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welcome to the best interest podcast
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where we believe Benjamin Franklin's
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advice that an investment in knowledge
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pays the best interest both in finances
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and in your life every episode teaches
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you personal finance and investing in
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simple terms now here's your host Jesse
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Kramer hello and welcome to episode 92
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of the best interest podcast my name is
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Jesse Kramer later in today's episode
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Dan otter from 40 3B wise will be
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joining us and yes if you're familiar
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with Dan or 403b wise that does mean
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that today's episode is targeted toward
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Public School teachers here in America
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and you might be thinking well that's
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not me I'm not a public school teacher
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this doesn't apply to me but before you
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go I want to say this first I think
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you'll find Dan very interesting and
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informative today whether you're a
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teacher or not his passion it it comes
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through the microphone so well you'll
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just find him easy to listen to and and
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you'll learn something from Dan and
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second if you're like me you can rattle
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off five or 10 or 20 close contacts in
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your life who are teachers who do work
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as public school teachers or maybe
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they're married to a teacher or they
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have children who are teachers in fact
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there are more than three million Public
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School teachers in the US today give
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this episode a listen and as you do I
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think you'll become appropriately
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aggravated by the current nature of the
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teachers 403b system and then you might
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feel motivated to send send this episode
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to the Educators to the teachers in your
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life who you care about and I think
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you'll be doing them a huge favor by
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doing so but first let's do a customary
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review of the week this one comes from
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us AF perio who left a five-star review
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on Apple podcast and said refreshing and
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easy to listen to although there are
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many dozens upon dozens of finance and
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investing podcasts out there Jesse's is
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refreshingly easy to listen to the
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wisdom he shares is often on topics I've
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heard many many times before yet his
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perspective and the method he uses to
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explain topics simply makes them easier
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to understand when it comes to teaching
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he's a natural well how appropriate USAF
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perel thank you for the teaching
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compliment I take a lot of pride in that
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as you'll hear me say at least once
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maybe even twice throughout this episode
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today both my parents were Public School
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teachers that's part of the reason why I
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wanted to record this episode today I
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think that's probably part of the reason
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why the teaching Gene if you will maybe
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the Apple hasn't fallen too far from the
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tree in terms of my ability to teach I
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find it very fun to teach part of the
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reason why I'm here in the first place
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well before Dan joins us today I want to
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read to you from a 2022 article I wrote
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called teachers are getting taken
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advantage of at the time when I wrote
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this article I had just sat down with
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actually one of my former teachers he
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and I it's funny we met at a bar we had
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a couple beers and they're on the table
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between us were his amera prize
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statements amera prize is what would you
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call them maybe like a chain financial
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adviser and again maybe I'm a little bit
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biased here but I think if you were to
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pull the public if you were to pull the
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personal finance and investing Community
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aera prize does not have a very golden
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reputation and this gentleman who I was
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meeting with his wife is also an
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educator happens a lot where you have a
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married couple they're both Educators
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because it's probably how they met in
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the first place and these two people
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they each had a Roth IRA those IAS were
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composed of 16 total mutual funds and
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you say why 16 and because well that's
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what their adviser at the time had
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recommended to them and as I went
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through the statements the majority of
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those funds 11 of the 16 funds had a
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5.75% frontload which means that every
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dollar that they would contribute into
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those funds immediately
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5.75% would get taken off the top an
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immediate haircut if you know anything
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about fees you know that that is pretty
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crazy all of the funds all 16 of the
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funds had a 12 B1 fee which sometimes is
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also called a marketing fee essentially
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it's a bloated fee that's not necessary
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at all many of the common index funds
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that we either talk about here on the
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best interest podcast that you've heard
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of through your own research that you've
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done elsewhere very rarely do those
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types of funds have 12 B1 fees a 12 B1
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fee is just a because we can fee we're
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going to charge you 0.25% simply because
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we can and then when we addit up the
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average dollar weighted expense ratios
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of these two portfolios that I was
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looking at the total expense ratio was
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1.17% which as we know 1.17% on on your
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portfolio fees that's much higher than
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it needs to be their total portfolio was
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about 10% cash and this is in their Roth
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IRAs 10% cash 40% fixed income and the
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other 50% being stocks equities but
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that's 10% cash and 40% fixed income
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despite them being part of the terrific
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New York State teachers retirement
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system a pension the best kind of a
