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How to Use Aspire Non-Advisor 403(b) Option

By Barbara O'Neill, CFP®, AFC®

Dr. Barbara 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. 

The term “financial supermarket” has been used since the 1980s to describe firms that offer a wide range of financial services under one roof.  For example, banking, lending, and stock brokerage services. An early example was Schwab OneSource®, which offers a wide variety of mutual funds on its platform. Investors can open one account holding multiple mutual funds instead of multiple accounts holding one mutual fund.

403(b) plan participants have access to their own financial supermarket. It is called Aspire Financial Services and it provides access to more than 10,000 mutual funds from over 500 fund families, including low-expense firms such as Fidelity, TIAA, T. Rowe Price, and Vanguard. Many 403(b) participants do not know that Aspire exists because it does not employ salespeople to pitch its products in faculty lunchrooms.

This post explores various aspects of Aspire as a 403(b) plan investment provider including its use as a “back door” to low-expense investments, pros and cons, how to enroll and access the Aspire platform, its rating by 403bwise, and an Aspire participant’s story. It also summarizes a comparison of 403(b) plan expenses and performance as well as three “need to know” facts and six take-away action steps.

“Back Door” Retirement Planning

The term “back door” is often used to indicate an indirect, sometimes shady, method of accomplishing a specific end goal; i.e., if you can’t do something the “regular “way, you find an alternative route. 

A primary example in financial planning is a “back door Roth IRA.” When taxpayers with high incomes earn too much to contribute directly to a Roth IRA (i.e., single taxpayers with a modified adjusted gross income more than $153,00 and married couples filing jointly with a MAGI more than $228,000 in 2023), they can contribute to a traditional IRA and then quickly convert the traditional IRA account balance to a Roth IRA.

The goal of Roth IRA investing is accomplished in two steps, instead of one, and (so far) it is still legal.

There is no income limit for Roth conversions, nor are there dollar limits on amount that can be converted.

An Aspire account is another “back door” financial planning strategy. When an employer’s 403(b) plan vendor list does not include low-cost companies such as those noted above, but it includes Aspire, participants can access investments with low expenses indirectly by selecting Aspire as their vendor. 

Aspire does not offer investment products of its own but, rather, it can facilitate “back door” investing in low expense mutual funds (think stock index funds). It does this through an open-investment platform that allows users to search for details about available plan options. 

Again, mission accomplished in two steps: choose Aspire as 403(b) plan vendor and select investments from among options on the Aspire platform. If you’re looking for a specific fund (e.g., Vanguard Total Stock Market Index Fund (VTSAX), with its 0.04% expense ratio), simply find it, select it, and start investing.

Aspire Overview 

While most 403(b) plans are annuity-centric, Aspire Financial Services focuses on mutual funds and provides participants with access to low-expense institutional pricing for their plan investments. Originally founded as a platform for 401(k) plans, Aspire is a division of PCS Retirement, the largest independent recordkeeper for K-12 retirement plans in the U.S.

 In 2010, Aspire introduced the FundSourceSM  platform for 403(b) and 457 plans that provides access to thousands of no-load mutual funds for a nominal fee. Both traditional and Roth accounts are available. Participants can open an account with Aspire on their own or with assistance from a paid financial advisor.

Aspire is currently an approved 403(b) vendor in over 6,000 school districts across the United States. To see where it is offered, teachers and other potential users can check their employer’s vendor list or the School District Search Tool on the 403(b)wise website.

The Aspire Platform 

Aspire is an open-architecture platform, which means that its technology infrastructure is publicly accessible instead of closed off to outsiders. This makes Aspire customizable by a wide variety of users including K-12 public school districts and religious, healthcare, and non-profit organizations with 403(b) plans.

Aspire platform users can select from a wide variety of mutual fund types and share classes. Fund types include balanced, growth, income, index, international, money market, and target date mutual funds. Share classes have different fees and expenses for the same mutual fund (e.g., a front-end and back-end load). Many Aspire mutual funds are also no-load (i.e., no upfront sales charge or back-end surrender charge).

Aspire Expenses 

Aspire charges a $40 annual custodial fee ($3.33 monthly) and a razor thin 15 basis point (bps) annual fee for recordkeeping; i.e., 0.15% of account value. Fees are charged to participants’ accounts monthly.

Above that, the expenses that 403(b) participants incur by using Aspire will vary and depend on two things: fees charged by the individual mutual funds that they select and whether they invest on their own or pay for the services of a financial professional. Internal expenses of mutual funds can range from 0.04% (no load index funds) to 2%+ (mutual funds with built-in sales charges and other fees). 

When Aspire users work with an advisor, the advisor may be commission-based and compensated with a commission derived from investments with a sales charge (load) or fee-based and paid directly by clients (e.g., with an hourly rate, a flat fee, or a percentage (e.g., 1%) of assets under management or AUM).

Clearly, the “best case scenario,” in terms of expenses, is a self-directed non-advisor plan with a no-load, low-expense mutual fund. For example, if someone invests directly in VTSAX, the total cost with its 0.04% expense ratio and the 0.15% fee is just 0.19%, a small fraction of the fees charged by commission-based mutual funds and 403(b) plans invested in high-cost annuities.

