The reason most teachers do not have low-cost index funds in their 403(b) plans is because they are too inexpensive. Financial salespeople have little incentive to sell a product when they will receive a small percentage of a number like 0.10%, the cost of a typical total market index product.
On the other hand, provide an expensive variable annuity or loaded mutual fund and now you are talking! Earning a commission of 5% of a typical 3.25% fee (or above) is much more enticing.
Most teachers believe their 403(b) plans are “free” because they receive no bill. This couldn’t be further from the truth.
California is lucky to have a site that exposes this great fallacy. 403b Compare was created by The California State Teacher’s Retirement System to help protect teachers from misinformation. My friend, Scott Dauenhauer, participated in this undertaking.
Unfortunately, this site is an oasis in a sea of misinformation. Most states have nothing of the sort available to teachers, which explains why teacher typically have no idea they are paying many of the egregious fees listed below in the Fee Glossary.
Feel free to click on any of the links below to understand the true cost of your “free” investment. Better yet, have your financial salesperson itemize each individual cost in dollar terms. You may want to bring along some smelling salts.
Stan Haithcock recently wrote in MarketWatch, Annuity sharks smell blood with market volatility.
He states, “Any time the stock market has a bad week or experiences extreme volatility, the annuity sharks start smelling blood in the investment waters and will be on the attack to lock your money into their ‘perfect product.'”
Don’t fall for this nonsense. If you do, you may just create your own line for the “Boy Wonder.”
“Holy, I have been ripped off for years, Batman!”
Fee Glossary