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fixed income out there you'll hear me
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say this throughout this article you'll
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probably hear me and Dan talk about it
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if you're already getting Social
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Security and you're already getting a
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pension you probably don't need much
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more fixed income in your portfolio so I
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went through and step by step and I
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explained to this former teacher of mine
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some of the problems that I saw and how
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to fix them for example there's no
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reason to be paying front loads there's
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no reason to be paying 12 B1 fees
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because there are too many great
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Alternatives out there that don't have
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those fees the there's no reason to be
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paying a 1% expense ratio for a simple
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stock Bond mutual fund portfolio because
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again there are two many great
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Alternatives out there that can provide
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the same exact asset class exposure for
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much much lower fees and for retirement
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specific savings there's rarely a reason
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for teachers for educators to hold fixed
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income Investments such as bonds cash or
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annuities because their pensions and
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because Social Security are already
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covering a lot of any fixed income need
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from their future retirement cash flow
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for any of you listening right now or
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for teachers specifically if you're
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listening if your current adviser a 403b
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adviser isn't willing to listen to those
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facts and fix your portfolio you should
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probably dump them like a bad prom date
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Vanguard Fidelity Schwab have amazing
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investing options with expense ratios
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what a tenth of a percent or less 2/10
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of a percent maybe and they're very
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rarely any sort of extra fees involves
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there
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at the time I originally wrote this
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article this had been the fourth
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educator that I'd sat down with in
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basically a year and a half for a
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similar portfolio rescue and four of
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those four Educators they were egregious
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examples of of a bad portfolio and in my
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opinion sure you can call it a biased
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opinion but of bad advising as I already
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mentioned once today both my parents
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were teachers so you know like Michael
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Jordan in that Chicago Bulls documentary
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I took that personally I'm going to link
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in the show notes a terrific video that
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I linked in the original article from
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Tony Isola it's called the 10 rules for
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retirement investing specifically for
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teachers and and the fact of the matter
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is Teachers educators are getting taken
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advantage of they have some amazing
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benefits in their life like Summers off
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like their pensions uh in many cases uh
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their health care can be fantastic like
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Sterling so good but their retirement
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investing world is actually the opposite
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of amazing it's infamously predatory
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their 403b programs introduce them to
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suboptimal advisers salesmen whatever
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you want to call them who too often
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guide the teachers into poor Investments
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now why is that the case well because
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those poor Investments usually come with
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very high fees as we've already
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discussed and that means High
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commissions for the advisers generally
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in these cases what's bad for the
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teacher is good for the adviser what's
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bad for the adviser is probably what's
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good for the teacher that's how the
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advisers are getting paid it's a nasty
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incentive system and we quote Charlie
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Munger here again one of our favorite
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people to quote who said show me the
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incentives and I'll show you the outcome
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when the incentives are set up against
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the teacher but for the adviser in those
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cases that's probably what's going to
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happen unless the teachers are armed
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with the knowledge of of something
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better as we'll allude to with Dan today
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as you'll hear me and Dan talk about
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there's a terrific article from The New
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York Times it was actually a many part
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article which we will link in the show
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notes today that shows just how
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predatory the teacher financial adviser
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landscape really can be here's a quick
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ad and then we'll get back to the show
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every week I send a quick free email to
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thousands of readers that shares three
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Simple Things One my new articles and
00:08:43
podcasts two the best financial content
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of the week from all over the Internet
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and three a financial chart that
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explains some important Concept in the
00:08:52
news that week it's a great primer to
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boost your financial knowhow but Jesse I
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don't want another email well this might
00:09:01
not be for you but I do hear you which
00:09:03
is why I make it very short sweet and
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full of only the essentials a whopping
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66% of subscribers read my email at
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least once a month they're enjoying it
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and maybe you will too you can subscribe
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for free on the homepage at bestter
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interest. blog again that's a free no
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strings attached subscription at bestter
00:09:23
interest. blog I don't want to steal too
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much of Dan's thunder today so Dan otter
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along with his his business partner John
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Moore were two Educators who got fed up
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with the lack of objective 403b
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information available to participants so
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way back in 2000 they started a website
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called 403bwise which is an amazing
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resource for teachers out there to learn
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more about their specific 403bs and and
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what they can do to optimize improve
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their not only their their 403b but
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their entire Financial ecosystem as
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teachers and Dan is also the author of a
