How a former teacher is educating the world about 403(b)s

Dan Otter has heard the story too many times: An insurance company rep walks into a classroom and pitches a teacher on a high-fee annuity in the school district’s 403(b) plan. 

Early in his teaching days, it happened to him. 

“I was in my classroom, desperately trying to get ready for the next day’s instruction. Any teacher, especially any new teacher, will relate to the panic you feel trying to get ready,” Otter said. “There was a knock on my classroom door. A woman poked her head in and said, ‘Do you care about your financial future?’” 

He didn’t take the bait, disregarding the 403(b) altogether and eventually looking the program up and selecting Vanguard as his provider. 

“I politely listened, and I said, ‘I’ll get back in touch if I’m interested,’” he said. 

But that incident, along with similar stories from peers, helped drive Otter to become an authority on defined-contribution plans for teachers, culminating in a website dedicated to the subject. 

Today, it is probably the most-used independent source of information on K-12 403(b) plans.The site, 403bwise.org, has an abundance of educational posts, a related podcast and, most recently, a growing database of school districts’ plans. Each plan gets a grade, and the investment providers in the plan also have traffic-light-style ratings. 

Of the roughly 13,500 school districts in the U.S., 403bwise has ratings for more than a third, with data covering over half of the country’s teachers, Otter said. 

LIGHTLY REGULATED 

When he started the site in 2001, there was little information about 403(b) plans for teachers — unless they were willing to read through a lot of fine print. 

Unlike 401(k) plans, the 403(b)s available to public school teachers aren’t covered by the Employee Retirement Income Security Act, meaning the plan sponsors are not acting as fiduciaries. As a consequence, the plans are often bloated with numerous vendors, and the list of investment options available through each plan can be exhausting. The plans are usually built with group variable annuity contracts, sometimes with high fees and surrender charges. 

Advocating for better 403(b) options only recently became Otter’s full-time job. Although he launched 403bwise more than 20 years ago, Otter, 58, taught grade school in Southern California and later college courses in New Mexico, where he earned a Ph.D. in education. 

He’s also a former journalist — a background that was crucial to his development of 403bwise. 

As interest in the site grew, companies began to notice. Otter and his 403bwise partner Scott Dauenhauer, principal at Meridian Wealth Management, got deals with 403(b) providers such as Fidelity, T. Rowe Price and TIAA to advertise on the site.   

That changed in 2019, when Next Gen Personal Finance founder Tim Ranzetta helped make the site a nonprofit, and Otter made it his full-time job. 

NICE GUY 

Talking with Otter, it’s hard not to like him. He’s present in the way a good teacher should be, and despite his categorical knowledge about retirement plans, he seems humble about it and gives much credit to the people around him — Dauenhauer, Ranzetta and the “community of educators” that passes along information about their plans and shares knowledge with their peers. It’s also notable that his wife, Amanda Otter, handles the art direction, site design and development for 403bwise. 

It’s easy to forget that in building an incredibly useful financial literacy resource for public school teachers, he’s ruffled some feathers along the way — mostly insurance companies and brokers who aren’t keen on seeing their bread and butter criticized. 

But Otter is respectful of different points of view, a trait that helps make him highly persuasive, Dauenhauer said. 

“In the 403(b) world, where we stand, we are looked at as enemies of these people,” Dauenhauer said. They are approached by people in the industry frequently, and they often agree to hear them out, meeting on Zoom in most cases. 

“It’s really hard for them to hate him,” Dauenhauer said. “He’s a personable guy.” 

Still, Otter might be more likely to get those folks to go vegetarian (he is, mostly) than disavow lucrative products they sell. 

“The more you hang out with him, the more you’re going to see his viewpoints, and probably, at some point, find yourself coming around,” said Dauenhauer, noting that Otter has been an influential force in his life. 

However, that has not extended to his friend’s affinity for ’80s punk rock, he said. “We have very different musical tastes.” 

PIVOTAL MOMENT 

A big change for 403bwise occurred in 2016, when The New York Times ran a series of articles highlighting the problems with teachers’ plans and posing suggestions on how to fix them. The pieces cited Otter, Dauenhauer and 403bwise. Suddenly, there was a lot more interest in 403(b)s and the site. 

