a 3.25% loan (30 year fixed) and had built up 25% in equity at that point. 7 years after purchasing, we now have about $425k in equity. We put down $15k at the time of purchase. We got lucky for sure but taking a risk paid off. If we'd been conservative, we'd be paying $3k/month for rent on a much smaller apartment today than $1800/month on a mortgage for our home.

2. We buy new cars with cash. I drove the last one for 15 years. The plan is to do about the same with the current car. Wife and I drive his & her Corollas. It's totally affordable.

3. The pension may not be fully there but to assume that it won't be there at all seems extreme. Yes, there are funding problems, but the chances of it being eliminated completely seems improbable. Also, in California, the issue is being addressed at least somewhat. Here are differences in contributions from a few years ago:

2014: members contributed 8.25%, employer contributed 8.25%, and state contributed 3.04%.
2017: members contribute 10.25% (those hired after 2013 contribute 9.2%), employer contributes 14.43%, and state contributes 8.83%
2020: members will contribute 10.25% (those hired after 2013 will contribute 9.2%), employer will contribute 19.1%, state contribution ?

Those are significant increases that don't ignore the funding problem.

4. I couldn't agree more!

5. My friend married a teacher. They are in their 40s, mid-career, and have a combined income above $200k. They're doing well.

6. I bought an expensive house because there is no such thing as an inexpensive house where I live. It was newly built too. Our cars are new also. We live below our means and save a third of our income despite not following rules 1 and 2. It's doable. There are just trade-offs in life. Yes, I could live elsewhere but I'd rather live frugally and have year-round good weather. It's just a personal choice.

white_water
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Re: Teachers: what are your best personal finance tips?

Post by white_water » Tue Jun 06, 2017 8:10 pm

The district DW and I worked for as teachers couldn't be bothered with retirement planning other than allowing several annuity salespersons access to the employees at one or two district wide functions per year. When some of us suggested a more inclusive sample we were told abruptly it wasn't possible.

Luckily we both contributed to 403-B plans ( with Fidelity) LBYM, saved, invested regularly and retired with a (modest) defined benefit pension plus our portfolio.

My advice to teachers and any other public employee is to pick your state and district/agency very carefully, some legislatures and districts have a history of hostility to employees at worst and indifference at best. That can change with time, but my 40 1/2 years of experience is that type of change is glacial and atypical

My other suggestion would be for professional associations to take it upon themselves to provide support and education; e.g. letting employees know about Bogleheads.org, index funds, and LBYM strategies.

SGM
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Re: Teachers: what are your best personal finance tips?

Post by SGM » Wed Jun 07, 2017 4:02 am

DW had a TIAA-CREF plan for 4 years at a university. We are very pleased with the monthly payout and marvel at how well those who stuck with the university for 25 years must be doing. It has some tontine-like features. Payments can vary in part based on divergence between predicted and realized of mortality rates.

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CyclingDuo
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Re: Teachers: what are your best personal finance tips?

Post by CyclingDuo » Wed Jun 07, 2017 2:26 pm

donaldfair71 wrote:1. Don't buy a house that costs more than twice your household income.
2. Don't buy new cars. Or finance any of them.
3. Don't trust your pension will be there.
4. Don't pass up savings on top of pension.
5. Don't marry another teacher (I broke this rule)
6. If you get #1 and #2 right, you really have to try to screw it up.
Seems a little Draconian. :oops:

1. Conservative would be no more than 25% of your take home income goes towards your monthly home payment (that 25% should include taxes and insurance). Average would be 35% of your pre-tax income goes for your home payment. Others say...

Your mortgage payment should equal one week’s paycheck.....or your mortgage payment plus all other debt should be no more than two weeks of paychecks.

https://www.moneyunder30.com/percentage ... e-payments

2. If you are frugal, save the money, and can buy a new car that you keep for a long time (10-12 years) - pay cash and do it. Again, the most conservative method comes from the Financial Samurai who says not to spend more than 1/10th of your annual gross income on the purchase of a car. That's seriously Draconian, but also very wise for young teachers to get some wheels and stay fiscally solvent in the early year(s) of their teaching. We prefer to extrapolate that out to purchasing a new car for cash only and driving it for 10-12+ years so you can average that cost out to cushion the blow. In that scenario, one stays below the 1/10th of annual gross income going for transportation. Dave Ramsey claims everything with a motor (cars, motorcycles, boats, snowmobiles, etc)) that you own should not total more than 50% of your annual gross income. So if a couple has a combined annual gross of $110K, they two cars they buy cannot be worth more than a total of $55K. Best to stagger purchases for a couple in such a scenario.

Again, most likely, somewhere in the middle is most likely the average.Obviously, younger teachers would be better served with a good used, lower cost entry level car until savings is built up enough over the years to afford more.

3. Although, in most states it will be there in some shape or form. We could say the same for Social Security. Life as we know it. Your school district. Things change, and yes one must plan for all scenarios, but in addition to mandatory contributions to your pension, seek additional investing vehicles if at all possible (IRA, voluntary 403b, as well as taxable).

4. Dovetails right in with #3, take the opportunity to save/invest outside of just the pension.

5. A double income household with two in education can easily provide a stable base of income for an enjoyable lifestyle. Two salaries in education combined may average a total of $90K - $120K household income in the US depending on school district, length of service, etc... . That can provide a nice lifestyle, as well as provide enough to save. And Summers are off where one could work a secondary 2-3 month job to round out a 12 month year if actually needed. It's all about living within your means. Blow that, and it doesn't matter what the income level is or what one's spouse does for a living.