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book called teach and retire Rich which
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lays out exactly how educators can reap
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the intrinsic and extrinsic rewards of
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the teaching profession so without
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further Ado I'd like to welcome Dan
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otter here onto the best interest
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podcast well Dan thank you for joining
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us today and I figur maybe we can start
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with the basics just set a little bit of
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foundation I have a feeling that most of
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our listeners today are familiar with
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the concept of a 401k they might not be
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as is familiar with a
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403b although perhaps there's some
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comparing and contrasting we can do
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between those two accounts but let's
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just dive in what what exactly is a 403b
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account who is it for does it make sense
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to compare it to a 401k great question
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Jesse well I'm an old teacher and one of
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my favorite tools was the VIN diagram
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you know you put two things side by side
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what are the differences what are the
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similarities and what would you would
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find is a big chunk of the middle being
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very similar they're almost identical
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they they share two numbers right the
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four and the zero the big difference
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with the k12 403b and I have to
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differentiate 403bs themselves come in
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different flavors so if you are a public
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school teacher that's the audience we
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serve you have a governmental
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403b Jesse the big difference is the K12
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403b does not enjoy Federal fiduciary
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protections that the 401K does you
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probably know this term probably many in
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your audience orisa the employee
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retirement income Security Act which
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protects participants in 401K plans so
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if you work for an employer that offers
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a 401k chances are they're pretty decent
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options one vendor completely different
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world with the K12 403b the town I live
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in Redlands California if you're a
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teacher in this town you have more than
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40 different Financial companies to Wade
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through and Jesse as a financial planner
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you could probably only recommend a
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couple of these the rest are high cost
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sales agent sold fees of 2 to 3% and not
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only that surrender charges that could
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cost you 6 7% of the balance so that's
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the big difference between the 401K and
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the 403b so let's dive into that a
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little bit let's peel back that onion so
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maybe we can start with the 40 different
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options in Redlands California or you
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know we were talking before recording
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here that you had some Western New York
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connections here Dan and I've got some
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Western New York connections where uh
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whether it's a teacher or a
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superintendent or a principal who's
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asked me to come into their school speak
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to their teachers so I've had a I've got
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to look at some of the 403b plans and
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the various Financial firms that offer
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their services through the 403b plans
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what kind of offerings are we talking
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about here maybe can we can we go
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through maybe The Good the Bad and the
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Ugly that you've seen absolutely and in
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fact what we've done is we have created
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a database of plan vendors and we' rate
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them actually Jesse we use a simple
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traffic light system red light green
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light yellow light red stop don't use
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yellow caution might be okay green go
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good so we'll start with the good if you
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have Fidelity or Vanguard available go
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those are our highest rated companies
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those are the Financial companies my
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partner and I invest with that is great
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unfortunately it's rare to find Fidelity
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and Vanguard or Vanguard in a 403b
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vendor list there's a company called
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Aspire which is very interesting we
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could we consider them like almost like
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a supermarket where you walk into the
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supermarket and there's 10 different
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kinds of breads this would be access to
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hundreds of different Financial
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companies and the good news is you have
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access to our two favorite companies
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that I just mentioned Fidelity and
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Vanguard I think there's an additional
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fee of
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0.15% which again as a planner you'd
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love to not have to pay that but compare
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it to our red vendors probably one of
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the most egregious is Equitable they're
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available in about every vendor list
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every school district in the country
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they're charging north of 2% plus
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they're imposing surrender charges so
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let's say you're a teacher you're
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listening to this podcast you go back
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and look at your 403b oh no I've got
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Equitable not only have you been paying
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more than 2% if you want to get out of
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this product you're going to have to pay
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three four five 6% of your balance so on
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403b go to our vendor rating tool and
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you will see them these companies
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grouped into these different buckets and
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what's funny and actually kind of
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horrifying as an educator basically if
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it's a former president is in the name
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like Lincoln stay away I mean that is
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probably a general rule of thumb
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Equitable formerly known as AXA is that
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correct right right and so the stories
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that I've heard from my parents who are
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both Public School teachers here in New
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York or other teachers is that it tends
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to not be the vanguards or fidelities of
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the world but maybe you can prove me
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wrong Dan I'm really looking to lean on
