The Rise of Fintech: Revolutionizing Retirement Saving

In the world of retirement savings, there are plenty of pessimistic headlines. Nearly half of Americans have $0 in their retirement plan, said one well-publicized 2022 report from the Survey of Consumer Finances; according to the AARP, that already-scary statistic includes a fifth of Americans aged 50 and older, who are going to need their non-existent savings quite soon.

But those who are paying close attention will see that retirement savings are still experiencing an upward trend, despite these eye-catching stories. For instance, per the same Survey of Consumer Finances data, in the six years between 2016 and 2022, the percentage of younger households (ages 20-20) with a positive-balance Roth IRA retirement savings account has increased by a whopping 191%—or, in other words, almost tripled.

Part of this is owed to the implementation of state-sponsored auto-IRA programs, which help employees without access to an employer-sponsored retirement account, like a 401(k), start seamlessly accruing savings. But the increase in retirement-savviness and access is also doubtless thanks in large part to another landmark development: the rise and proliferation of fintech innovations and companies.

While no one specific fintech company started the revolution, over the last decade, many have emerged with game-changing developments, from IRA matches to robo-advisors that made investing more accessible to beginners. With so many more retirement strategies at hand, it’s easier than ever for everyday people to meet their retirement goals.

Of course, this is just the start of what promises to be a much longer and more interesting journey with plenty of stops along the way we have yet to anticipate—especially as new technologies like artificial intelligence and machine learning continue to evolve.

Traditional Retirement Savings Methods

With this much progress, many of us may have forgotten what the retirement savings system looked like for most savers just over a decade ago. Let’s take a quick look in the rear-view mirror.

Before the rise of fintech companies, most people relied on their workplace to help them navigate their retirement savings. In the mid-20th century, many careerists had access to a pension—though they started to fade in favor of voluntary-contribution plans like 401(k)s by the 1980s.

Those who didn’t have access to employer-sponsored retirement plans relied on individual retirement accounts (IRAs). Investing was something that had to be figured out on one’s own, or with the help of hired (and potentially quite costly) retirement plan advisors. Along with lack of access, information and educational opportunities for would-be investors were also thin on the ground. The process wasn’t democratized, speedy, or easeful.

Fintech Solutions for Retirement Savings

In response to the clunkiness of these older retirement strategies, fintech companies have come up with innovative retirement solutions that have broken new ground—and helped many who might otherwise not have done so reach their retirement goals.

• Companies like SoFi have implemented IRA match offers, which help private-sector savers to maximize their nest eggs

• AutoPilot allows everyday investors to track the trades of high-profile investors and politicians—and follow in their portfolios’ footsteps
• Betterment, Wealthfront, and other robo-advisors that came after them dialed down investment’s steep learning curve and created a set-it-and-forget-it option

These are just a few of the digital retirement savings tools and apps that make saving for retirement—and ensuring you’ll have enough retirement income to sustain your golden years—easier and more accessible than ever before.

Benefits of Fintech for Retirement Savings

While certain companies stand out for their special features or and fintech innovations, the retirement industry as a whole has been totally transformed. These days, just about every online retirement savings account or investment fund offers a wealth of educational tools, retirement calculators, and on-the-go accessibility that has put saving enough retirement income at the general public’s fingertips—literally.

Many platforms begin new user journeys with a questionnaire that helps them assess their specific retirement goals, a process which, in the old world of retirement, they may never have embarked on. The ability to have your retirement fund personalized and tailored to your specific needs is one of the best of the many fintech innovations that have become so ubiquitous. Many also offer retirement calculators to help users understand how much they’ll need to save in order to meet retirement income goals.

These platforms are also usually accessible via web portal or mobile app, which means convenience and accessibility have increased dramatically. Another way financial technology has increased accessibility—and frankly revolutionized the retirement industry—is by lowering the overall cost of maintaining a retirement savings account. Many of these platforms offer access to a retirement fund with no monthly maintenance fee or minimum account balance, and may also offer the opportunity to make $0-commissions trades.

Finally, the massive increase in the amount of available information and planning resources, including the aforementioned retirement calculators along with third-party research integrated into trading platforms, makes it possible for even brand-new investors to meet their retirement goals—without necessarily needing to rely on a professional for investment advice.

Challenges and Risks of Fintech in Retirement Savings

Of course, there’s no such thing as a free lunch. For all the retirement solutions these companies have offered, financial technology innovations are not without their challenges and risks. Primary among these include:

• Data security and privacy concerns. Though most fintech companies implement the highest levels of encryption and other state-of-the-art security technology, along with offering FDIC/SIPC insurance for appropriate products, breaches happen—and when it’s your retirement savings account at stake, that risk can feel outsized.
• The lack of human interaction. While it’s true that robo-advisors and other advanced technology retirement solutions can streamline the process, some people may long specifically for the human element. (Fortunately, human professionals are still around to offer financial advice, and some fintech companies offer customer support hotlines where you can talk to a real person.)
• Regulatory challenges and oversights. Like any brand-new industry or field, fintech has and may continue to experience some challenges as legislators come to understand how best to regulate it. As fintech itself continues to evolve, so will the laws that govern it.

What Financial Professionals Have to Say

You don’t just have to take our word for it. Financial professionals are also excited about the future of fintech—and its current gains in helping younger generations get started on their savings.

Kelli Keough, EVP, Group Business Unit Leader for Spend, Invest, Protect and Save at SoFi, shares enthusiasm for fintech’s role in the future —especially in its ability to help younger generations. “Our IRA match is a compelling incentive for younger households to start saving in an IRA. Anything that helps younger generations save more is a step in the right direction.”

Malik S. Lee, Certified Financial Planner and founder of Felton & Peel Wealth Management in Atlanta, thanks fintech for maximizing his efficiency in planning for others to reach their retirement goals—and putting advisor-level tools within clients’ reach. He also thanks fintech for reducing his six-hour tax-planning process to only a single hour’s work, he says; in other parts of his practice, fintech has enabled advisees to take financial planning matters into their own hands.

“Innovative software on dollar-cost averaging, rebalancing, tax-loss harvesting, and direct indexing has made investing for the average American much easier,” he mentions. While many of this advanced technology have been available to professionals for quite a while, he says, “with the advent of robo-advisors, the everyday person has it at their fingertips”—which democratizes the world of financial literacy and independence.

With more fintech innovations on the rise, that seems to be the direction we’re headed—as the statistics clearly support.

Future Outlook

Given how much advancement has happened already, it’s clear that the future of fintech is a bright one—specifically when it comes to closing the retirement gap and helping everyday people meet their retirement goals. As existing companies see further uptake and new companies innovate to compete, available retirement strategies may continue to expand, and saving may become even more automated and therefore painless.

Investors may double-down on newer alternative asset classes, like cryptocurrency, and AI is sure to play a key (if slightly unpredictable) role. All in all, the battle to secure enough retirement income – from starting a retirement savings account to finding old 401(k)s – is one that fintech will likely continue to help Americans win.

The Bottom Line

Fintech has revolutionized the American retirement savings landscape—and this truly is just the beginning. It’s encouraging to see younger people open a retirement fund and set course to meet their retirement goals. From IRA matches to the one-button ease of robo-advisement, today’s world of retirement planning is, simply put, worlds away from yesterday’s. Financial planning is more accessible to the everyday saver, which is a world worth striving toward.