The articles also attracted the attention of Ranzetta, co-founder of Next Gen Personal Finance, a nonprofit that aims to get all high schools to include a semester of personal finance in their curricula by 2030. Ranzetta has provided the financial backing necessary for 403bwise to operate as a nonprofit for at least the next few years — but the organization’s mission essentially is to make its existence unnecessary. 

“We joke that our goal is to put ourselves out of business — 403bwise should not exist. We exist because of this gap in [regulatory] oversight,” Otter said. “We think a viable solution is to forget the 403(b) and go with the 457 — if it’s a good plan.” 

The latter, a defined-contribution plan frequently used by groups of public workers with unions, often has better investment options and lower fees, he noted. One state, Illinois, recently added a 457(b) plan that could eventually apply to all public-school teachers; the plan has funds with low fees and “is really going to be good,” Otter said. 

ONE TEACHER’S PLAN 

Teacher Sue Eastman got involved about 10 years ago with an after-school financial education program that included a stock market game for elementary students. 

“We bought Tesla. We bought index funds when we could — the stock market game limits you to what you can buy. We couldn’t buy ETFs,” Eastman said. 

She had an interest in finance and a curiosity about investing. But it wasn’t until The New York Times series in 2016 that she learned how bad some 403(b) options are. 

“It was the first time I heard about hidden fees,” she said. “The District of Columbia allows vendors, unvetted, to go into schools and sell these 403(b) plans.… [Teachers] get sucked into very expensive products.” 

Although Eastman asked a plan rep about hidden fees, her concerns were dismissed, and he told her that any such charges were minimal, she said. “Being a busy teacher … not being terribly financially literate at that point, [I] went along with that.” 

Eastman, now retired, reached out to Otter during the pandemic. 

“He was so responsive and so educational,” she said. 

She reviewed all her plan statements going back 20 years, finding that she had been paying about eight times what someone in a competitive 401(k) plan would expect to pay. She estimates that the high fees ended up costing her between $40,000 and $50,000. 

As quickly as she could, she changed her investments, opting for index funds. 

WEALTHY CUSTODIAN 

One longtime 403bwise user, Jeff York, is totally unlike most retirement investors. 

York is a case study in frugal living and financial discipline — he values time more than money, he said. He doesn’t own a cell phone, and he lives to spend long days fishing on a boat near his home in Redding, California. 

York was a school custodian for decades, before he stopped working for the district in 2021 at 56 years old, then financially independent, with a net worth of about $1 million. That earned him a nickname from Otter: The Wealthy Custodian. 

He’s been gleaning knowledge from the site since 2001. 

The following year, he convinced the Redding School District to add Vanguard, as the plan lacked a low-cost provider with index-fund options. 

“Without Dan and Scott, there would have been no Vanguard account. I would have been stuck in the annuities I was in,”  York said. 

Otter “has a servant’s heart,”  he said. “He could have easily gone to the dark side — the financial services industry … and been much wealthier than he is today.” 

York listens regularly to Otter and Dauenhauer’s “Teach and Retire Rich” podcast, which shares its name with the 2005 book Otter published on the topic. But York has also been a guest on a couple of episodes. 

Something he’s noticed: Otter, who sometimes shares a fantasy of working in a brewpub, can be self-deprecating, and earlier in the 403bwise days, he was open about feeling imposter syndrome. That, York said, would now be unjustified. 

UNDERDOGS 

Aside from Otter’s niche career focus and a love of classic punk, a few other interests shed some light on him. He loves the subject of history — which he taught — and isn’t shy about sharing accounts of it that aren’t exactly popular in many classrooms (think Howard Zinn’s “A People’s History of the United States”). He has played hockey for years, and continues to do so. He’s also an avid cyclist, with a keen interest in overhauling infrastructure in favor of bikes and public transit. 

There’s some overlap there with his work in the 403(b) world. 

When asked about it, Otter took a while to think, replying in an email after the interview. 

“My mom reminded me that as a kid I wasn’t a big fan of Superman, Spiderman or Batman,” he said. “I liked Underdog! I even dressed as him for Halloween one year.” 

Related Topics: 403bwise.org