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your expertise one of the unfortunate
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things about the 403b program it seems
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is that some of these advisers likely
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advisers who are yellow or red light
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advisers are in the schools themselves
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at time you know they're in the break
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room I call them the doughnut people
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they're showing up in the break room
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with the free donuts to start the
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conversations with the teachers whereas
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maybe the green light companies are not
00:15:49
necessarily doing that
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100% yeah in order to keep the fees low
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Vanguard is not going to send a sales
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agent to ro Chester City Public Schools
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and have that person sit in the staff
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Lounge to sell a Index Fund charging
00:16:06
0.2% it just doesn't happen several
00:16:10
Dynamics at play here teachers such a
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busy job there's so many facets to being
00:16:15
an educator and so you can understand
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that they don't have time to become
00:16:20
experts so picture this and this is what
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I experienced you're a first year
00:16:25
teacher you're exhausted you walk into
00:16:26
the staff Lounge there's a person there
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in a suit with free food you reference
00:16:32
these lunch lunchroom people and he or
00:16:35
she says that they can help you with
00:16:38
your financial future and you're
00:16:40
thinking well there's no way my school
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district would let just anyone walk into
00:16:44
the uh staff Lounge I'm sure that they
00:16:47
are vetted by the school district and
00:16:49
nothing could be further from the case
00:16:51
there's this illusion of vetting and
00:16:55
also these sales agents will send emails
00:16:58
that are very misleading they'll say
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Jesse you're eligible to meet with a
00:17:03
financial professional boy that sure
00:17:05
sounds like a benefit doesn't it so they
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skirt the line they're not certified
00:17:11
financial planners they're not
00:17:13
fiduciaries and again many of them are
00:17:16
good people many Educators establish
00:17:19
relationships with these people and many
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Educators save money they might not have
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saved if they hadn't met these
00:17:26
individuals but here's what we always
00:17:27
tell teachers would you rather have
00:17:30
$800,000 in your 403b in retirement or
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$500,000 in your 403b retirement to me
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the answer is clear $300,000 means I can
00:17:42
visit my grandkids I can take more trips
00:17:45
I can repair the house etc etc etc let's
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dive into some of the we we already
00:17:52
talked about surrender charges as being
00:17:54
one of the downsides that some of these
00:17:56
yellow or red plans have or I should say
00:17:59
you know Financial firms have compared
00:18:01
to the vanguards and fidelities of the
00:18:02
world but then also isn't it fair to say
00:18:04
that there's somewhat of an annuity
00:18:06
focus in 403b land I mean what is going
00:18:09
on there what what what exactly am I
00:18:11
referring to for the listeners who are
00:18:12
unaware and is that good or bad for
00:18:15
participants well as my partner Scott
00:18:17
danau always says annuities aren't good
00:18:19
or bad it's the products that used
00:18:22
within the annuities that can be good
00:18:25
and can be bad and you have to go back
00:18:27
in history and this is a surprise to a
00:18:29
lot of people the 403b predates the 401K
00:18:33
by over 20 years it was established way
00:18:35
back in
00:18:37
1958 whereas the 401K was
00:18:41
1978 so up until 1974 which is a heck of
00:18:45
a long time ago I think if I'm right
00:18:47
Nixon or Ford was the president then so
00:18:50
we're going way back up until that point
00:18:53
people investing in a 403b could only
00:18:55
invest in annuity products Insurance
00:18:58
based B products that changed in 1974
00:19:02
when paragraph 7 was added allowing
00:19:05
direct investment in mutual funds that
00:19:08
Legacy continues it continues not only
00:19:11
in the staff lounges where sales agents
00:19:13
are selling fixed annuities and variable
00:19:16
annuities fixed annuities in many ways
00:19:19
are just like simple CDs unfortunately
00:19:22
the insurance industry has taken the
00:19:24
simple fixed annuity and they've layered
00:19:26
on complexity bonus annuities Equity
00:19:30
indexed annuities these are probably the
00:19:32
most pernicious of all products because
00:19:35
the sales pitch is how would you Jesse
00:19:38
like the upside of the market without
00:19:40
the downside give me heaven don't give
00:19:42
me hell sign me up I will take that all
00:19:45
day long it is false you're going to get
00:19:50
the minimum return and pay maximum in
00:19:53
fees and here's the other thing they'll
00:19:55
say oh there's no fee in this product
00:19:58
Tech technically they're correct because
00:20:00
it's a spread product like a a CD you
00:20:02
know they might earn 5% they give you 3%
00:20:05
they're making 2% on this now you look
00:20:09
at the variable annuities these are
00:20:13
Insurance Plus mutual funds and boy that
00:20:16
sounds good right let's have some
00:20:18
insurance here to protect you and this
00:20:20
is often called the m& charge and this
00:20:23
can be over
00:20:24
1.25% so let's go back to our favorite
00:20:27
SL least company Equitable every
00:20:31
investment from them in their equivest
00:20:34
2011 series which is their most popular
00:20:36
product and it's understanding they're
00:20:38
revamping this but as of today that's
00:20:40
their most popularly sold widely sold
00:20:43
product in the K12 Market every single
00:20:46
investment starts with a
00:20:49
1.25% fee then if you want to add an
00:20:52
s&p500 fund you're now paying 50 basis
00:20:56
points .56 and that's a thing the sales
00:20:59
agents will say to these people and some
00:21:01
might have a little bit of Education you
00:21:03
know a teacher might say well I want to
00:21:04
be in the S&P 500 I want an index fund
00:21:06
oh we we got an index fund for you here
00:21:08
you go it's the S&P 500 Index you know
00:21:11
they might have listened to your show
00:21:13
they might have read about oh that's a
00:21:14
good way to invest but there maybe not
00:21:17
being super forthcoming about insurance
00:21:20
add-on charging
00:21:22
1.25% so there's a little bit of an
00:21:25
element of caveat mtor here a buyer
00:21:27
beware
00:21:29
you know I as you're describing
00:21:31
essentially what is a sales pitch going
00:21:32
on it's something that in my
00:21:34
interactions with the insurance industry
00:21:37
in general the 403b side where there's
00:21:39
this mix of insurance 403bs like there's
00:21:42
always a good pitch from the insurance
00:21:44
industry right whether it's you can get
00:21:46
heaven without any hell or how would you
00:21:48
like to have insurance and get the
00:21:49
upside of it markets at the same time I
00:21:51
mean it sounds great until you peel back
00:21:54
the onion and understand the math like
00:21:55
you and I do but if you're a teacher
00:21:57
listening to this right now now what can
00:21:59
you do to protect yourself or what kind
00:22:01
of path can you go down to make sure
00:22:02
that you're in a good spot yeah it's
00:22:04
such a good question and I should point
00:22:06
out that we are a nonprofit We Sell no
00:22:09
Financial products we are very lucky to
00:22:11
be funded by a gentleman named Tim
00:22:14
ranzetta who runs NextGen personal
00:22:17
finance I'm not sure if you're familiar
00:22:19
with this organization and Tim does not
00:22:21
want us trumpeting his name because he
00:22:24
is just so lowkey but Tim has this
00:22:27
amazing mission his goal is to get
00:22:30
personal finance a required class for
00:22:32
graduation in all 50 states so far to
00:22:36
date they've got 26 dates Jesse where so
00:22:40
probably in about two or three years
00:22:42
it'll be implemented widely it starts
00:22:44
with personal finance education and many
00:22:46
teachers don't have this they walk into
00:22:49
the staff lounge and they are truly
00:22:51
sitting ducks so what I would tell any
00:22:54
teacher listening come to our website
00:22:58
403b wise.org join our Facebook group
00:23:03
read the books that you recommend Jesse
00:23:06
I love your curated list of books
00:23:09
psychology of money is one of my
00:23:12
favorite the Morgan housel podcast is
00:23:15
genius I enjoy his work so much our
00:23:19
original idea with 403b wi.org was to
00:23:24
call ourselves
00:23:26
inoculate and we wanted to go go to
00:23:29
teacher education programs and reach
00:23:32
teachers before they got in the
00:23:35
classroom to in effect inoculate them
00:23:38
against the disease that is what they
00:23:41
face in the staff Lounge by these sales
00:23:43
agents unfortunately you know I was a
00:23:46
public school teacher for over a dozen
00:23:48
years I also taught college and it is
00:23:52
very hard to get College professors to
00:23:55
give up a little bit of their time where
00:23:58
we could come in and educate future
00:24:00
teachers I will tell you that last
00:24:03
Friday we spoke to 50 pre-service
00:24:06
teachers at Southern Illinois University
00:24:10
and we gave them the lowdown so those 50
00:24:13
it's a very small amount now are
00:24:16
educated and will be able to resist that
00:24:19
sales pitch but to your question we have
00:24:22
to be wise consumers in every aspect
00:24:25
whether we're buying a washer a dryer
00:24:27
especially when it comes to financial
00:24:29
products don't sign anything take the
00:24:33
paperwork say thank you very much I'll
00:24:35
do my research I think you had money
00:24:38
with Kate on she's fantastic she's a
00:24:41
former teacher there's a lot of us out
00:24:44
there increasingly teachers are getting
00:24:46
into this sort of advocacy space we
00:24:49
think we do really good work but we know
00:24:51
we're not the only ones the irony of
00:24:54
Jesse is it's education teachers need to
00:24:57
learn about this stuff unfortunately
00:25:00
here's a quick ad and then we'll get
00:25:02
back to the show one of the more common
00:25:04
questions I hear is Jesse what do you
00:25:06
like and use books blogs podcasts even
00:25:09
Banks and brokerage firms what are your
00:25:12
recommendations so to answer that
00:25:14
question I put together a web page you
00:25:16
can check it out at bestin interest.
