Free Pizza Can Be Dangerous to Your Financial Health

Blog entry Jack Ehnes

When I talk with teachers in California about their savings plans for retirement, I am always pleased to hear that many have chosen early in their careers to supplement the CalSTRS defined benefit with retirement savings through a 403b plan. The pre-tax savings of fully participating in such a plan adds significantly towards your retirement goal.

Remember, on average, CalSTRS teachers retire with a 62 percent replacement ratio –replacing about 62 percent of their salary from their active employment. Most financial planners set a goal in the range of 80 to 85 percent, which means the difference needs to be made up from other financial sources.

Decisions Critical to Retirement

Unfortunately I hear too often some regrets from teachers who, although they made the right decision to invest early, made the wrong investment decisions– either ending up in an inappropriate investment or with a product with excessively high fees. Making a decision that could ultimately impact your retirement by many thousands of dollars should be done with a professional that you trust and know is working in your interest.

Is it a Free Meal?

We all get flyers in the mail encouraging us to attend a “free” dinner or lunch that will involve a financial presentation. What we save on a meal can be quickly lost if we don’t make a prudent decision on the investments.

In her May 23 column in the Los Angeles Times, Kathy Kristof makes a very compelling case on the importance of having a financial advisor that serves in a fiduciary role to you – someone who must put their clients’ interests ahead of their own. This means that if you are working with a broker or insurance agent who is not a fiduciary, they are not legally required to sell you a product that is good for you. And that agent may be getting big commissions for your investment that may not be fully disclosed to you.

Bottom line, supplemental savings for retirement is an important element of a plan to meet your long-term retirement needs, but take the necessary steps to do it right.


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