InvestMyself®: A 403(b) Plan Vendor to Consider
May 14, 2024
By Barbara O'Neill, CFP®, AFC®
As many long-time readers of Dan’s blog know, 403(b)wise uses a “traffic light” system to rate 403(b) plan vendors: Green means “go” (i.e., proceed to use a vendor), Yellow means “proceed with caution,” and Red means stop (i.e., avoid using a vendor). Sadly, their most recent rankings summary, with 51 listed vendors, shows that 34 (67%) are rated Red, ten (19%) are rated Yellow, and only seven (14%) are rated Green. This includes the only two Green + vendors, Fidelity and Vanguard, and two vendors, Aspire and CalSTRS Pension2, that provide indirect access to them.
In an ideal world, every 403(b) plan participant would have access to at least one Green vendor. In the real world, many lack access to any of them. In fact, some school districts that are graded with an “F” by 403(b)wise offer only Red rated plans.
Green is Great But What About Yellow?
Sometimes, the best strategy is to step down a rating notch and select from among Yellow vendors, if they are available. The Yellow vendor category includes decent investment choices offered by bad (i.e., Red rating) plan vendors and investment products with no upfront or back-end commissions or sales charges, low administrative fees, and reasonable account fees.
This post describes a good choice available from a bad vendor: NEA InvestMyself® (a Yellow rated product) offered through Security Benefit (a Red rated vendor). It describes key plan features, the rationale for its Yellow rating, advantages and disadvantages, plan expenses, InvestMyself® investment options, and the enrollment process for InvestMyself®. It concludes with a summary of research about the growth of an InvestMyself® account over time, three “need to know” facts, and six take-away action steps.
InvestMyself® Background
Perhaps the best way to introduce InvestMyself® is with this description of its history by 403(b)wise Executive Director, Dan Otter:
We are generally very critical of Security Benefit and the National Education Association for their K-12 403(b) collaboration. The NEA receives more than $3 million annually in exchange for endorsing extremely costly Security Benefit products. To us, this is an unholy alliance. Unions should be looking out for their members, not looking out for themselves. We aren’t alone in this assessment. In fact, the NEA was once sued for this arrangement. They prevailed but were clearly rattled by the experience. So much so that they rolled out a pretty decent product: NEA DirectInvest®. In 2022 this offering was replaced by NEA InvestMyself®. It's not as good as green rated vendors but it is not bad.
In a nutshell, a lawsuit and blowback about a conflict of interest resulting from NEA’s endorsement of Security Benefit motivated a Red vendor to offer a better investment than its standard high-fee products.
Key Features of InvestMyself®
- Offers traditional and Roth 403(b)s as well as traditional and Roth individual retirement accounts (IRAs)
- Accepts rollovers of balances held in other qualified retirement plans
- Provides access to 20 Vanguard mutual funds that match a variety of investment objectives
- Has a minimum purchase requirement of a $1,000 lump sum or $100 monthly through payroll deduction
- Charges a $35 annual administrative fee for balances under $50,000 and no fee for balances of $50,000 +
- Charges an annual recordkeeping fee of 0.30% of assets that is capped at $500 (i.e., this translates to a balance of $166,667 and above as $166,667 x 0.003 = $500)
- Makes 403(b) plan loans available ($1,000 minimum and maximum of $50,000 or 50% of account value) with a $100 loan origination fee and a $12.50 quarterly maintenance fee; only one loan at a time is allowed
Why a Yellow Rating?
The answer to this question is best explained by 403(b)wise Director of Research, Scott Dauenhauer, CFP® in an article that he wrote about InvestMyself®:
InvestMyself® is not a bad product; it would be rated Green by the 403bwise.org system based on the fee structure. Still, the affiliation with Security Benefit and NEA Member Benefits makes it Yellow. NEA Member Benefits partners with Red-rated vendor Security Benefit to sell high-cost financial products to unsuspecting members. This brings the rating down from Green to Yellow (meaning proceed with caution). If your public school employer doesn't offer one of the vendors rated Green by 403bwise.org, the InvestMyself® 403(b) from NEA Member Benefits and Security Benefit might be your next best option.
InvestMyself® Fees
As noted above, the NEA DirectInvest® product was succeeded by InvestMyself®. A significant change that resulted from this transition was the addition of the 0.30% recordkeeping fee that did not exist previously. This fee is charged to compensate the plan recordkeeper, Security Benefit, since InvestMyself® consists entirely of non-revenue sharing Vanguard mutual funds. Previously, DirectInvest® included high-fee mutual funds that provided a revenue stream for Security Benefit.
Still, 0.30% is small fraction of the 2.0%+ fees that are charged by the Security Benefit standard 403(b) plan and by other Red-rated vendors. In addition, it is less of an issue for “super savers” due to the $500 cap.
As for fees charged by the 20 Vanguard mutual funds available within InvestMyself®, they have razor-thin expense ratios ranging from 0.04% to 0.12%.
