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Teachers Pay High Fees for Retirement Funds

wsj.com

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Re: Teachers Pay High Fees for Retirement Funds

#21

Post by sebasmurphy »

Ididntdothis wrote: post #4
lotsofpulp wrote: post #3

I don't see any reason an employer or union wouldn't offer Vanguard/Fidelity/Schwab for 401k/HSA with access to the I assume they're probably getting some kickback or something from the arrangement of restricting the 401k/HSA member's funds to high fee investments. Edit: At least for an HSA, one can transfer the funds out into a Fidelity HSA account immediately. With a 401k, you have to wait until you leave your empl…

I don’t understand why 401k even exists. The money should go into an IRA controlled by the owner. The employer should have no say in this. The same should go for health insurance....

And even if it does. I don't really see the reason that I should be locked into the employers 401k and not be able to choose my own.

Re: Teachers Pay High Fees for Retirement Funds

#22

Post by kazagistar »

bifrost wrote: post #2

Unions in CA are also why teachers can't get disability insurance. Have to go out for surgery? You get nothing.

If a union isn't democratically controlled by the workers it's not a proper union, and if it is, it is possible to make work for the majority of its employees, at the very least. So what's the full story you are missing here?

Re: Teachers Pay High Fees for Retirement Funds

#23

Post by lotsofpulp »

joncrane wrote: post #19
lotsofpulp wrote: post #3

I don't see any reason an employer or union wouldn't offer Vanguard/Fidelity/Schwab for 401k/HSA with access to the I assume they're probably getting some kickback or something from the arrangement of restricting the 401k/HSA member's funds to high fee investments. Edit: At least for an HSA, one can transfer the funds out into a Fidelity HSA account immediately. With a 401k, you have to wait until you leave your empl…

It's minor kickbacks and a lot of information asymmetry. The big kickbacks come from the "benefits consulting" companies that "help" small to midsize businesses figure out what vehicles to use to offer benefits for their employees. (This sometimes includes health insurance but we're not talking about that) Their main source of income is commissions to their company for funneling their clients' employees money into th…

>It's amazing how simple human laziness and willful ignorance leads to literally millions in wealth being siphoned off of hard working employees into the pockets of benefits consultants and mutual fund companies.

Surely the bosses at these employers, who are smart enough to be bosses in the first place, can recognize that they are getting taken for a ride for their own 401k investments just like the employees are. Therefore, the only reason I can come up with that makes sense is the somehow the bosses themselves are getting incentivized to choose suboptimal investment options for themselves.

Re: Teachers Pay High Fees for Retirement Funds

#24

Post by Ididntdothis »

lotsofpulp wrote: post #16
unicornmama wrote: post #11

Earlier quoted context omitted.

Maybe this made sense in 1978. But we are now in an era of zero fee trades, index funds, and microscopic management fees.

I am alluding to the 401k contribution limit being $20k+ versus the IRA contribution limit being $6k. There is absolutely no reason why one should differ from the other, other than one benefits those who have employers that offer 401k. In fact, couples where one spouse who works for an employer with a 401k and one who doesn't are actually punished by lowering the contribution limit for IRA to zero. Someone explain to…

It’s pretty crazy that employers have any power over things like health insurance or retirement savings and play by different rules. These should be completely disconnected from employment. The only thing employers should compete on is things like 401k matching.

Re: Teachers Pay High Fees for Retirement Funds

#25

Post by toomuchtodo »

Ididntdothis wrote: post #4
lotsofpulp wrote: post #3

I don't see any reason an employer or union wouldn't offer Vanguard/Fidelity/Schwab for 401k/HSA with access to the I assume they're probably getting some kickback or something from the arrangement of restricting the 401k/HSA member's funds to high fee investments. Edit: At least for an HSA, one can transfer the funds out into a Fidelity HSA account immediately. With a 401k, you have to wait until you leave your empl…

I don’t understand why 401k even exists. The money should go into an IRA controlled by the owner. The employer should have no say in this. The same should go for health insurance....

401ks should not exist. IRAs should support the same contribution limits, with funds deposited in the same way payroll is done. This would be extremely beneficial to everyone saving for retirement, as fees would be driven down due to the ability to shop your account around, and there is zero friction in opening an IRA compared to your employer needing to sponsor and support a 401k plan.

