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The K-12 403(b) is broken.
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Dan's Blog

Dear Employer... ✍🏽

September 15, 2020

As we have shared here and here, teachers are being inundated with sham emails from salespeople posing as district-approved financial professionals: "... as an employee of ABC School District, you are eligible to schedule a phone call, teleconference, or in-person meeting with a representative for answers to your specific state, federal and individual retirement benefit questions." 

I can guarantee you Apple Computer employees are not getting these type of emails. 

It's time that school district benefits officials, superintendents, and school board members start getting inundated with a different kind of email blitz: one advocating for better, lower cost 403(b) investments.

I want to be clear that I am not advocating a spam campaign. Instead, I am advocating a targeted, respectful outreach program. Our guess is that many holding these positions don't know what they don't know about the 403(b). Let's educate them. Respectfully. 

Dear School Benefits Official or Superintendent or School Board Member,

Which of the following saving balances would you want in your retirement plan?

  1. $185,391
  2. $241,537
  3. $343,474*

Obviously, you would want choice #3 ($343,474). Unfortunately, the preponderance of high-cost 403(b) vendors available to employees in our district make it almost impossible to achieve this savings amount.

Ideally the district would do a Request-for-Proposal and choose one low-cost vendor. This is what companies do with their 401(k), and it is what Montgomery County Public Schools in Rockville, MD did with its 403(b). Employees of that district have one-low-cost vendor: Fidelity Investments. 

I am not asking for the school district to engage in an RFP at this time. I simply would like to see one of the following companies made available: Aspire Financial Services, Fidelity Investments, or Vanguard. These are companies known for offering quality, low-cost investments. I have no financial connection to these companies beyond wanting to save the most money possible. 

Unlike the 401(k) where employees have access to low-cost products, the K-12 403(b) is a mess. You can learn more about the issues in this short video: What is a 403(b)? The New York Times ran a series of stories documenting the problems with the K-12 403(b). 

I look forward to working with you to help our colleagues achieve a better retirement outcome. 

*These example savings balances were calculated using the following assumptions: Total value after 35 years, assuming $250 contributed monthly with a 6% average annual return. Balance #1 assumed annual investment cost of 3%; Balance #2 assumed annual investment cost of 1.74%; and Balance #3 assumed annual investment cost of 0.07%. 


Your Name

That's it. Short and sweet. This letter is now available in our Advocacy section — along with other resources — and can be adapted as teachers and school employees see fit. Just click "Make a copy" and adapt as you see fit. There is zero reasons teachers shouldn't have at least one, low-cost 403(b) option. 

Stay wise. Stay well.