InvestMyself® Pros
- All available investment options have low expense ratios
- Self-directed investment product with no commissions
- Phased out administrative and recordkeeping fees for larger account balances
InvestMyself® Cons
- InvestMyself® is not heavily marketed and many 403(b) plan participants are unaware of it
- Not all Vanguard funds are included (e.g., LifeStrategy funds and Emerging Markets Stock Index fund)
- Potential for “baiting and switching” unsuspecting plan participants to high-fee investment products
InvestMyself® Investment Options
Below is a list, by fund category in ascending order of investment risk, of the 20 Vanguard mutual funds that are included in InvestMyself®:
Money Market Fund- Vanguard Federal Money Market (VMFXX)
Intermediate Bond Fund- Vanguard Intermediate Term Bond Index (VBILX)
Balanced/Asset Allocation Fund- Vanguard Target Retirement Income (VTINX)
Target Date Funds- Vanguard Target Retirement 2020 (VTWNX), Vanguard Target Retirement 2025 (VTTVX), Vanguard Target Retirement 2030 (VTHRX), Vanguard Target Retirement 2035 (VTTHX), Vanguard Target Retirement 2040 (VFORX), Vanguard Target Retirement 2045 (VTIVX), Vanguard Target Retirement 2050 (VFIFX), Vanguard Target Retirement 2055 (VFFVX), Vanguard Target Retirement 2060 (VTTSX), and Vanguard Target Retirement 2065 (VLXVX)
Large Cap Stock Funds- Vanguard 500 Index (VFIAX), Vanguard Total Stock Market Index (VTSAX), and Vanguard Growth Index (VIGAX)
Mid Cap Stock Fund- Vanguard Mid Cap Index (VIMAX)
Small Cap Stock Fund- Vanguard Small Cap Index (VSMAX)
Sector Fund- Vanguard Real Estate Index (VGSLX)
International Stock Fund- Vanguard Total International Stock Index (VTIAX)
InvestMyself® Enrollment Process
Online enrollment in InvestMyself® is relatively simple.
First, 403(b) plan participants sign in with their NEA member benefit account and confirm personal information. Next, they select the type of account they wish to fund (e.g., traditional 403(b), Roth IRA) and whether they wish to work with an advisor or use a self-directed retirement plan. Those who desire assistance from a financial advisor will be assigned a Security Benefit contact person (a.k.a., retirement specialist). There are also instructional videos to help new users navigate the InvestMyself® platform.
When online forms are complete, contribution amounts must be established with plan participants’ employer. This typically involves selecting a flat dollar amount or percentage of gross income to be invested via payroll deduction. The minimum contribution amount is $100 monthly ($1,200 annually), which is 2% of a $60,000 gross income. The maximum contribution amount cannot exceed annual IRS limits for 403(b)s or IRAs.
Research Results
An analysis was conducted by Fisch Financial that compared three investment options for public employees in Colorado: 1. a 401(k) plan called PERA that is available to public employers (target-date fund with a 0.10% fund fee), 2. InvestMyself® via NEA and Security Benefit (0.38% fee: 0.30% for recordkeeping + 0.08% for a target-date fund), and 3. one of Security Benefit’s high-cost investment products with a 2.03% expense ratio.
As shown in this spreadsheet, the analysis assumed a $0 starting balance, a 7% annual rate of return, and a monthly contribution of $500 over a 50-year holding period. When account balances were compared at the 35-year mark (a typical career length for school employees), the following balances were noted:
- PERA 401(k) account: $809,928
- InvestMyself® 403(b): $780,121, $29,807 less than the PERA 401(k)
- Standard Security Benefit 403(b): $535,873, $244,248 less than InvestMyself®
Take-Away #1: InvestMyself® will always have a lower accumulated value than investments that do not charge an additional fee on top of underlying mutual fund expense ratios. The longer the time frame that savings accumulates, the greater the difference will be.
Take-Away #2: When InvestMyself® is compared with a Red vendor product, the difference in accumulated value was almost a quarter of $1 million! In addition, it could potentially be $1 million or more if larger monthly contributions are made and a larger difference in accumulated earnings compounds over time.
Three (More) Things
- InvestMyself® account holders have 24/7 access to their accounts via the Security Benefit InvestMyself® website or mobile app.
- 403(b) plan vendors are selected locally and, unfortunately, InvestMyself® is not available in all school districts.
- The date in the ten InvestMyself® target-date funds (e.g., 2030, 2065) is meant to correspond to plan participants’ projected retirement date.
Six Smart Strategies
No. 1: Satisfice With InvestMyself® — Accept that this vendor has that 0.30% fee and is not a Green vendor. It is still an adequate choice and, according to Scott Dauenhauer, “better than 98% of the products offered in the non-ERISA 403(b) world.”
No. 2: Hedge Your Bets — Consider saving both pre-tax (traditional account) or after-tax (Roth account) for tax diversification purposes if you are uncertain about your future wealth accumulation and income tax rate.
No. 3: Read the Prospectus — Select three or four of the 20 Vanguard funds available through InvestMyself® and study their prospectuses (available online). Key criteria to review are fund objective, performance history, and fees and expenses.
No. 4: Diversify Your Investments — Consider a target-date fund with a mix of stocks, bonds, and cash assets or a combination of Vanguard Mutual funds (e.g., Total Stock Market Index, Intermediate Term Bond Index, and Total International Stock Index).
No. 5: Read the Fine Print — Review the basics of InvestMyself®. There are very specific rules regarding loan interest rates (prime + 2%), dollar-cost averaging, automatic asset reallocation, investment transfers, and more.
No. 6: Get Help When Needed — Decide whether or not you want help from a financial advisor. If so, beware of sales pitches for high-cost Security Benefit products. If not, take advantage of InvestMyself® videos, online tools, and fact sheets.
In Summary
Sometimes in life, we need to take what we can get, even if a choice has some flaws. InvestMyself® is an example. If your employer does not provide access to any Green rated 403(b) plan vendors, consider investing in InvestMyself® for indirect access to low-cost Vanguard mutual funds, albeit with an extra 0.30% fee.
This post provides general personal finance information and does not address all the variables that apply to an individual’s unique situation. It should not be construed as legal or financial advice. If professional assistance is required, the services of a competent professional should be sought.
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Dr. O'Neill is the owner/CEO of Money Talk: Financial Planning Seminars and Publications where she writes, speaks, and reviews content about personal finance. She is a Distinguished Professor Emeritus at Rutgers University and a long-time 403(b) plan participant.