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Practice Management

Advisors Should Educate the Educators

Edward Dressel

Teachers are woefully unprepared for retirement (and we should not miss the irony of many of them being in DB plans, which were supposed to alleviate this) and most are not even aware of what their retirement picture looks like. 

Rather than leaning on legislatures, we should remember problems often create opportunities, and I believe proactive advisors could use this as an opportunity to grow their business. 

I believe the best way to educate a teacher about retirement is to provide them an integrated benefit analysis (the 403(b) arm of the NTSA has a CRES program that focuses specifically on this), showing them the incomes from their various sources (including their pension, Social Security (when relevant), and other assets). When compared with the projected income they need in retirement, this often will include a shortfall. Asking the teacher how they want to solve a funding shortfall gives them ownership of the issue and makes them engaged in their own retirement planning—which is more than any “information interventions” is ever going to provide them.

Having been around the 403(b) industry for over 30 years, I agree with Dillon Fuchsman of Saint Louis University’s Sinquefield Center for Applied Economic Research, Josh McGee of the University of Arkansas Office for Education Policy and Gema Zamorro of the University of Arkansas Department of Education Reform and Center for Economic and Social Research in their study, “Teachers’ Knowledge and Preparedness for Retirement: Results from a Nationally Representative Teacher Survey” that teachers are woefully uneducated about retirement. But I am not sure what they would have legislatures do with “information interventions”—that seems pretty ambitious, and we should know from the 401(k) industry that just giving participants more information doesn’t move the needle on retirement education or readiness. 

I believe the key (and the NTSA CRES program promotes this) is to provide teachers with an integrated benefit analysis, showing them their retirement incomes from their pension, Social Security, and any savings. While many will find themselves unprepared for retirement, it does give them the opportunity to “see” how retirement looks for them, and understand what they need to do to fund their retirements. 

Edward Dressel is President of RetireReady Solutions.

Opinions expressed are those of the author, and do not necessarily reflect the views of the NTSA or its members.