220 | 403(b) Investment Options for Teachers and Public Employees

ChooseFI | Financial Independence Podcast

Jonathan Mendonsa & Brad Barrett | Choose FI Media, Inc

Business, Careers, Investing

4.8 • 5.2K Ratings

🗓️ 15 June 2020

⏱️ 60 minutes

🔗️ Recording | iTunes | RSS

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Summary

Most people assume government-backed retirement plans are safe and well-regulated — but public school teachers often face some of the worst retirement account options in the country. Nancy Bacchetti, a former teacher, shares her journey from paycheck-to-paycheck living to financial independence after discovering the hidden fees and lack of protections in her 403(b) plan. She explains the critical differences between 403(b) and 401(k) plans, breaks down how seemingly small fees can devastate long-term savings, and provides practical steps educators can take to optimize their retirement accounts — including selecting low-cost index funds, working with HR to add better vendor options, and leveraging real estate investing. Nancy's activism through fixmy403b.com aims to educate teachers about these financial pitfalls and advocate for better retirement choices. Key Topics: Understanding 403(b) Plans [00:04:10] Many public sector employees, especially teachers, have access to 403(b) retirement plans, which can be high-cost and poorly managed. Awareness of the differences between 403(b) and 401(k) plans is crucial, as 403(b) plans lack the protections of ERISA laws. Hidden Fees Discussion [00:08:04] Fees associated with 403(b) plans can significantly decrease retirement savings; hidden fees can be present in expense ratios and annuity products. Nancy's Journey to Financial Independence [00:35:20] After facing challenges with high fees, Nancy took proactive steps to optimize her savings by understanding her retirement plans and investing in real estate. Resources for Teachers [00:50:16] Nancy discusses her website, fixmy403b.com, aimed at educating teachers about their retirement options and advocating for better choices. Action Steps: Evaluate Your 403(b) Plan [00:21:54] Check for hidden fees and understand the investment options available in your plan. Reach Out to HR [00:29:59] Inquire about low-cost vendor options and discuss the possibility of adding preferable providers to your plan. Educate Yourself on Retirement Plans [00:43:06] Learn about the differences between 403(b) and 457 plans and the benefits each can provide. Timestamps: 00:01:10 - Discussion of Episode 13: The Unfair Buy Advantage of Teachers 00:02:19 - Nancy's transition from financial struggle to independence 00:05:11 - The truth about 403(b) regulatory protections 00:12:41 - Understanding the hidden costs of "free" financial services 00:22:29 - Steps to take if your 403(b) plan has high fees 00:50:16 - Resources for improving retirement options for teachers 00:59:02 - Action Steps for Teachers Notable Quotes: "Nancy's journey from living paycheck to paycheck to achieving financial independence showcases the challenges faced by many educators." [00:02:19] "Discovering the hidden fees in her 403(b) prompted Nancy to seek additional strategies to optimize her retirement savings." [00:36:19] "Nancy exposes the truth about the 403(b) and its lack of regulatory protection compared to 401(k) plans." [00:05:11] Resources: fixmy403b.com - Nancy Bacchetti's website for resources and education on 403(b) plans. 403BWISE - Resource for teachers seeking information about 403(b) plans. ▶ Listen Next: Ep. 222 — Navigating Midlife Career Changes and Financial Independence | Essential Listening

Transcript

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0:00.0	You're listening to Choose FI Radio.
0:07.0	The blueprint for financial independence lives here.
0:15.0	If you're looking to unlock the secrets to financial independence and early retirement,
0:25.0	you're in the right place.
0:27.0	Stay tuned and join a community of like-minded people who are getting all finance to be there
0:32.0	and taking control of their lives in the pursuit of financial independence.
0:36.0	Choose FI, your home for financial independence online.
0:42.0	Hello everyone, very excited about today's episode.
0:53.0	We're getting a chance to speak with Nancy Backety.
0:55.0	And when Brad and I are putting these episodes together, we're trying to think about you, our audience,
1:00.0	and how will this episode serve you and who will it serve?
1:03.0	And I can tell you that to this date, one of our most useful and most sought after episodes is episode 13 of our podcast.
1:11.0	And in that episode, we talked with the millionaire educator.
1:14.0	And the title of the episode was actually the unfair FI advantage of teachers.
1:19.0	And we were exploring how you could utilize this vehicle called the 457.
1:23.0	And in this case, a 457 B to effectively double your pre-tax contributions into a tax advantage vehicle, the 457 B.
1:32.0	Anyways, go check out that episode if you haven't.
1:35.0	But it's unfair to talk about that without also saying that it isn't all roses.
1:40.0	In fact, the 403 B, which is another vehicle that most public sector employees have access to, in many cases, is horrible.
1:51.0	It's horrible.
1:52.0	And we're going to get into some of the reasons why, but more than that, instead of just telling you how bad it is, we're going to tell you what you can do about it.
1:58.0	And Nancy is here to help us with that and just to set the frame.
	...

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