Over the last 13 years, Jason Allaire, a captain with the Rhode Island Division of Sheriffs, had saved thousands of dollars in a state retirement plan created for public employees.

The account is a 401(a), a 401(k) equivalent for government workers, so he assumed it worked the same way: He could withdraw funds before he hit retirement age but would have to pay a penalty and taxes to do so.

Earlier this summer, with Allaire seeking to pull out some money to help his daughter pay for college, he got a shock. The company handling the account told him he couldn’t access the money until he stops working for the state.

“We cannot touch it, borrow against it or move it,” even in an emergency, he told NBC News. “This plan is pretty much holding us hostage.”

Allaire’s experience reflects the sad reality facing many older Americans. Saving for a prosperous retirement has never been harder, financial experts say, citing risky products, hidden investing costs, complex rules and undisclosed conflicts of interest at financial firms.

“Our system depends on Americans’ ability to invest well for their retirement,” said Barbara Roper, an expert in investor protection who was senior adviser to Securities and Exchange Commission Chairman Gary Gensler from 2021 to 2025. “But the majority of Americans are not good at investing — they pay too much for substandard products recommended by conflicted representatives.”

Making matters worse for Allaire and his colleagues, the Rhode Island 401(a) account automatically funnels many participants into a costly product that generates profits to TIAA, the huge New York financial firm designated by the state to handle the plan.

Participants must opt out of the product under a change the state made in 2023 to eliminate low-cost provider Vanguard from the plan. The change has resulted in millions of dollars’ flowing to TIAA from participants unaware they are paying them because the costs are not disclosed. Rhode Island officials and TIAA defend the plan.

TIAA is being investigated by regulators in three states — Montana, Vermont and Washington — who are probing allegations that it steers retirement savers into two costly TIAA products, according to Ted Siedle, a lawyer for a former TIAA financial consultant who filed a whistleblower complaint with the SEC last year.

Last year, NBC News reported on the former financial consultant’s complaint, which contends that a key investment tool used by the firm pushes its clients into TIAA products, including one in the RI Plan, that yield the firm significant profits but generate lower returns to investors.

“This is a company that’s been plagued by disturbing whistleblower allegations for over a decade now,” Siedle said. “These state regulators are seriously concerned about the integrity of the advice that’s being offered by TIAA and its sales and representative licensing practices.”

Spokespeople for the Montana state auditor’s office and the Washington Department of Financial Institutions confirmed they have open investigations into TIAA. Vermont declined to comment.

Michael Tetuan, a TIAA spokesman, said of the investigations: “We cooperate fully and transparently with all regulatory authorities.”

As for the RI Plan, he said in a statement, “TIAA participated in the state’s competitive bidding process” and is proud the state selected it to “provide a custom retirement default solution for its eligible employees.”

“Rhode Island makes all legally required disclosures available to participants,” the statement added. “Ultimately, it’s up to participants to decide which specific investments best suit their financial goals.”

Accusations of undisclosed conflicts have dogged TIAA in recent years, with a raft of insiders alleging it pushes clients into high-cost accounts and products, putting its profits ahead of its customers’ best interests.

A recent lawsuit, filed by former employees and supported by the AARP Foundation, accuses TIAA of pressing its own workers into expensive investments that underperformed for years. TIAA says it will vigorously defend against the suit.

In 2021, New York state regulators and the SEC alleged the firm had quietly propelled clients into higher-cost accounts. TIAA paid $97 million to settle the case without admitting or denying the allegations.

Carla Rojo, a spokeswoman for the Rhode Island Treasurer’s Office, said TIAA was selected after a transparent process and a thorough evaluation.

“The Rhode Island Treasurer’s Office, along with the State Investment Commission, is a careful, conscientious steward of the retirement plan investments for more than sixty thousand current and retired state and other government employees,” she said in a statement. “Together with the defined benefit pension system, the 401(a) Plan allows for secure and more portable retirement savings.”

The 401(a) plan does not allow withdrawals “to ensure financial security in retirement,” Rojo said, adding that one-third of TIAA’s 401(a) plans similarly bar withdrawals.

Allaire was not wrong in assuming he could withdraw money from his 401(a) plan before he retired, as 401(k) holders can. The IRS, whose rules govern those plans, says: “Retirement plans established for the benefit of governmental employees generally function similar to those covering private employers.”

When Rhode Island state officials selected TIAA to administer the 401(a) plan for its public workers, the plan was meant to supplement those workers’ severely underfunded public pensions. It was 2011, and RI Plan pensions were in crisis, with enough funding for less than half the pensions’ combined liabilities.

