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LIKE MANY OF MY generation, I grew up in a family that never talked about money. I had some sense that I should save, but no sense of where to save. This made me susceptible to a lot of advice—both good and bad—that shaped my financial journey.
I married a teacher and I became a school-based speech pathologist. I knew we’d never be rich, but we would have a comfortable life. In those early days, the teachers’ lounge was often visited by guys I called “lounge lizards,” who pedaled 403(b) plans specifically for educators. I usually avoided the lounge on those days, but one salesman happened to visit on “Friday treat day.” As I walked into the lounge to grab a delicious treat, I overheard him say that people of my generation “will need $1 million to retire.” I thought to myself, “That’s absurd.” Yet the statement stayed with me and quickly became the foundation for my financial journey.
Fortunately, those 403(b) plans weren’t our only retirement savings option. At that time, our state retirement system—which covered school district employees—was providing a small match for those who saved in its 401(k) plan. Thinking about that $1 million, I opened my first 401(k) and saved just enough to get the match. Three months after I signed up, the match was eliminated. Still, the momentum of automatic savings had begun. A short time later, my husband opened his 401(k). We never thought about or missed the money that was deducted.
We also saved outside of our 401(k)s. When we amassed a small sum, we wanted to do more than just keep it in a savings account. We didn’t know where to invest it, so I asked my dad for advice. He gave me the name of his “guy,” who invested it in a few mutual funds and took 1.5% for himself. After a couple of years, we looked at our statements and thought, “Why are we paying this guy 1.5% while our money just sits in these funds? We can do that ourselves.”
Around this time, just as we were gaining the confidence to do our own investing, we made our biggest mistake. Two insurance agents were making a slick, compelling presentation in all of the local school districts about a new product that would make everyone a lot of money. We saw all of our colleagues signing up for it. One of the insurance agents was the trusted parent of one of my husband’s students, so we signed up, too.
“It” was variable universal life insurance. When we finally figured out it was complete garbage, it cost us $4,000 in surrender fees. That was painful, but we concluded it was better to lose $4,000 now than tens or even hundreds of thousands of dollars later by sticking with the policies.
While feeling stupid and mad about being so gullible, I happened to be watching Suze Orman on PBS. I’m not a huge fan of following the advice of a financial personality. Still, Orman said something that profoundly affected our financial journey: “No one will ever care about your money as much as you do.” That’s when we finally agreed that we’d never again let anyone manage our money. We opened a brokerage account with Charles Schwab and transferred the mutual funds from my dad’s “guy” to our new account.
Eventually, we talked about starting a family. We read that four years of college would cost around $100,000 to $120,000 for a child born in the early 2000s. It was another absurd number, and yet it spurred us to save money for our son’s college education before he was even born. At the time, 529 plans were still new and most didn’t have great investment choices, so a Schwab advisor suggested we each open a Roth IRA and earmark the dollars we contributed for future college expenses. That advice was both good and bad. Arguably, no one should be dipping into retirement savings to fund a child’s college education. Still, the advice did get us to open and regularly contribute to Roth IRAs early in our careers.
Through all of this, we lived below our means. That advice was never spoken, but it was the behavior I learned from watching my parents. This allowed us to consistently put money into our 401(k)s and Roth IRAs. We worked to keep our living expenses low, so our savings naturally rose with each pay increase. When my husband became a school administrator, we continued to spend as if he still only had a teacher’s salary.
We also paid off our mortgage early, which then freed up money each month to cover our son’s college expenses. Thanks to that, along with a generous scholarship, we never touched those Roth IRAs for college costs. At the same time, we taught ourselves about low-cost index funds. Today, we keep our accounts simple, holding just a few low-expense ETFs and mutual funds.
My husband retired a year ago and I’ll retire in the next year or two. As our son gets ready to graduate, we gave him the only advice we ever needed: Live below your means, save early and automatically, and learn to be a do-it-yourself investor—because no one will ever care about your money as much as you do.
Allison Foster is a soon-to-be retired speech pathologist in Colorado. When she’s not at school, she’s busy hiking, biking and kayaking in the Colorado mountains. She’s looking forward to exploring new trails in her retirement.
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I did the same as you when I read the same statement by the senior editor (at the time) of Money magazine nearly 40 years ago.
Thank you for the article Allison. As a fellow educator, I often tell people that are interested in teaching that having a defined benefit pension is one of the most enticing things about the profession. And that a couple who are both educators and both contribute to a 403B should be okay financially in retirement. As I get ready to retire this year, I am hopeful that my pension should cover close to 80% of my expenses in retirement, with the rest covered by my wife’s social security benefit, since teachers in California do not receive SS. Best of luck to both of you in your retirement.
Live below your means, save early and automatically, and learn to be a do-it-yourself investor—because no one will ever care about your money as much as you do.
best advice ever. Thanks for the article.
Thanks for the inspirational article! You are lucky that your husband wasn’t locked into TIAA and all their promoting of annuities and high fee funds. TIAA has taken over administration of my educational institution’s 403b retirement plan. When my employer switched my retirement funds to TIAA, they parked everything in an annuity fund, which I didn’t notice for several months. Fortunately I was able to get out of that due to lack of notice and to go back to my Vanguard index funds with TIAA as administrators. I don’t look forward to eventual retirement transfers—the BBB is full of complaints about the friction TIAA places on that step—hopefully Vanguard can handle that.