00:25:18
blog reccommendations again that's best
00:25:22
interest. blog reccommendations to check
00:25:25
out how I'm improving my financial life
00:25:28
and something Dan that you've made me
00:25:30
think about that is kind of interesting
00:25:32
this is a bit more of the nerdy
00:25:33
financial planner in me which is taking
00:25:35
a step back to the whole annuity idea
00:25:38
where a lot of 4 3bs are the money ends
00:25:41
up in an annuity oftentimes you have a
00:25:43
public school teacher who's already
00:25:45
getting some form of state sponsored
00:25:47
pension which is fixed income many are
00:25:50
getting Social Security which is fixed
00:25:51
income I I think some states actually I
00:25:53
learned this more recently some states
00:25:55
if you have a a a public pension you
00:25:57
don't get Social Security but that's
00:25:59
that's a separate conversation but
00:26:01
either way the idea is teachers are
00:26:02
already getting a lot of good fixed
00:26:04
income in retirement and then what does
00:26:06
the 403b adviser come in and say Here's
00:26:09
more fixed income for you through the
00:26:10
annuity so even if the annuity was low
00:26:13
fee which we know it's not odds are it
00:26:16
might not be a great fit from a
00:26:17
financial planning point of view is I'm
00:26:19
just from the 403b wi's organizational
00:26:22
point of view when it comes to that
00:26:25
aspect of financial planning or like a
00:26:27
tax planning or anything like do you
00:26:28
have any tips or tricks for for teachers
00:26:30
to be aware of well you're exactly right
00:26:33
if you are a career public school
00:26:35
teacher you teach 30 years your pension
00:26:38
should provide anywhere from 40 to 60%
00:26:42
of your final year salary in retirement
00:26:45
wow what a nice solid basis for a
00:26:49
successful retirement layer on Social
00:26:52
Security but to your point there's about
00:26:55
I think 8 to 10 States California is one
00:26:58
of of them and I didn't realize this
00:26:59
until maybe my third year I wasn't
00:27:02
paying into Social Security and I was a
00:27:04
career changer so I had you know maybe
00:27:07
five years into the system but you know
00:27:10
there's these pension offsets and other
00:27:12
complexities so you're right teachers
00:27:15
have a lot of what we would call fixed
00:27:18
income sources in retirement so one
00:27:22
school of thought and again everybody
00:27:23
has to invest at their comfort level so
00:27:26
what I say may be right for me not for
00:27:28
one I feel like teachers could let it
00:27:30
ride just S&P 500 in your 403b and I
00:27:34
think you're fine because then you've
00:27:35
got the upside of the market and you've
00:27:38
got this pension and social security to
00:27:40
rely on but you're right the sales
00:27:42
agents are going to sell what yields the
00:27:44
biggest commission my partner is really
00:27:47
good about digging into disclosure
00:27:49
documents and this is horrifying he
00:27:52
found that Equitable salespeople in
00:27:56
order Jesse to get health insurance and
00:27:59
other benefits have to sell a certain
00:28:01
amount of Equitable products could you
00:28:03
imagine that we always say imagine if
00:28:05
teachers in order to get their health
00:28:07
care had to give X number of A's X
00:28:10
number of B's the incentives are so
00:28:13
perverse at that point you remind me Dan
00:28:15
there's a great New York Times article
00:28:17
or I even think it was a series of
00:28:19
Articles three or four or five articles
00:28:21
that came out in a row you're nodding
00:28:23
your head I mean what is this in the
00:28:24
last five or eight years something
00:28:26
something like that well this is what
00:28:28
led us to Tim ranzetta so Scott my
00:28:30
partner Scott down downhow and I were
00:28:33
the lead sources for Tara and Ron Liber
00:28:37
who did these articles and we worked
00:28:40
with them for over a year they were
00:28:43
constantly saying you're this can't be
00:28:45
right because you know their frame of
00:28:47
reference is the 40K which has a RIS of
00:28:50
protection and boy that was a sensation
00:28:53
for our movement CU I've been doing this
00:28:54
for for over 20 years I originally
00:28:56
launched the website way back in 2000
00:29:00
because I was getting sales agents
00:29:02
coming into my staff uh Lounge coming
00:29:04
into my classroom I began to
00:29:06
self-educate we didn't have podcasts
00:29:08
back then we didn't have U the internet
00:29:11
I was listening to the radio at I think
00:29:13
11:00 a.m. on Saturday mornings I I
00:29:16
learned about mle fool so I launched my
00:29:19
website just to warn teachers way way
00:29:22
back then but yeah you you are
00:29:24
absolutely right those New York Times
00:29:26
series of Articles yeah I tell everyone
00:29:29
go search for those we have them in our
00:29:31
advocacy section of 403b we'll steal
00:29:34
those links and throw them in the show
00:29:35
notes here because I mean I can picture
00:29:38
some of the interviews in those articles
00:29:42
with Equitable advisers or maybe former
00:29:45
Equitable advisers you know it's Evan
00:29:47
Jones 27 of Bloomington Indiana who
00:29:50
graduated with economics degree got a
00:29:53
job at Equitable for all he knew here's
00:29:54
a big firm he's like okay cool this is
00:29:56
an interesting path and throughout his
00:29:58
training program they're telling him you
00:30:01
are helping teachers you are doing a
00:30:03
good thing for teachers this is a
00:30:05
positive and by the way if you don't
00:30:07
sell enough of our products you don't
00:30:10
get health insurance so here's all these
00:30:12
reasons why he ass sensibly thinks he's
00:30:14
doing right by these people he's showing
00:30:16
up in the break room you know bushy
00:30:18
tailed young guy box of donuts talking
00:30:21
to teachers and it wasn't until a few
00:30:22
years later when he realized like wait a
00:30:24
second he got you know something's not