State officials began requiring workers like Allaire to contribute to 401(a) retirement accounts while the state worked to shore up the beleaguered pensions. Most workers contributed 5% of their salaries to their 401(a) accounts each year, with the state kicking in 1%.

After a bidding process, the RI State Investment Commission unanimously selected TIAA to run the 401(a) plan in July 2012, according to a news release.

“Our goal was to choose a provider whose priorities are low-cost and secure investment products, along with robust and dependable customer service,” Gina Raimondo, then the state’s general treasurer, said at the time. “We have accomplished that with the selection of TIAA-CREF,” then the name of the company.

Experts question the assessment of TIAA as a company with low-cost priorities, especially when its signature product — an annuity — is in the mix. Annuities are contracts that promise to provide income for holders during their lives, but their often higher costs can be hidden from view.

TIAA’s annuity is included in the RI Plan’s “default” product, into which participants’ money automatically goes if they do not opt out and make their own choices.

Raimondo, now a distinguished fellow at the Council on Foreign Relations, did not reply to an email seeking comment.

Chris Tobe, a retirement investment expert and former trustee of the Kentucky Retirement Systems public pension, estimates the annual cost of the TIAA annuity in the RI Plan’s default investment product at 1.2% to 1.5%, making the product more expensive for participants than the previously offered target date fund from Vanguard, at a 0.06% cost.

RI Plan participants are not told of the annuity’s costs. Instead, state documents list the annuity’s expense as “0.00%,” saying TIAA provides RI Plan participants “an inexpensive fee structure (estimated at 0.022%).”

TIAA says its annuity, known as Traditional, has zero costs because it is “not an investment for purposes of securities laws” and does not have an “identifiable expense ratio,” or cost, like a mutual fund. The money TIAA makes on the annuity is generated by the difference between what the insurer earns on its investments and what it pays out to its annuity holders, known as the spread, or also as a markup.

The higher the spread, the lower the payouts annuity holders receive, so the spread represents a cost to those holders. While these costs do not have to be disclosed, they can be onerous.

Research from the Federal Reserve Board in 2021 described the spreads annuity marketers earn on the products as “notoriously high life annuity price markups.” Annuities are not federally regulated as mutual funds are.

The TIAA spokesman declined to say what TIAA earns on the annuity. That is “competitive and proprietary information,” he said.

Tobe, who worked as an insurance company executive for several years, said that response was not surprising.

“These products are created so you don’t have to show the fees,” he said.

In addition to the annuity costs, the Rhode Island 401(a) plan participants pay TIAA administrative fees. For the fiscal year that ended June 30, 2024, those costs totaled almost $1.3 million, state records show.

Initially, RI Plan participants were able to keep their costs low by investing in Vanguard funds. And most of them did so: By 2023, almost 90% of the plan’s assets, or $1.2 billion, were in Vanguard products, state records show.

That changed when the Rhode Island Investment Committee, chaired by James A. Diossa, the state treasurer, eliminated the Vanguard option. The decision came during an executive session at a meeting in May 2023, with no details of the deliberations, state records show.

The change drove up plan members’ costs and increased TIAA’s profits, according to Tobe’s analysis. By this July, the most recent figures available, plan participants had $2.27 billion invested with TIAA, or 92% of the total $2.47 billion. Of that amount, $336 million was invested in TIAA Traditional. Using Tobe’s estimate of 1.2% in annuity costs, those participants are paying $4 million in revenues to TIAA per year. Had that amount remained in the Vanguard option charging 0.06%, participants would have paid roughly $200,000.

Asked why the committee eliminated low-cost Vanguard from the mix, the state treasurer’s spokeswoman said: “The goal was to improve overall retirement outcomes for participants while also being mindful of plan costs.”

The decision to alter the 401(a) plan was made after a “careful and extensive review,” the spokeswoman added, “while also helping participants build a more secure retirement foundation.”

Robert Jalette, a sergeant with the Division of Sheriffs, was also hoping to tap into the money he has placed in his 401(a) account. He said he wanted to put it into a higher-paying investment that would be better for his family.

But then he learned that he was barred from accessing it.

“I don’t think any of us knew that it was going to be locked in,” he said.

As for the higher costs some of his fellow participants are paying for the TIAA annuity, Jalette said: “That made it even more infuriating for me.”

Allaire, meanwhile, is unhappy about continuing to be charged fees for money he can’t get at.

“This whole situation from the onset was a disaster,” he said.