Recently PA State Treasurer, Joseph Torsella, discussed his priorities for the coming year.  One of the items he mentioned caught my eye – Lower Pension Fees.  As reported by Erin Arvedlund of the Philadelphia Inquirer, Torsella said “I could not be more convinced the variable most within our control is investment fees”.  He is talking about paying less for the investment products that the state invests it’s pension money in – the fund that will pay you your future pension benefits.  The State Treasury is leading the way to consolidate three state pension funds to either an in-house or low-cost index that will save $6 million a year in management fees.  The annual expense ratio for PSERS and SERS is .78%, Torsella estimates.  “We need to take an eagle-eyed look at costs and move into passive investing.

It’s no different for a teacher.  A good place to start is to understand what you are paying now.  And, chances are, most of you have no idea.  It’s the murky reality of a culture within the school system 403(b) sales culture that prevents the type of transparency.  Fee-only financial advisors can be worth their weight in gold since they act as the eagle eyed fiduciary looking out for your best interests.  Some 403(b) investment products can be charging in excess of 2% or more per year and you don’t even know it.  Index funds on the other hand might only cost you .20% percent per year – a huge savings to you and subsequent future increase in the value of your investment account!  Like Joseph Torsella said, it’s in your control.  So, why are you waiting?

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