00:30:26
quite right here it's not the advisers
00:30:28
themselves are bad people I think people
00:30:32
who are attracted to working with
00:30:33
teachers are generally good people if I
00:30:35
had a broad brush it and I think they
00:30:38
experience exactly what you just
00:30:39
described they have an interest in
00:30:41
personal finance they hear about this
00:30:44
opportunity we've all graduated not all
00:30:46
of us but I remember when I graduated
00:30:47
from college I was desperate to get that
00:30:49
first job right they go to work for a
00:30:51
company like inequitable and they're
00:30:53
told all these sunny things like you
00:30:56
they go into the classroom they going to
00:30:58
the staff lounges they're establishing
00:31:00
relationships but as they begin to learn
00:31:03
more they might have a crisis of
00:31:05
conscious and I experienced this this
00:31:07
summer before we started recording I
00:31:09
mentioned uh I attended a wedding in the
00:31:12
Woodstock New York area and one of the
00:31:15
groomsmen was a former teacher who just
00:31:18
got a job with a financial company I'm
00:31:20
not going to say the name it wasn't
00:31:21
Equitable he and I started talking and
00:31:25
during the course of our conversation
00:31:27
you could see him start and mention red
00:31:30
flags and red flags and red flags and so
00:31:34
we did a zoom call about a month ago and
00:31:36
he just let me know he quit the company
00:31:39
because he thought they were unethical
00:31:41
he's going back to teaching he's going
00:31:44
to earn his uh cfp and become a
00:31:46
fiduciary adviser So within our orbit we
00:31:49
have a lot of former equit salespeople
00:31:53
who have come to us and said you guys
00:31:55
are 100% right I want to do it the right
00:31:58
way what do you recommend and they've
00:32:00
gone down that and many have
00:32:02
successfully transitioned we also have
00:32:05
teachers and again we don't want to pull
00:32:07
teachers out of the classroom because we
00:32:09
you know we need as many good teachers
00:32:11
as we can but we've worked with probably
00:32:13
half a dozen teachers who have
00:32:15
transitioned to becoming fiduciary
00:32:17
advisers because frankly you talk to a
00:32:19
100 teachers you talk to a 100 Americans
00:32:22
I think it's not an exaggeration to say
00:32:24
90 of them would feel more comfortable
00:32:26
talking to a trusted person person and
00:32:28
we're not against advisers not at all
00:32:31
but whose interest are they serving
00:32:33
that's why I love your title of your of
00:32:35
your program somebody sent me these hats
00:32:38
that say merely
00:32:40
suitable and your best interest right I
00:32:43
like that explain to the audience what
00:32:45
does that refer to Dan because I I know
00:32:47
the joke I know the joke yeah it's the
00:32:49
type of advice you're getting in a
00:32:51
single ad so you want someone who's
00:32:53
working in your best interest not
00:32:55
someone who's you know the minimum
00:32:57
standard something that's merely
00:32:59
suitable and what you know and what
00:33:02
we've learned is that the same advisor
00:33:05
might wear both hats in different
00:33:07
situations so one of our most popular
00:33:10
resources is we have a fiduciary Pledge
00:33:12
on our website where we tell people look
00:33:16
no problem you know using advisor but
00:33:19
have them signed a fiduciary pledge
00:33:21
pledging to always put your interest
00:33:23
first in all situations because
00:33:26
Equitable we're starting to the
00:33:28
Equitable advisers that have cfps and we
00:33:31
found this very curious because you have
00:33:33
to be a fiduciary but we think there's
00:33:36
ways that they can sort of skirt this
00:33:39
I've told the story here on microphone
00:33:41
on the podcast at least once probably
00:33:43
twice of a former adviser at a firm like
00:33:47
of one of the ones that we're talking
00:33:48
about here who when he learned of my
00:33:51
career transition and and where I am at
00:33:53
a independent raia you know the whole
00:33:55
fiduciary standard and and he asked me
00:33:58
one day we're just having a coffee and
00:33:59
he goes how often do you put your
00:34:01
clients in annuities well at least I
00:34:03
said never so far I said you know we
00:34:05
help a thousand families we've been
00:34:06
around for 35 years we've never found a
00:34:08
reason where the math led us to selling
00:34:11
an annuity for one of our clients or
00:34:13
even directing I don't think we would
00:34:15
have the ability to sell it here we
00:34:16
don't sell insurance products even
00:34:18
directing or advising an annuity and he
00:34:20
looked he kind of twisted his forehead
00:34:21
and looked at me and he goes you guys
00:34:23
are fiduciaries and you've never sold an
00:34:25
annuity and I kind of looked at him and
00:34:27
I said well you're a fiduciary because
00:34:29
he's a cfp I said you're a fiduciary and
00:34:32
you you do push annuities so it's a I I
00:34:35
hear what you're saying it's a strange
00:34:36
gray area that I don't have an answer to
00:34:39
I'm not sure if you do Dan or what your
00:34:41
thoughts are well I feel like the
00:34:42
government on two occasions has tried to
00:34:44
address that and the most recent effort
00:34:47
by the current Administration the Biden
00:34:49
Administration was curtailed by annuity
00:34:53
sales agents in Texas filing lawsuits
00:34:56
and there's a lot of Court shopping that
00:34:58
goes on and they found friendly judge in
00:35:01
Texas who has blown it up and so once
00:35:05
again it seems so simple right anyone
00:35:08
selling Financial products should put
00:35:10
the partic the the client best interest
00:35:14
first what do you always say follow the
00:35:16
money you know I used to teach um social
00:35:19
studies I feel like we have four
00:35:20
branches of government and the fourth is
00:35:22
lobbyist and I think that they are
00:35:24
becoming more and more powerful so to me
