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Speaker 1: These sees Bloomberg Business Week with Carol Messer and Tim

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Speaker 1: Stenebek on Bloomberg Radio.

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Speaker 2: Americans are facing a massive retirement shortfall, and potential cuts

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Speaker 2: to Social Security benefits could make matters worse. A recent

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Speaker 2: report from Vanguard found that the average balance for Vanguard

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Speaker 2: to Find Contribution Plan participants was roughly about one hundred

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Speaker 2: and twelve thousand dollars at the end of the of

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Speaker 2: last year. The median, so we're talking about half below

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Speaker 2: half above, was a little over twenty seven thousand dollars.

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Speaker 2: Flip over to Fidelity Investments, the average four oh one

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Speaker 2: K balance JESS was one hundred eighty two hundred dollars

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Speaker 2: in the first quarter of twenty twenty three. So a

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Speaker 2: little perspective on kind of what the general public who

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Speaker 2: have four oh one ks our retirement plans.

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Speaker 1: And as Bloomberg Susian Wooley recently noted, workers are finding

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Speaker 1: it harder to save for retirement even as the amount

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Speaker 1: they need keeps rising. Bloomberg actually crunched the numbers from

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Speaker 1: a Charles Schwab survey showing that the average savings target

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Speaker 1: in the US is now one point eight million from

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Speaker 1: one point seven million a year ago. But that's kind

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Speaker 1: of an eye popping number there when you see that guy.

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Speaker 2: Yeah, and that's certainly our audience right right in terms

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Speaker 2: of the scale. So let's get into it what you

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Speaker 2: really kind of need to be thinking about and some

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Speaker 2: of the concerns and trends we're seeing when it comes

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Speaker 2: to retirement planning with us, And she certainly is thinking

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Speaker 2: about individuals and their financial wellness is Betterment CEO, Sarah Levy.

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Speaker 2: She joins us in New York City or from New

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Speaker 2: York City. Sara, good to have you here with us.

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Speaker 2: Let's do the big picture. You know, certainly the Bloomberg

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Speaker 2: audience and our surveys show a higher number when it

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Speaker 2: comes to retirement planning. But you know, we gave you

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Speaker 2: some perspective from Vanguard and Fidelity in terms of, you know,

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Speaker 2: average retirement plans. What are you guys seeing when it

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Speaker 2: comes to retirement planning, savings and stresses?

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Speaker 3: So I think I'll start with your last word, stresses,

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Speaker 3: because I think that's really the operative word. And you

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Speaker 3: know your framing is exactly right right, which is pensions

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Speaker 3: are no more and there's uncertainty around social security and

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Speaker 3: so sort of the employees are being left holding the bag,

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Speaker 3: and the opportunity that we see is that this stress

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Speaker 3: can be alleviated by employer support. And so, you know,

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Speaker 3: we do a lot of research. Our business covers both

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Speaker 3: retail consumers as well as a four to oh one

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Speaker 3: K product, and so we see sort of both sides

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Speaker 3: of the conversation. And when we talk to our retail customers,

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Speaker 3: you know, their concern is, I don't know where to start.

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Speaker 3: I have a ton of you know, current demands, and

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Speaker 3: retirement feels really far away, and so I think, you know,

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Speaker 3: where we see the opportunity is almost what's old is

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Speaker 3: new again, which is employers have an opportunity really to

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Speaker 3: step in here and fill the gap and support their employees.

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Speaker 3: And more than an opportunity, I would actually say, you know,

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Speaker 3: a moral imperative to step in and really support employees,

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Speaker 3: not just with current compensation, but with long term kind

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Speaker 3: of financial support and planning and thinking.

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Speaker 1: Something that's been a big topic this fall has been

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Speaker 1: the resumption of student loan repayments on the federal side.

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Speaker 1: How do you think that is going to impact savers

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Speaker 1: when it comes to retirement.

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Speaker 3: Well, that is a huge question. There's one point seven

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Speaker 3: trillion in student loan debt outstanding in this country, and

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Speaker 3: it is the top worry for most, certainly millennials and

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Speaker 3: Gen Z and so this is a really big issue.

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Speaker 3: You know, now that inflation has started to come down,

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Speaker 3: we're seeing some more optimism from the retail sector, and

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Speaker 3: particularly given that unemployment is remaining low. So, you know,

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Speaker 3: knock on wood, the FED is sort of threading the

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Speaker 3: needle there in a great way. But I think what

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Speaker 3: we're seeing is that the primary reason that employees don't

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Speaker 3: contribute to retirement plans is because they have student loans

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Speaker 3: to pay down and they just don't have an extra dollar.

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Speaker 3: And so I think the most interesting thing to watch

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Speaker 3: is going to be how the regulatory environment sort of

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Speaker 3: ties these two concerns for folks together, right, which is,

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Speaker 3: how do they link the four to one K and

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Speaker 3: student loans and help employers again support a journey for

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Speaker 3: employees that might be about paying down debt and might

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Speaker 3: be about saving for retirement. But wherever you are on

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Speaker 3: the personal journey, both the government and your employer should

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Speaker 3: be able to support you and meet you where you are.

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Speaker 2: If you've got an employer who's going to help you

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Speaker 2: with that. And the reason I bring that up, Sarah,

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Speaker 2: two individuals that I helped this week who are in

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Speaker 2: work situations. They're working, they make money, but they're basically

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Speaker 2: like independent contractors, and so they aren't with a company

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Speaker 2: that helps them with a four oh one K. And

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Speaker 2: I feel very blessed to be with companies that do

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Speaker 2: or have done. And you know, I look at your background.

