Aug. 25, 2005 - It's Up To You

There is one simple rule you must absolutely understand when it comes to handling your money -- it's all up to you.

A case in point comes to us through a front page story in today's Wall Street Journal:

Hard Lessons

As Teachers Sock Money Into 403(b)s, Few Defenses Exist

Oversight for Retirement Plans Fall on Patchwork of States;

Districts' Hands-Off Policy

The story focuses on 403(b) retirement plans which are a close cousin to the more popular 401(k) plan.  403(b) plans are primarily available only to teachers and hospital workers.  The big difference is that 401(k) plans have many rules and regulations that hold employers accountable and protect employees.  403(b) plans do not.

That's a big, red flag right there.

What we learn in this article is that teachers trust their school districts to look out for their interests in hiring plan administrators for 403(b) accounts.  But the school districts hide behind the lax rules because they don't want any responsibility for these plans.  Thus, the door is wide open for abuses by 403(b) plan administrators -- theft of money, fraud, terrible investment choices, high account fees, and inappropriate investment sales practices.

The winners are the plan administrators, salespersons, and insurance companies behind these plans because they make big dollars in fees and commissions.  The school districts and hospitals win because they get to stick their heads in the sand and avoid any responsibility for their employees' well-being.  The losers are the teachers and hospital workers who participate in these plans.

As the Journal notes, the higher costs associated with 403(b) plans can easily cost each participant tens of thousands of dollars over the course of a career -- money that could have been better used for retirement expenses.

The lesson?  No matter what financial arrangements you or your employer make, no matter whom you trust for advice, no matter from whom you buy financial/insurance/legal products, YOU have to be the one in charge of looking out for your financial interests.

No one else is going to do it for you.

When you do go looking for advice, be sure to deal with someone who has a fiduciary responsibility to look out for your best interests.  The vast majority of the financial services/advice industry do not meet that requirement.  You need someone without conflicts of interest and whose advice is objective.

Otherwise, you're just asking for trouble.