The Aspire Enrollment Process 

Aspire has an enrollment portal with three distinct links: plan participants looking for a plan to self-enroll in, advisors enrolling their clients, and third party administrators (TPAs) who want to learn about plan offerings.

For individuals who enroll themselves, Aspire lists three steps:

1. Download and complete the 403(b) Enrollment Kit and fax or mail the forms to Aspire following instructions on the form.
2. Download and complete a salary reduction agreement to authorize the deduction of a percentage of pay and submit it to your payroll office or TPA.
3. Create and access your 403(b) account once the enrollment forms are deemed to be in good order.

If you are transferring an existing account to Aspire, an additional Exchange/Transfer/Rollover form must be completed. Aspire has dedicated staff to help new clients request account proceeds from a surrendering company. They also have a toll free number for questions: 866-634-5873 (M-F, 8 am to 8 pm).

Advantages and Disadvantages of Aspire

An independent review of Aspire by a fee-only financial planner listed the following pros and cons:

Advantages: Extensive open architecture platform, industry leading technology, the option to invest yourself or work with an advisor, very competitive fee structure, and a diverse array of fund offerings.

Disadvantages: Seven to ten business day processing for new accounts, service may be slower than other 403(b) plan providers, and having to choose among mutual funds with different loads can be confusing. 

The reviewer also provided this note of caution for do-it-yourselfers with self-directed accounts” “be aware that you will need to build knowledge regarding investing, spend time managing your own account, and hopefully have the desire to do so.”

403bwise Assessment of Aspire

In a 2021 post, executive director Dan Otter wrote “A core goal of ours is to ensure that teachers have at least one low-cost option. Adding Aspire is one of the simplest ways to do that.” Not surprisingly, the Aspire non-advisor option (along with Vanguard), is one of 403bwise’s highest rated companies.

An Aspire Participant’s Story

I wanted to hear from real life Aspire non-advisor investors and asked for comments on the 403bwise Facebook page. While I got lots of “likes’ for my forthcoming article, only one teacher- Christopher Riccobono- provided the detail that I was looking for. Below is his story.

Christopher is in his 22nd year of teaching in Michigan. From 2002 to 2020, he invested in a 403(b) and 457(b) with VALIC/AIG and, in 2020, he moved this money to Aspire. At first, his Aspire account was in a Vanguard target-date fund. During the pandemic, he learned more about investing. Later, he handcrafted a portfolio of five mutual funds: U.S. growth, international, emerging markets, U.S. small cap value, and international small cap value. He noted, “Am I content with this? Yes! Sure, I am buying losers in the short term. That is how globally diverse investing goes. I hope the short-term losers are long-term winners.” 

Likes and Dislikes

Christopher provided the following insights from his vantage point as an Aspire participant:

• Likes- Straightforward statements with contributions and fees well laid out and great mutual fund options
• Dislikes- Website that is not easy to use (especially with rollovers) and poor telephone customer service

Advisor Option

He also recalled his experience with the Aspire advisor option: “I did meet with an advisor that was assigned to Aspire investors in my district before I became self -directed. It was an interesting experience. The funds he offered were not the Vanguard or Fidelity funds I was looking for. His list did not have them at all! He went right to A Share [front-end load] American Funds.”  

Research Results

Not an empirical research study, but a hypothetical illustration of the impact of low-fee 403(b) plan investing from the 403bwise web site. An average index fund will produce $158,083 more in savings than an average variable annuity. The illustration assumes $250 monthly investments for 35 years and a 6% average annual return. Investing through Aspire makes access to mutual funds with low expenses possible.

 

Three (More) Things

• There are some employer plans with Aspire as a vendor that require 403(b) participants to use a financial advisor. In this case, some cost advantage will be eroded.
• The Aspire platform includes investor education tools such as FAQs, articles, and calculators.
• Participants have real-time access to 403(b) account details such as their account balance and plan investments.

Six Smart Strategies

No. 1: Spread the Word — Remember, Aspire does not employ an army of school sales representatives to market its products and services. You can help boost its visibility by telling colleagues about its cost advantages.

No. 2: Read Fund Prospectuses — Get to know the mutual funds you are considering- before you buy them. Key data to look for in a fund prospectus are its objective, fees and expenses, performance history, and investment policies.

No. 3: Do the Math — For the Aspire non-advisor option, add the 0.15% fee to the fee charged for underlying funds to calculate total expenses. If you use an advisor, factor in additional fees. 

No. 4: Expect a Learning Curve — Making a switch to Aspire will require learning about mutual funds and how to read a mutual fund prospectus as well as learning how to navigate the Aspire website.

No. 5: Narrow Down Your Choices — A platform with 10,000+ mutual fund choices can be daunting. Limit aimless searching by focusing on several key “must have” features (e.g., growth potential with an expense ratio less than 0.10%).

No. 6: Get Help When Needed — Aspire has trained call center specialists to help plan participants. Fee-based advisors are also available and less likely to push expensive commission-laden investments.

In Summary

There is no reason to invest in high-fee 403(b) plan investments that are a drag on account performance. If your employer does not provide good plan choices, try using a “back door” approach through Aspire.

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.