Sage speaker of truth to power, or Looney Toons billionaire with bad hair. However you feel about Donald Trump, one thing is clear; any pretense of press objectivity is officially over.
Some argue he’s so dangerous an adversarial stance is not only justified, but morally required. Whether or not it’s true doesn’t detract from the central premise, and appears to confirm Trump’s comments that the media is rigged against him.
Indeed, New York Times columnist Jim Rutenberg spoke for much of the mainstream press when he advocated taking sides last August, describing Trump as “a demagogue playing to the nation’s worst racist and nationalistic tendencies,” and that “he cozies up to anti-American dictators.”
That the “Gray Lady” would go this way is sad but not surprising, and reflects the paper’s deepening direction for some time.
If only it were confined to politics. A piece about 403(b)s illustrates bias best left for the opinion pages. The following sentence about teacher compensation is symptomatic of the article’s tone, which was pitched as a straight news piece:
“As a result, the people who do the most good in the world, spending their careers helping others in exchange for modest paychecks, often get the worst retirement plans.”
Far be it from us to slam teachers, as more than one family member has entered the noble profession, but any retirement talk must include pensions that, until recently, included 70 percent of salary and health care benefits for life. Union negotiating tactics often called for lower salaries in order to win better benefits.
Strapped state budgets mean such “Cadillac” retirement plans (described that way for a reason) are increasingly rare, but some salaries—in Massachusetts, for instance—average over $100,000 per teaching position. Low? We guess it’s a matter of perspective.
As for 403(b)s, Plan Sponsor Council of America reports higher contributions and better balances than similar DC plans. TIAA (yes, we’ll adjust for the source) finds that “not-for-profit sector” plan participants—read 403(b)—are estimated to replace more than 90 percent of their pre-retirement income in retirement.
Even Alicia Munnell of the Center for Retirement Research at Boston College, once a solid defined contribution skeptic, now says the hit taken by switching from defined benefit to defined contribution plans isn’t what she once thought, and finds parity in replacement rates between both.
Is there still work to be done? Sure, but to dismiss 403(b)s out of whole cloth reflects not only a brash bias, but a staggering ignorance of the true retirement challenges teachers face.
With more than 20 years serving financial markets, John Sullivan is the former editor-in-chief of Investment Advisor magazine and retirement editor of ThinkAdvisor.com. Sullivan is also the former editor of Boomer Market Advisor and Bank Advisor magazines, and has a background in the insurance and investment industries in addition to his journalism roots.
403(b)’s are often THE BEST plans I see! The competition leads to better plans, lower costs, and more connectivity with independent advisors than the 401(k) monopoly provides.
We know what the NYT and Hillary’s advisor Teresa Ghilarducci want – a nationalized plan for all accounts. I suspect this 403(b) attack is due to the fact that many 403(b) plans are not covered by ERISA and Ms. Ghilarducci laments in one of her white papers that they may be safe from being confiscated and given to her Wall Street backers.
I have to admit – I can’t get this logic. So because teachers – by and large – have pension plans (often instead of Social Security – for sure CT) they should be given what ANYONE with a modicum of understanding of fees, commissions etc would surely see are some of the most expensive and worst investment options seen in any plan setting?
Teachers have been abused to the point of no return in many of these plans – if you can’t see that, how can you see anything?
Honestly – I’m stunned that this is your position. I had thought much better of your editorials.
Dan McConlogue,
Everyone knows teachers are low-profit clients. I met with one tonight. Low savings, nice pension, etc.
Explain how you think teachers are getting personal advice on a low-cost option.
They never have, and they never will. This teacher’s 403(b)’s have been stripped from people she had access to, to 1 which she can’t get anyone to talk to her.
Are you an advocate of the benefits of a planner? I used to think much better of planners at justifying their importance. Most of those who think an “abusive” .75% fund that compensates an advisor for doing meetings and education and planning aren’t working with teachers.
How many new teachers are on your client list Dan?
Excellent interview with Charlie Epstein, John! I too read that article about teachers and noted that there was no mention of STRS and the high replacement of pay it provides. Teachers were permitted to participate in 403(b’s in the early 60’s when there retirement plans weren’t so good. Unions over the years have corrected that. I don’t begrudge teachers their benefit, just don’t say they have been abused. I hardly think a 70-90% replacement of pay is abuse. It is always difficult to quantify the value of advice, but I like Charlie’s points. Advisors if they are doing their job, bring perspectives and successful outcomes. The government’s perspective is only about price per pound. Ultimately this protectionist attitude hurts the very people it was meant to help, because even though they are educators, they can still learn something, especially about financial planning.
To advisorguy,
I work with a number of teachers on an hourly basis, offering comprehensive financial planning and tax services. Advising them on their 403(b) allocation usually takes less than an hour. If they had direct access to no-load mutual funds, I would still spend less than an hour on their allocations.
The abusive 403(b) plans to which Mr. McConlogue refers and to which most school district treasurers subscribe are those that offer only variable annuity products with insurance company fees (mortality and expense ratios) as high as 2.25% on top of the mutual fund management fees. The expensive “return of principle” guarantee should be worthless if the participant has been contributing into sound investment choices for any length of time. Too, this guarantee usually disappears if/when the retiree annuitizes the account. I have spoken with a number of treasurers about offering direct access to no-load mutual funds (Fidelity, T Rowe Price, Vanguard, et cetera), but to no avail.
Of course, the abusive nature of most 403(b) plans has nothing to do with STRS nor any other sources of income. The 70% salary replacement provided by some STRS plans was based upon that State’s plan’s performance, making this apology/excuse an irrelevant fallacy.
We must also acknowledge that there are abusive 401(k) plans as well, but at least the DOL is trying to address the 401(k) issues. No one can make an informed decision without the relevant information. Unfortunately, teachers are usually sold a 403(b) rather than choosing a 403(b), and the choices they do have are usually severely limited.