Support retiring 401k legislation. Call your representatives.

Re: Teachers Pay High Fees for Retirement Funds

#26

Post by ralph84 »

Pfhreak wrote: post #17
seibelj wrote: post #10

Earlier quoted context omitted.

Employees have the ability to switch jobs, whereas unions make it hard to join a different shop at the same seniority level as before. I would rather be able to switch jobs easily than have to follow union rules.

This is FUD. There are seniority based unions, and there are merit based unions. Nothing about a union means you can't negotiate, have merit based promotion, etc. Also, as someone in tech, I constantly hear people talking about downleveling when they change jobs, I hear people talking about unclear promotion criteria, etc.

This. Some of the highest paid individual contributors in the world are actors and professional athletes. They're represented by unions.

Re: Teachers Pay High Fees for Retirement Funds

#27

Post by Spooky23 »

lotsofpulp wrote: post #3

I don't see any reason an employer or union wouldn't offer Vanguard/Fidelity/Schwab for 401k/HSA with access to the I assume they're probably getting some kickback or something from the arrangement of restricting the 401k/HSA member's funds to high fee investments. Edit: At least for an HSA, one can transfer the funds out into a Fidelity HSA account immediately. With a 401k, you have to wait until you leave your empl…

Most good ones do.

Unions are democratic institutions and members have the ability to drive changes to this type of thing. Often in many places local teachers unions affiliate with pools of unions or upstream affiliates to get better buying power. Sometimes issues like this are legacy things -- in the past many public school teachers had to use 403(b) plans, as they weren't eligible for or had issues with using 401k or 457 (more common for government) plans.

When my wife was a teacher, her union negotiated membership a "best of breed" 457 plan as a secondary retirement option (they have pensions) that picked investments from different investment firms based on price and performance, as well as negotiated reimbursements. Typically they would get 10-15% rebates from companies like Vanguard or T Rowe Price.

This was, however in a closed-shop environment, not a "right-to-work" state, and both the union and school districts had much better leverage due to the size of the pool.

The fact that you're reading a story about a union in Florida in WSJ is meaningful context. I'm sure they picked this one for a reason.

Re: Teachers Pay High Fees for Retirement Funds

#28

Post by ummonk »

aphextron wrote: post #6

Unions are not perfect. But they are the only protection individual laborers have left against the unstoppable power of modern corporations. Don't ever fall for the endless slandering laid against them by capitalists.

Unions are often rent-seeking monopolies. Labor organization is important, but that doesn't mean those claiming to organize labor are actually always doing what is in labor's best interests.

Re: Teachers Pay High Fees for Retirement Funds

#29

Post by dangerboysteve »

This Frontline doc (2013) paints a nice picture.

https://www.pbs.org/wgbh/frontline/film/retirement-gamble/

Many pension funds are screwing their members with high fee mutual funds resulting in 2-3%+ haircuts on annual returns. And this does not include all the mystery fees on top of everything else. Imagine what the compounding effects on this is. And these funds are shitty compared to Vanguard index fund over time. It comes down to shady backroom deals, kickbacks and incentive based selling.

edit: added year of the doc.

Re: Teachers Pay High Fees for Retirement Funds

#30

Post by sct202 »

lotsofpulp wrote: post #23
joncrane wrote: post #19

Earlier quoted context omitted.

It's minor kickbacks and a lot of information asymmetry. The big kickbacks come from the "benefits consulting" companies that "help" small to midsize businesses figure out what vehicles to use to offer benefits for their employees. (This sometimes includes health insurance but we're not talking about that) Their main source of income is commissions to their company for funneling their clients' employees money into th…

>It's amazing how simple human laziness and willful ignorance leads to literally millions in wealth being siphoned off of hard working employees into the pockets of benefits consultants and mutual fund companies. Surely the bosses at these employers, who are smart enough to be bosses in the first place, can recognize that they are getting taken for a ride for their own 401k investments just like the employees are. Th…

The sales people selling the investments can be very charming and convincing that they are much better than other companies. Plus a lot of the low cost options are very hands off so you don't have someone on the low-fee side arguing or driving around doing pitches.
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