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Auto-IRAs & New Fintech Options Are Changing The Face of Private Sector Retirement Savings


Transformative changes are afoot in the creation of retirement savings options for private-sector workers.

 
 

Auto-IRAs & New Fintech Options Are Changing The Face of Private Sector Retirement Savings

 
Transformative changes are afoot in the creation of retirement savings options for private-sector workers.
 
Two trends are converging: First, state-sponsored auto-IRA programs and pooled employer plans are emerging as cost-effective options that place little to no burden on employers. At the same time, the rise of fintech is accelerating innovation and competition for business, making more options feasible for small businesses. 
 
“Tens of millions of people aren't participating in retirement plans,” says Jeff Schneble, CEO of San Francisco-based Human Interest, a retirement plan platform that is also a registered investment adviser (RIA) said in an interview with PlanSponsor. He said the disruption of old models is just getting underway.
 
Schneble told PlanSponsor that nearly all his customers use robo-advisory services that invest in passive index funds.  Human Interest is an open-architecture platform where plan sponsors can select their own lineups if they prefer from 2,000-plus funds in every major asset class, including the popular category of environmental, social and governance (ESG) funds.

Ubiquity Retirement + Savings, which has about $2.8 billion in assets, is also coming on strong in the fintech space. Its average plan size is 13 employees, even though very few companies under 20 employees have plans. Switching to Ubiquity from a traditional provider can mean plan savings of about 30% to 40%, he told PlanSponsor.
Meanwhile, the interest in auto-IRAs appears to be steady. Michigan residents of voting age are strongly in favor of establishing a state-run retirement savings option for private sector workers who lack access to a workplace retirement plan, according to a survey by AARP.
 
AARP surveyed voters between the ages of 25 and 64 to gauge sentiment about financial and retirement security and to determine their interest to public-private retirement savings plans. AARP Michigan said that 1.69 million people, about half the state's private sector workforce, are employed by an entity that does not offer a retirement plan.
 
Two-thirds of the respondents supported a state-run retirement savings option, and half said they are behind in planning and saving for retirement.
 
Some 83% agreed that state policymakers should take action to make it easier for all workers to save for retirement in a tax-advantaged way out of their regular paycheck. About the same proportion said it was important to be able to save for retirement in the workplace. Both figures broke down fairly evenly across political affiliations.
 
Eight in 10 respondents who don't have access to a retirement savings plan at work say they would take advantage of one if it was available.
 
 

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