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Speaker 2: You've worked at Disney and Viacom. I'm assuming that they

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Speaker 2: had plans that kind of helped you along the way.

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Speaker 2: There's got to be something better that we can do

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Speaker 2: as society to get individuals since at this point not

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Speaker 2: a lot of them are going to have pensions. Who

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Speaker 2: knows about social security some other type of planning for retirement.

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Speaker 2: How do we do that?

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Speaker 1: Well?

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Speaker 3: I think at Betterment we're taking one of the first steps,

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Speaker 3: which is acknowledging and recognizing that fifty percent of workers

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Speaker 3: in this country work for small and medium sized businesses,

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Speaker 3: and that is the group that isn't supported. Exactly to

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Speaker 3: your point, I worked at major organizations where they supported

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Speaker 3: a four one K. But what we see is the

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Speaker 3: six million small and medium sized businesses, eighty or ninety

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Speaker 3: percent of those businesses don't offer retirement solutions to their employees,

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Speaker 3: and what's going on? And I think, you know, this

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Speaker 3: is one area where the government, I think is doing

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Speaker 3: great work, both at the federal level and at the

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Speaker 3: state level of really putting in kind of new markers

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Speaker 3: and new requirements sort of stayed by state to look employers.

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Speaker 3: This is no longer an optional benefit. This is a

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Speaker 3: required benefit, even if you have a small business. And

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Speaker 3: by the way, solutions like Betterment and they're a handful

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Speaker 3: of others who offer this in an incredibly affordable way,

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Speaker 3: subsidized by the government to get started, and there's really

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Speaker 3: no excuse, I think for employers not to be offering,

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Speaker 3: you know, a delightful, you know, digital affordable solution in

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Speaker 3: this area.

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Speaker 1: Many of your customers are affluent millennials. How are you

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Speaker 1: advising them in this market as well as this economy.

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Speaker 3: So year to date, I think what we've really seen

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Speaker 3: is that cash is king right. The good news, you know,

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Speaker 3: for us is we serve customers both on the investing

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Speaker 3: side and on the cash side, and savings has been

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Speaker 3: a really nice haven sort of high yield cash accounts.

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Speaker 3: A lot of the digital players, including betterment are offering

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Speaker 3: very high yields. We're currently offering a five point five

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Speaker 3: percent yield. What we've seen is we've said to customers,

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Speaker 3: if you're jittery about what's going to happen in the markets,

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Speaker 3: let the money sit on the sidelines in cash and

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Speaker 3: get a guaranteed return with principal protection and with access

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Speaker 3: to that capital. So that's been really I would say

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Speaker 3: the theme for the first six months of the year.

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Speaker 3: Over the summer, we've started to see sort of signs

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Speaker 3: of life in the investing sector in particular. You know,

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Speaker 3: today was obviously an interesting day for the FED to say,

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Speaker 3: you know, maybe we're on a pause for a minute

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Speaker 3: here and let's see how the tightening had, you know,

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Speaker 3: plays through in the market. And so what we're seeing

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Speaker 3: is some beginnings of investor optimism as inflation has cooled.

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Speaker 3: And I would say the evidence for that is flows

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Speaker 3: into ETFs. So July and August in the market at

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Speaker 3: large saw fifty billion in inflows each month into ETFs,

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Speaker 3: which is up five x from January. So again just

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Speaker 3: to see that trend line, it's still, you know, it's

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Speaker 3: still relatively low from a historical basis. So I think

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Speaker 3: we're in early innings, but that's what we're watching. And

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Speaker 3: our recommendation and advice is always about long term diversification

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Speaker 3: and not to gain the market, not to try to

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Speaker 3: time the market. But the average investor, it should just

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Speaker 3: be invested. Our view is be invested and whatever you

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Speaker 3: can save is better than nothing. Don't be intimidated.

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Speaker 1: I'm curious because you we were talking about the flows

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Speaker 1: into those ETFs, and as people have been so hung

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Speaker 1: up on money market funds and higher yields there, do

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Speaker 1: you think that money is maybe bodes well for the

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Speaker 1: broader stock market if you're seeing flows like that.

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Speaker 3: Look, I don't like to predict the stock market. I

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Speaker 3: think what we what we preach. I know a lot

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Speaker 3: a lot of folks. Do you know again, what we

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Speaker 3: preach is. I don't pretend to know better than the rest.

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Speaker 3: But I think that dollar cost averaging is always a

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Speaker 3: good idea. So, you know, for my for my money,

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Speaker 3: I think having a plan, sticking to your plan, remaining

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Speaker 3: diversified and being in the market is always sound advice,

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Speaker 3: sort of regardless of the uh, you know, of the

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Speaker 3: of the moment. Shall we say, all right, we're going.

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Speaker 2: To leave it On that note, listen, great to catch

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Speaker 2: up with you. Have a great weekend. I really appreciate it.

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Speaker 2: Better meant CEO Sarah Levy joining us there in New

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Speaker 2: York City. You are listening and watching Bloomberg Business Week

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Speaker 2: Carol Master along with Jess Mettin. You know, but it's different, right,

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Speaker 2: and I do think about I think it'll be interesting

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Speaker 2: to see if government, if officials start to look at

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Speaker 2: that connection between student debt, right and lack of retirement savings,

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Speaker 2: because there's got to be a connection.

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Speaker 1: There has to be, And it's astounding when you think

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Speaker 1: about just the average amount of debt debt Americans do

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Speaker 1: carry from obviously going to college.

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Speaker 2: Yeah, I'd remember with the tipping point when all of

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Speaker 2: a sudden, student debt was more than credit card debt,

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Speaker 2: and like it just caught everybody's attention,