In the past, teachers were forced to participate in their work retirement plans (i.e. 403b) by investing into one of the several annuities that were available. Maybe you recall that these plans were also called TSA (Tax Sheltered Annuity) plans. What this essentially meant was that teachers were forced to contribute to some type of annuity.
In many cases, when a teacher contributed to the annuity, it tied up their money for many years. And, if they tried to move the money somewhere else they were not able to do so unless they wanted to pay a penalty fee to the annuity company.
Over the past few years, the options for teachers have changed for the better, at least in the St Louis, Missouri area. Many school districts now have a new option called the Aspire 403b Plan. I suspect that many teachers are not even aware that it is an option for them. It is not an annuity. Instead it is known as an “open architecture” retirement plan which means that a teacher can choose from thousands of different investments. In my opinion this is beneficial for proper diversification. And to top it off, there are typically no penalty fees if a teacher decides to move their money elsewhere. If anyone has questions regarding this relatively new retirement plan, then feel free to call, send an email, or leave a comment below.
Brad E.S. Tinnon
CERTIFIED FINANCIAL PLANNER™
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Photo courtesy of Joanne Johnson