Teacher Retirement Savings Accounts: The Good, the Bad and the Ugly

The New York Times recently ran a good piece, “When Teachers Face the Task of Fixing Their Retirement Accounts,” on how difficult it is for teachers to sort through the wide array of tax-sheltered savings accounts typically offered, using the plans offered to teachers in Greenwich, Connecticut as a telling example.

In another recent piece, “An Annuity for the Teacher — and the Broker,” the Times warns teachers from the perspective of a former Axa salesperson of the perils of purchasing an annuity that works better for the salesperson than it does for the teacher:

Bradley Bergeron’s first professional job out of college was selling retirement savings investments to public schoolteachers in Connecticut. The applications he carried in his black leather briefcase, however, were for one type of product only: a high-priced variable annuity.

‘From the teacher’s standpoint, they really miss out getting quality advice,’ said Mr. Bergeron, 27, who sold the plans for Axa Advisors’ retirement benefits group. “People who are in the schools pitching them and positioning themselves as retirement specialists are really there just to sell them one product….’

Only after setting the stage does the broker introduce the main performer. For Axa’s brokers, that role is usually assigned to Axa’s Equi-Vest variable deferred annuity. It isn’t simple: To get the full rundown on how it works, people must sift through a document that is 460 pages long.

And it doesn’t come cheap. The most popular version of the Equi-Vest annuity has a total annual cost that can range from 1.81 to 2.63 percent, according to an analysis from Morningstar…. [Editor’s note: the MassSmart plan available to BPS staff has a typical, significantly lower annual cost of less than .5 percent.]

Selling annuities also creates a continuing income stream for the brokers. Axa pays a commission of 1.5 percent to 2 percent on every future dollar an employee contributed to a 403(b) annuity. The annuity sold to the teacher, in a sense, becomes an annuity for the sales rep and the company’s managers….

Continue reading.

What distinguishes a good plan for the teacher from a good plan for the salesperson? Boston teachers have the same issue: how to choose from 50 annuity companies or whether to choose the 457 MassSmart plan instead. Get some help on how to get started. Please feel free to call or email me with questions.

SMART Plan: Appointments Available this Thursday
Have you saved enough for retirement? The SMART Plan offers tax-advantaged savings to help you build a secure retirement. Our SMART Plan representative, Lisa Cardinal, will be holding SMART Plan meetings this Thursday, March 16 from 4-6 PM at the BTU Hall. All are welcome to make an appointment, whether currently participating in the SMART Plan or not. To schedule a meeting, please RSVP to smart@empower-retirement.com. Meetings are by appointment only.