My wife is a retired school teacher from Western PA. Your mention of 403b plans reminded me of what teachers face in PA with their investment choices. The school district chooses 403b providers authorized to accept investments in their districts. In my wife’s district, they kicked out Fidelity after a few years because they would not pay the district or contribute to the teacher’s union. The providers that remained were definitely part of the lounge lizards. High up front fees and selling annuities with insurance wrappers as 403b investments . Their reps trolled the break room and were usually former teachers. Teachers deserve better.
While I agree 100% that no one will ever care about your money as much as you do that comes with a huge correlary: We all get emotional with our money and hiring someone to make sure we aren’t the ones who torpedo our our own portfolios (because of fear or exuberance for ex.) around markets, is the best reason to work with an advisor. As we live our lives it is unlikely that most people with money will ever be as dispassionate abour investments as someone who gets compensated for helping people follow an agreed upon plan and there’s no way people who are not working in personal finance will be familiar with all the tools, tricks and products which are available in the market.
I have a nuanced view of this, I suppose, based on my own experience. While working my wife and I were DIY with a few mutual funds-made a few mistakes along the way that may or may not have been avoided with an advisor and debatable if worth it. Later on when they became available, we also had target date funds. As you can now tell, we were not by any sophisticated but we knew enough what not to do and to invest in indexes. In retirement, we have chose to go with a flat fee only independent advisor who specializes in retirement and advises across all of financial planning-investment management is a small piece. As far as fees, when we started with him a year before retirement, our percentage was 0.3-0.4, now its around 0.2. We feel its worth avoiding stupid mistakes, having a professional in our corner and someone to us after loss of spouse, amongst other things. Works for us.
There’s no way people who are not working in personal finance will be familiar with all the tools, tricks and products which are available in the market.
You sound like you have something to sell. Education and understanding your own investments/goals goes a long way in preventing those emotional responses…and makes it easier to stick with your plan. For the average person with limited choices in the company 401k, an advisor is unnecessary. In fact, the data is now pretty clear…those who buy and hold just a few low cost index funds come out ahead. If you want a great illustration of just how much those fees impact your portfolio, read this… https://humbledollar.com/2021/06/what-a-drag/
The thing is, you don’t need all those tools, tricks and products, just a few – maybe as few as three – dirt cheap index funds. In fact, you’re better off without most of the products. You do need the fortitude to stick with the plan, but is the hand holding really worth 1% of assets every year? That sure adds up over time.
Good point
“…the behavior I learned from watching my parents.” I think setting a good example is the ideal way to teach our children. And when giving advice, keep it succinct, as you did in your final paragraph.
Congratulations on avoiding the traps. I hope you have a wonderful retirement.
Great article! My wife is a retired teacher, and your mention of the “lounge lizards” struck a chord. Many years ago she signed up with school board approved lounge lizard for a school board approved ‘dual tier annuity’ 403b. The ‘dual tier’ moniker was beautiful – the first tier was an imaginary number that reflected how much the account was supposedly worth if you left it with the insurance company (Great American Life Insurance Company), and the way lower tier was the value if you transferred it out of their hands! We finally bit the bullet and moved it into a mutual find company when it became available and eventually transferred it into Schwab. BTW, much later we read about certain school board members and administrators being brought up on bribery charges in return for authorizing those lounge lizards!
While working I used Universal Life with side fund as term insurance. Later I used the investment fund to convert the policy to a paid up life. The earnings in the fund were tax free and today 30 years later we have over $100,000 in insurance as a survivor benefit in retirement.
I don’t claim it was the best possible investment, but it served a dual purpose for many years.
That was my thought as well. The author never talks about why they got life insurance in the first place and, once they surrendered the policies they bought, if they replaced it with either term or whole life. Each has it’s pros and cons and universal life isn’t always a bad deal if it’s explained right (ex. life insurance is never an “investment” but it can be a great asset on one’s balance sheet.
Thanks for your comment. As I mentioned in the article, it was presented as a “hot new investment option” that happened to have a life insurance benefit. These guys had an amazing presentation with graphs and charts about all the potential investment income we would make. They said no other investments would ever be needed. There was no mention of the exhorbitant fees, commissions, etc. Admittedly, we were completely ignorant about this stuff, so we fell for it. After the complaints began rolling in, these guys were eventually banned from making their presentation in any of the school districts. We were ignorant, but the presentation was a misrepresentation of what they were selling. It illustrated exactly why people need to learn how to invest and manage their own money, so they don’t get mislead by slick sales people who are not true fiduciaries.
This situation wouldn’t be less of a problem if all our educational systems required a comprehensive course on personal finance to graduate from high school.
Those decisions are made by state education agencies and local school boards. Fortunately, many districts have adopted financial literacy standards and curriculum. In Colorado, it’s now part of the state standards.
Enjoyed the article. Congrats to you and your husband for learning along the way ( as most of us have to) and reaching sound financial conclusions.
“Live below your means, save early and automatically, and learn to be a do-it-yourself investor—because no one will ever care about your money as much as you do.”
Simple but powerfully important financial advice.
Thank you for sharing. Did either your or your husband ever use a 457b?
My husband used a 457b at the end of his career. It was not an option when we were younger, so it wasn’t the primary place for our investments.