Episode 9 of Tech Lightning Rounds explores how mobile applications can help reduce debt, increase personal and business savings, and also plan for retirement. Beth Kindig interviews Twine, Catch and United Income, who are disrupting traditional finance by offering enhanced services to help automate the process of savings and financial management. Interviews are held in “lightning round” format, which are rapid interviews with tech experts for immediate depth on each topic.
Despite one of the strongest economies in decades, only one in four Americans feel financially prepared for retirement with many having less than $400 in savings. In this episode of Tech Lightning Rounds, we speak with Elizabeth Kelly of United Income on how a finance app can provide tools to help people who are aged 50 plus.
This lightning round explores how to automate savings so that people who are near or in retirement can maximize investment returns by helping to simplify government benefits and deadlines, and also how to lower taxes. The average retiree has six sources of income, including 401K, IRA, Roth, and more. The goal is to bring finances together so it’s easy to budget.
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16:22 BK: Despite one of the strongest economies in decades, only one in four Americans feel financially prepared to retirement. In the last interview, we speak with United Income, a company with tools that are geared towards helping people who are aged 50 plus.
16:36 BK: Why is managing our finances and saving for retirement so challenging? Is it like a delay in instant gratification or is it something bigger than that?
16:45 EK: Sure, so there’s plenty of research showing that lots of people don’t even have $400 saved. We know it is hard to make people save, we know that financial literacy doesn’t stick, and the best way to get people to save is to make it automatic. Through automatic enrollment in a 401K or an immediate deduction from a paycheck or anything else. As you said, it’s hard to think of your future self, especially when we’re bombarded with immediate needs and potentially immediate wants. What I would say is that while we’re very focused on why aren’t people saving enough, it’s even more complicated when you actually get to retirement age and try and figure out what to do with the savings that you do have. And that’s what we’re focused on at United Income. Those people, 50 plus, who are nearing or in retirement and have to think about, “What age do I retire? How much do I withdraw each year? In what order do I withdraw from my various accounts? How do I maximize government benefits like Social Security and Medicare? Should I think about an insurance product like an annuity?” And all of these questions are incredibly complicated and present lots of opportunities for people to make a mistake at the very point when those mistakes have the highest cost because they can’t just go back to work easily in those instances.
18:00 BK: Can you break down what you do for retirees?
18:03 EK: We’re very focused on helping the individual who comes in the door, not only maximize their investment returns by giving them equity premium, lowering their taxes through withdrawal strategies we talked about, but we’re also focused on helping them maximize government benefits. Social Security and Medicare are a huge part of financial security for many seniors, and most people make sub-optimal decisions about claiming. For instance, claiming Social Security at 62 or missing a Medicare filing deadline, decisions that can have huge impacts in their financial wellness. And we want to help optimize that for them and make recommendations to set them up for success.
18:42 BK: You’ve talked a lot about the benefits of having your finances in one place. Can you tell me a story around… You’ve told me, but can you illustrate it more as far as a real life case scenario or a case study of any kind?
18:58 EK: Sure. So the average retiree has six different sources of income that covers their 401K, their Roth, their IRA, we’ll keep going with the alphabet soup. One example is just in the past couple of months, we had a woman who came in and had nine different financial accounts across four different financial advisors. To the point that she was having trouble figuring out what money she had, she had missed a couple of required minimum distributions causing her to incur tax penalties and was just really having a hard time figuring out, “What do I withdraw? Where is my money? What do I do?” And we were able to bring those finances together so that all she had to do was budget to that paycheck each month and we handled the rest for her.
19:45 EK: I think there’s this misnomer that people want to diversify across financial advisors. When, really, what you need to do is diversify across strategies with one or two advisors. I would caveat that we are a fiduciary, we’re an investment advisor. We will only accept a rollover of someone’s account if we feel like it is in their best interest for us to manage it. So for instance, if someone was saving in the government’s thrift savings plan, which has an underlying fund fee of two basis points, we can’t beat that, no one can. We would tell them to leave their money outside and we would make recommendations on how to manage it outside, but not recommend consolidating it. So there are examples where it doesn’t make sense, but in a lot of instances, it does.
20:33 BK: Thank you for listening to Tech Lightning Rounds. Please support the production of this podcast by subscribing to iTunes and leaving a review.
20:41 S1: This podcast was brought to you by Intertrust Secure Systems. We deliver proven technology to enable banks and other financial services organizations to build security into their apps. Go to Intertrust.com for more.