If you ask Congress about teachers, you’ll hear a lot of rosy rhetoric about how valued they are, and how important they are to society. But then they turn around and treat them like dirt.
Congress sticks teachers and non-profit workers with a piece-of-trash retirement program called a 403(b). The vast majority don’t get the benefit of the 401(k) plans offered to employees of traditional businesses.
403(b)’s are a disgrace. They’re managed by insurance companies who’ve bought off Congressmen and Senators to support giving this vastly-inferior retirement plan to teachers and non-profits — just so the insurers can continue to fatten their pockets. It’s a disgusting, dirty-money game.
Congress recently voted to make all 401(k) fees transparent, so employees can see the true costs of the plan. But, since they’re still in the hip pocket of the insurers, Congress exempted this requirement for 403(b) plans! So teachers remain in the dark about any potential rip-off fees associated with their plan.
But there are options. According to USA Today, the NEA teacher’s union has designed a new disclosure form that teachers can use to check out the plan you’re in, even if you’re not a member of the union.
But if you’re a disciplined saver, Clark says teachers and non-profit workers are better off turning their back on the 403(b), and opening their own Roth retirement account. See Clark’s Investment Guide for info on setting up a Roth.
If you’ve been in a 403(b) plan for a long time, consider migrating your account to TIAA-Cref. They’re one of a very small number of 403(b) plan providers that don’t rip you off with massive, hidden fees. You can do a 1035 exchange to move your money tax-free.