Andrea Viudez, 37, followed all the rules of retirement savings when she started her career as a middle school math teacher in Hudson County, New Jersey.
She joined the school's 403(b) plan, purchasing an annuity from an insurance company representative who hosted a presentation in the teachers' lounge. With every paycheck, Viudez made a faithful contribution of $215.
In an annuity, savings accumulate on a tax-deferred basis that pay out a monthly stream of income for life once you retire. Annuity contract holders can invest their money in underlying investments that are similar to mutual funds. These are known as subaccounts.
In 13 years, Viudez's annuity, which was conservatively invested, grew to $63,000. Excluding the amount that she had deferred from her pay, her contract earned about $10,000 in that time.
"That's really not a lot for all the years I've been working," Viudez said. "I was with them for so long."
Although limited market exposure was a contributing factor to the slow growth, Viudez was also paying 2.5 percent annually in fees – all in the name of saving for retirement.
She isn't alone.
That's because while there's been a trend of falling fees and plaintiffs' lawsuits against too-costly 401(k) plans, public school teachers are dealing with a different saving regime known as the 403(b) plan.
"You can go out and find some pretty egregious public school plans," said Thomas E. Clark, partner at the Wagner Law Group. "Because public schools by their nature are small, they don't get a lot of attention from plaintiff's attorneys, who will justify damages."
Here's what you need to know about 403(b) plans for public school workers.