6. Actually, if one spends more than their means and gets any of the big three incorrect - housing/transportation/food - things will be a non-stop struggle until things are righted. Get all three right by keeping the portion that goes to each, and one will be fine. Beyond that, save the equivalent of one hour's wage per day, each and every day of your working life starting at age 25. That's a good simple formula that creates wealth. :dollar :dollar :moneybag :moneybag

seligsoj
Posts: 20
Joined: Mon Apr 25, 2016 11:44 am

Re: Teachers: what are your best personal finance tips?

Post by seligsoj » Wed Jun 07, 2017 8:51 pm

Hey all,
OP here...I've been really busy with my end of the year evaluations (7 days of school left!!) but wanted to express my gratitude for everyone's input. I have been floored by the number of responses and nuggets of wisdom from my fellow educators (and spouses of educators). I checked out many of the resources and articles shared as well as the websites of Ed La Fave and Steve Schullo-great work guys...we are lucky to have you amongst our ranks! I really enjoyed reading the different tips and stories such as the administrator from California who bought back 5 years of service credit and is moving to Texas to capitalize on no state income tax and a lower cost of living- nicely played, sir :) It was interesting to see how people working in both higher and lower paying districts were able to LBYM and accumulate savings. Also, the corruption within the 403B financial industry is very disheartening to read about and it is disturbing to see how greediness erodes the hard-earned savings of many of us. And yes, many intelligent teachers do bury their heads in the sand when it comes to money matters, often investing their everything in their school buildings and students and neglecting their financial health.

A little background to share where my interest in teachers' finances stems from. I am the daughter of a veteran special education teacher. My mother worked as a teacher for over thirty years, yet only receives a pension of about $8,000 a year. She was hit with a triple whammy of working for many years in private schools, taking time off to raise kids, and moving between states due to my dad's career. Her lack of a pension is one of her biggest financial regrets.

One issue I didn't read as many people bringing up was the health care situation. I remember when I worked in Texas for a year as part of my school psychology internship, about three months into my position, the district decided that they were going to triple the premiums....which was not such a big deal for me at the time as a single person, but I remember, thinking how much that was going to hurt for those with families. I do very much appreciate the stellar benefits my current district offers- the premiums and co-pays are low and the coverage is extensive. As a 39 year old who has a mildly crappy body, (Crohn's disease, Osteopenia, PCOS, etc., etc.), I feel like the health insurance is as important to me as the salary and the pension.

For anyone interested, when I finally do get this blog up and running, I would love your expertise, critiques, and guest posts!!!

livesoft
Posts: 57303
Joined: Thu Mar 01, 2007 8:00 pm

Re: Teachers: what are your best personal finance tips?

Post by livesoft » Fri Jun 09, 2017 12:04 pm

Another NYTimes article this week about teachers and retirement:
https://www.nytimes.com/2017/06/09/your ... plans.html
“Perhaps one of the cardinal sins that I see the most, though it’s not a popular one to talk about, is sloth,” he said. “Some people are afraid but also a little lazy, and they don’t really want to do the hard work of facing their mistakes or lack of organization and knowledge on these subjects and take responsibility.”
This signature message sponsored by sscritic: Learn to fish.

BashDash
Posts: 435
Joined: Mon Nov 28, 2016 12:31 pm

Re: Teachers: what are your best personal finance tips?

Post by BashDash » Thu Oct 12, 2017 11:59 am

- Avoid the 403b insurance salesmen in the lounge like the plague.

- In a district where getting graduate or "inservice" credits raises your pay significantly then do this EARLY and get paid the rest of your life.
- Get involved in the school community and get paid extra via an extracurricular activity.
- Get paid to supervise ( watch ) athletic events and toss that extra money in your deferred accounts.
- Treat all the "extra" work during the school year as your "summer" money. Practice "retirement" during the summer and don't work.
- Head back to school in the fall re-charged.

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CyclingDuo
Posts: 930
Joined: Fri Jan 06, 2017 9:07 am

Re: Teachers: what are your best personal finance tips?

Post by CyclingDuo » Thu Oct 12, 2017 9:49 pm

BashDash wrote:
Thu Oct 12, 2017 11:59 am
- Avoid the 403b insurance salesmen in the lounge like the plague.
Again, it really depends on the company and the plan that was negotiated by your employer/school district/state with regard to ER fees and wrap fees. It's nice to think that they are all wolves in sheep's clothing, but on occasion - you might actually find a decent plan. Usually, you have to dig deep into the plans offered on the benefits website as the really low cost, good plans rarely make the trip out to the faculty lounge.

We both feel fortunate - I guess - to have decent 403b plans compared to so many horrible ones we have seen posted here at BH and on the 403bWise forums. One of ours is with TIAA (administrative fees are covered by employer) and one is with VALIC (.18% administrative wrap fee added to each fund) - both of which have the low cost Vanguard Index funds to build the Three Fund or Four Fund portfolio.
BashDash wrote:
Thu Oct 12, 2017 11:59 am
- In a district where getting graduate or "inservice" credits raises your pay significantly then do this EARLY and get paid the rest of your life.
- Get involved in the school community and get paid extra via an extracurricular activity.
- Get paid to supervise ( watch ) athletic events and toss that extra money in your deferred accounts.
- Treat all the "extra" work during the school year as your "summer" money. Practice "retirement" during the summer and don't work.
- Head back to school in the fall re-charged.
^^This!

We've been practicing "retirement" in the Summer for three decades now which allowed us to travel the world, and front-end load our lives with world travel and domestic journeys/experiences while still young, mobile, physically fit, and nearly 100% coherent. :mrgreen:

That has allowed us to head back in the Fall recharged year after year.

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