Here are three paragraphs from page 191 of Jane Quinn Bryant’s Smart and Simple Financial Strategies for Busy People
“These plans are typically offered to public school teacher, among others. I approach them with a heavy heart. You should definitely participate; they’re payroll-deductible and tax-deferred. But school districts tend to offer these plans through insurance agents, whose mutual funds and annuities cost two or three times as much as the funds in the 401(k)s. It’s dereliction of duty; you ought to scream to the school boards and administrators. There’s no excuse for sticking teachers with poorer plans than corporate employees have. Hospital 403(b)s often have better options, too.
If you’re among the stuck, however, here’s what to do.
Get the list of investment plans your school district uses (called the vendor list) from your school office. If it includes low-cost groups such as Vanguard and TIAA-CREF, or Fidelity, T. Rowe Price, and USAA, you’re in luck. Get the enrollment forms and sign up for the plan yourself. You don’t need a salesperson as intermediary. Use the diversification rules you’re seen above to choose your mutual fund.
If you’re forced to invest through an insurance agent, choose the insurer’s mutual funds rather than its annuities (for annuities, see page 201). Agents push the annuities because they pay much higher commissions. But their high costs mean poorer investment returns. Also, you usually can’t change investments until six or seven years have passed, making it difficult to rebalance. The agents who sell you 403(b)s will probably present themselves as “financial advisers,” eager to help you decide on the best ways to invest. Always remember: They’re salespeople, that’s all. For good advice on 403(b)s, see http://www.403bwise.com/.”