00:35:27
it's enormously frustrating I feel like
00:35:30
in our country you are unbelievably
00:35:33
vulnerable as a consumer what gives me
00:35:36
optimism is shows like yours you look at
00:35:39
Tik Tok you look at all the social media
00:35:42
platforms and that cuts both ways right
00:35:44
you've seen some
00:35:45
absurd posts by people whether it's
00:35:49
Bitcoin or name the the flavor of the
00:35:51
month but I do feel like it's very
00:35:54
different than when I was in my 20s
00:35:56
finding information it's out there and
00:35:58
at some point consumers have to be
00:36:01
active in their own financial future in
00:36:04
my opinion Dan I think there's more
00:36:06
noise than ever before there's also more
00:36:09
signal than ever before one of my
00:36:11
guiding principles is is trying to
00:36:13
provide as much signal as I can and
00:36:15
trying to not provide any noise and
00:36:17
hoping that people over time will will
00:36:19
come Discover it I mean 43b wise I think
00:36:21
is doing the same exact thing and it is
00:36:23
it's hard but ultimately it's up we we
00:36:25
hope that individuals can somehow find
00:36:27
the work that we're doing or other other
00:36:29
people like us and and start to realize
00:36:31
that genuine signal and maybe that that
00:36:33
brings me to my my last question today
00:36:35
which is I can imagine and I just know
00:36:37
for a fact of the way I'm going to share
00:36:39
some of this conversation today with
00:36:40
people that teachers are going to tune
00:36:42
in some of whom have been going down a
00:36:45
particular 4 or 3B path for five or 10
00:36:48
or 20 plus years and they're going to
00:36:50
hear what we've said today and they're
00:36:51
going to say oh boy I think I'm doing
00:36:54
something in the red light district as
00:36:56
it were that's a I I love that I'm gonna
00:36:59
use that and so the question is if
00:37:03
you're one of those teachers listening
00:37:04
right now Dan where where would you
00:37:06
point them how can they start to unwind
00:37:08
untangle or head toward the green lights
00:37:11
H fantastic question so right from our
00:37:14
homepage middle left it says stuck in a
00:37:18
bad
00:37:19
403b what you can do click that we have
00:37:22
detailed information at the bottom of
00:37:25
that page is a link specific
00:37:27
specifically about Equitable because we
00:37:30
have a very active Facebook group and I
00:37:32
would urge your audience who's
00:37:34
interested in this topic to join the
00:37:36
403b Facebook group we are closing in on
00:37:39
18,000 members the number one first post
00:37:44
is I was sold a 403b by company X it's
00:37:49
almost always Equitable I've now learned
00:37:52
how expensive this product is how do I
00:37:55
get out of it we have amazing volunteers
00:37:59
on that site you have to register to be
00:38:02
accepted we don't take sales agents we
00:38:04
don't take financial planners you have
00:38:06
to be a 403b participant you're going to
00:38:09
get fantastic advice not only from our
00:38:12
volunteers but also Educators they will
00:38:15
say stick with it I got out of Equitable
00:38:18
Equitable they're probably aware of us
00:38:21
because they seem to be constantly
00:38:23
changing the procedures they put so many
00:38:26
roadblocks in in front of teachers and
00:38:29
so if you're a teacher listening right
00:38:30
now and you have Equitable here's what I
00:38:32
would say number one stop contributing
00:38:35
what do they say when you're in a hole
00:38:37
stop digging just stop contributing okay
00:38:41
come to our website look at that
00:38:43
resource another resource we have is we
00:38:46
are endeavoring to post as many School
00:38:49
District 403b vendor lists as we can so
00:38:53
at the top of our page you can select
00:38:55
your state you'll see a list of all the
00:38:57
school districts in your state to date
00:39:00
we have
00:39:01
5,000 school districts out of the more
00:39:04
than 13,000 in our database but we've
00:39:07
focused on large school districts so we
00:39:09
think we have data covering those over
00:39:11
60% of the teachers then see if you have
00:39:15
a better option see if you have one of
00:39:18
these green vendors one of these even a
00:39:21
yellow vendor isn't bad so if we don't
00:39:25
have that data contact your school
00:39:27
district and asked to see the 403b
00:39:30
vendor list and that's just the
00:39:32
financial companies that are offered if
00:39:34
you want to come back to our site and
00:39:36
upload that information we will get it
00:39:38
in our database and accessible and this
00:39:40
is what we do like on a daily basis I'm
00:39:42
uploading five to 10 new school
00:39:44
districts so what I did was before we
00:39:47
started is is Rochester City Public
00:39:49
Schools that's in the town you're in
00:39:51
right yeah I mean a whole bunch of
00:39:53
suburbs Rochester up on your uh yeah so
00:39:55
I just I uploaded it and they've earned
00:39:58
a c because they have at least one
00:40:00
lowcost vendor now the problem is you
00:40:03
know most teachers in your uh City are
00:40:06
not in the lowcost vendor which is
00:40:08
Aspire this is that Supermarket company
00:40:11
that will give you access to Vanguard or
00:40:14
Fidelity for only
00:40:16
0.15% so again Rochester will this use a
00:40:19
Rochester City teacher as an example
00:40:21
stop contributing to Equitable which is
00:40:24
available take that new contrib open up
00:40:27
an account with a Spire Vanguard through
00:40:30
a spire and start putting the $200 or
00:40:34
300 whatever it is a month into a Spire
00:40:37
not during the school year because it's
00:40:39
so complex you can if you want to
00:40:41
dedicate a weekend but it's some point
00:40:44
revisit your other product and here's
00:40:47
what's again so egregious they do a
00:40:50
rolling surrender charge so if you've
00:40:53
been contributing for like 10 years and
00:40:55
you stopped 10 years ago you can move
