Wednesday, November 30, 2005

10 Rules for Saving For Retirement

What follows are the 10 rules you need to know to effectively save for retirement. I will expand on each one as time goes by.

  1. Start now
  2. Make it automatic (either from your paycheck or checking account)
  3. Diversify, Diversify, Diversify
  4. Don't be overly conservative in your allocation
  5. Don't be overly aggressive in your allocation
  6. Consistently increase contributions
  7. Tax Diversification - use both pre-tax & post tax accounts (Roth)
  8. Don't borrow from your retirement savings
  9. Keep overall expense low
  10. Avoid products with long surrender periods and high surrender charges

If you follow these ten rules you will have a successful retirement savings plan.

Scott Dauenhauer, CFP, MSFP

Kiplingers: I Teach Teachers How To Invest Better

403bwise creator and author of two books on financial planning for educators (including the latest, Teach and Retire Rich) Dan Otter is featured in December's publication of Kiplingers magazine. For those of you who have never met Dan Otter the above link will take you to his ugly mug (Ok, he's not that ugly, but you didn't hear it from me)!

The article is about how Dan got into educating teachers on how better to invest. Recently Dan gave a presentation based on his book Teach and Retire Rich in San Diego to a crowd of over 100 educators and it was clear that they were Wowed. The crowd had never before heard the things Dan was saying and they came away with a sense of determination to improve their financial situation. They also bought a lot of Dan's latest book which is the most excellent piece of literature ever written for educators on the topic of finance, you can pick it up at or his other website I do not get any kickbacks from the sale of his books.

Dan and I collobarated on the first book, The 403(b) Wise Guide which has become THE book on 403(b) plans - though it is now out of print (though it may make a comeback once the final 403(b) regulations are published).

It's been five years since the 403(b) Wise revolution got started and a lot has changed, but as they say, you ain't seen nothing yet!

By the way, the "financial planner" mentioned in the article is me! Thanks Dan.

Educators and School Employees - if you want to learn how better to plan for your financial future you need to read Teach and Retire Rich.

Scott Dauenhauer, CFP, MSFP

Monday, November 21, 2005

Long Live The 20% Surrender Charge....

These days you'd think that excessive surrender periods and surrender charges would be gone, after all, didn't Eliot Spitzer clean up the financial services industry?

Unfortunately there are still many unscrupulous individuals and companies who sell fixed annuities that have low returns, high surrender charges, and long surrender periods. Much of the time the products are not fully disclosed. Not only that, but the products are sold by Certified Financial Planners (of which I am one). It seems that these days you can't even trust "the most trusted designation in the industry."

Recently I met a school employee who had worked in the past with a company by the name of Zuk & Associates. I have come across Zuk many times in the past and so far have never seen anything from them that impresses me. Zuk's idea of diversification during the tech bubble was to own five different Janus funds (if you don't believe me I can show you the statements). Zuk was also against AB 2506, the legislation that created a full disclosure databank online at (I have copies of the letters they sent to client lying about the bill).

Zuk sells a lot of products from Great American, but also products from companies like AVIVA and even occasionally mutual funds. In this instance the school employee was sold several fixed annuities. Each had 10-12 year surrender periods and one (from AVIVA) had a surrender charge that started at 20%. Another of the products had a "bonus" that was supposed to make up for surrender charges in another product that the employee was told was possibly having financial problems (a whole other story). The bonus however doesn't show up until the 5th year and even then the employee doesn't actually get to keep the bonus until the 12th year. In addition, the bonus is reduced if withdrawals are made, considering the client was at retirement age when the product was sold it is unlikely the employee will ever see the bonus.

What is wrong with the 403(b) industry? I would say that these product sales were isolated instances, however when I look up who is behind the National Tax Sheltered Accounts Association (the trade organization for 403(b) agents) I find AVIVA and Great American as two of the major sponsors. The other sponsors aren't exactly pillars of wonderful products either. This indicates to me that poor products are not the exception, but the rule.

What is clear is that something needs to be done to clean this up. Selling a fixed annuity with a 20% surrender charge isn't illegal, however it is unethical, especially if it isn't properly disclosed. It is time that a new system is put in place, a system that takes the best of the 403(b) world and the best of the 401(k) world and combines it, who will do this?

School employees - it is up to you to take better care of your retirement, you are being taken advantage of every day and don't even know it. It's not all your fault, but now there are resources to help you like and and hourly based financial planners. It is up to you to approach your union and districts and demand that they take responsibility for their retirement plans.

Scott Dauenhauer, CFP, MSFP

Wednesday, November 09, 2005

MSN Money - Teachers' investment plans flunk

MSN Money - Teachers' investment plans flunk

Tim doesn't get an A for accuracy oro balance, but the overall message is pretty good - School Employee Retirement Plans are for the most part BAD and they deserve better.

I continue to see simply eggregious behaviour on behalf of the industry serving school employees and I am sick of it. The self serving behaviour and flat out fraudulent behaviour has got to stop, it risks ruining educator retirements because they lack trust in the institutions delivering the services.

If you knew the things that I knew that went on behind your back you'd be ready to sue everyone in sight. It is high time that somebody stepped up to the plate and cleaned up this mess we call the 403(b). I have a vision for what that clean up would look like, but it will take a lot of hard work and faith for this vision to come true. Over the next 12 months I will slowly reveal my vision. I'd do it sooner, but I don't want to give ammunition to those who want to derail my efforts.

Scott Dauenhauer, CFP, MSFP