Retirement investing for teachers can be confusing. In addition to pensions, teachers can have access to 403b and 457 plans. There are also considerations related to Social Security. It’s no wonder many teachers are scratching their heads. When it comes to the San Juan 403b plan, there are excellent resources available from human resources and the benefits team. But don’t stop there. Whether you are a current participant or a recently terminated employee, get an independent review. Make sure you’re not in the dark.
Investment choices available for the San Juan 403b plan
There are a wide range of investment choices available within the San Juan 403b plan. These include fixed annuities, variable annuities, and mutual funds. There are significant differences among these investments in terms of costs and risks. Some of these investments are sold by life insurance sales people or via brokers. Often, the costs of these investments aren’t transparent and commissions earned by financial sales people is not disclosed. There are also low cost investments available and the ability to work with independent advisors who aren’t selling financial products or earning commissions.
In the interest of full disclosure, I am an independent advisor held to the fiduciary standard and never earn commissions from the recommendations I make to clients. For a more detailed look at fees versus commissions, transparency, and fiduciary advisors you can visit my article 403b Plans And What Teachers Need To Know.
This is where things get tricky and it is one of my biggest gripes about 403b plans in general. There are way too many choices when it comes to investment providers commonly referred to as approved vendors. Bigger doesn’t always mean better when it comes to the number of investment providers. Having so many choices can lead some participants to become overwhelmed and potentially fail to make selections. It also increases the difficulty of managing your investments because it isn’t always clear as to who does what and when. Rather than focus on the problems with the current way most 403b plans work through investment providers (approved vendors), lets look at the following:
- There are 42 separate investment providers (approved vendors). That means 42 separate companies with different procedures, account options, and investment products.
- Of these 42 investment providers (approved vendors), at least 21 are life insurance companies. I’m not suggesting that life insurance companies are bad. However, it is important to understand that when you invest in a 403b through a life insurance company, you have actually bought either a fixed, variable, or indexed annuity. Without going into too much detail, most people who invest in their 403b fail to recognize the negative impact their costs and surrender periods can have on their long term investment success. A likely reason so many teachers invest in annuities is because “plan participants don’t fully understand the options available to them.” This is according to the California Teachers Association investment site ctainvest.org.
- Direct mutual funds: There are at least 10 investment providers (approved vendors) that are direct mutual fund companies. These mutual funds are often sold by financial sales people (brokers) who receive a commission or load every time you invest. There are also no-load mutual funds available where you can invest directly without a broker thus lowering your costs.
- There are also investment providers (approved vendors) that work with independent advisors who don’t charge their clients commissions, but rather a fixed fee as a percentage of assets. This allows your independent advisor to recommend a variety of no-load or no-commission rather than selling the financial product that pays the highest commission.
For more information on evaluating the investment providers (approved vendors) for the San Juan 403b plan, visit 403bCompare.
Do you have questions or need help?
If you have questions about your San Juan 403b plan, be sure to contact HR and the benefits team at the San Juan Unified School District.
In addition, please feel free to contact me via this link. I offer prospective clients a free consultation. This is where we discuss your needs and identify the level of service that is right for you.
Have you recently terminated employment with the San Juan Unified School District? If so, you have some important decisions to make with regard to your 403b. Contact me today to get started.
Information contained in the article regarding the San Juan 403b plan, is based solely on publicly available information. In addition, information was gathered from other media outlets. Do not base your investment or financial planning decisions on this article alone. Contact your benefits team, tax advisor, and financial professional to discuss your unique situation.