00:40:57
all the money penalty-free but every new
00:41:00
monthly contribution begins a new 7 to
00:41:04
10e period people get so angry at their
00:41:07
school district for allowing this at
00:41:10
themselves and we always tell teachers
00:41:12
don't beat yourself up you didn't know
00:41:13
what you didn't know now if they listen
00:41:15
to this podcast and then sign up with
00:41:17
eidal we can't help you yeah well you
00:41:21
remind me I'll I'll have to send you
00:41:23
this link offline Dan or I'll throw it
00:41:25
in the show notes for listeners I was
00:41:26
helping a family M move her assets from
00:41:31
Lincoln from a Lincoln
00:41:32
403b and just to roll it over into a
00:41:35
self-managed IRA and the process for her
00:41:37
to do so was so convoluted with multiple
00:41:41
fors back and forth and Medallion stamps
00:41:43
and
00:41:47
notorized baseball thing from content
00:41:49
creation there's the saying the medium
00:41:51
is the message that this social
00:41:53
scientist Canadian guy Marshall mcluen
00:41:55
said in the' 60s medium meaning like
00:41:57
media TV versus internet versus
00:42:00
Instagram versus podcasts and his whole
00:42:02
idea is well if I'm trying to send a
00:42:05
certain message it's going to be
00:42:06
received differently if it's coming
00:42:08
through Tik Tok than if it's coming
00:42:09
through a podcast or if it's coming
00:42:11
through a Facebook post like there's a
00:42:12
certain underlying message in the the
00:42:14
media Choice itself well I took that
00:42:17
idea and I said the friction is the
00:42:19
message because a lot of times in
00:42:21
financial interactions if a company will
00:42:24
very easily accept your money but then
00:42:27
will add a lot of friction if you want
00:42:29
to get your money back they're sending a
00:42:31
certain message there and there's a
00:42:32
reason why the rollovers in the vangard
00:42:35
and Fidelity in Schwab world are
00:42:37
extremely easy compared to the rollovers
00:42:40
in this 403b world because there's a
00:42:43
certain message that they're sending
00:42:44
with that that added friction and you
00:42:46
just reminded me of that we've covered a
00:42:48
lot of very valuable ground today Dan
00:42:50
and I'm sure listeners will have a
00:42:52
pretty good idea of where to go but
00:42:54
whether it's the Facebook group
00:42:55
specifically or your website
00:42:57
how can our listeners today reach out to
00:43:00
you or access some of these resources
00:43:02
that you and your partner put together
00:43:04
yeah absolutely come to the website 403b
00:43:06
wise.org join the Facebook group if
00:43:08
you're new to this and you want to share
00:43:11
this information with your colleagues we
00:43:13
do two podcasts we do a weekly we call
00:43:15
it teach and retire Rich it's a
00:43:17
tongue-in-cheek name it has to do with
00:43:19
the in intrinsic rewards of being a
00:43:21
teacher that's accessible from our
00:43:23
homepage as is a special podcast series
00:43:26
that we have produce called learn by
00:43:28
being burned it lays out how teachers
00:43:31
around the country were burned how they
00:43:34
learned and how they started advocating
00:43:36
for Change and we think it is a powerful
00:43:39
way to educate Educators about the
00:43:42
problems of a 403b and the solutions
00:43:46
fantastic oh I was going to say if you
00:43:48
want to reach us at the very top it says
00:43:50
contact email will come right to me also
00:43:53
hello 403b wi.org
00:43:57
another thing we do is we have
00:43:59
self-paced free learning modules so from
00:44:02
our event section if you were to click
00:44:05
events at the top of our homepage at the
00:44:07
top of that page that launches it'll say
00:44:10
on demand learning modules we have one
00:44:12
on the 403b a second 401k like
00:44:16
retirement plan available to teachers
00:44:18
called the 457b oh and I'd be remiss if
00:44:21
I didn't mention this especially for
00:44:23
someone in New York the state of New
00:44:25
York has the single best
00:44:27
state-run 457b Plan called New York
00:44:31
deferred compensation every school
00:44:33
district in New York should make this
00:44:35
available and If I was a teacher in New
00:44:38
York and it was available that's where
00:44:40
my first dollar of contribution would go
00:44:42
the 457 over the 403b so that's what I
00:44:47
would do there and then also I think a
00:44:49
Roth IRA for every teacher is maybe
00:44:51
where you should begin because it's not
00:44:53
tied to your employer if you change
00:44:56
School District or stay
00:44:57
change careers you don't have to deal
00:44:59
with it we think that is a good way to
00:45:01
go a Roth IRA fantastic fantastic stuff
00:45:04
today Dan thank you so much for joining
00:45:06
us so Dan otter of 403bwise we will make
00:45:10
sure that listeners can find all these
00:45:11
resources you've detailed today and
00:45:14
thank you again for joining us here on
00:45:15
the best interest podcast oh my pleasure
00:45:17
thanks for the opportunity to talk about
00:45:19
something you can see I'm very
00:45:21
passionate
00:45:22
about thanks for tuning in to this
00:45:25
episode of the best interest podcast if
00:45:27
you have a question for Jesse to answer
00:45:29
on a future episode send him an email at
00:45:31
Jessie bestin interest. blog again
00:45:34
that's Jesse at bestter interest. blog
00:45:38
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00:45:40
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00:45:42
listen this helps others find the show
00:45:44
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00:45:47
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00:45:49
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00:45:54
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00:45:56
person podcast meant for education and
00:45:59
entertainment it should not be taken as
00:46:01
Financial advice and is not prescriptive
00:46:03
of your financial situation