WEBVTT - Betterment Planning for the Future Today

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<v Speaker 1>These sees Bloomberg Business Week with Carol Messer and Tim

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<v Speaker 1>Stenebek on Bloomberg Radio.

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<v Speaker 2>Americans are facing a massive retirement shortfall, and potential cuts

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<v Speaker 2>to Social Security benefits could make matters worse. A recent

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<v Speaker 2>report from Vanguard found that the average balance for Vanguard

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<v Speaker 2>to Find Contribution Plan participants was roughly about one hundred

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<v Speaker 2>and twelve thousand dollars at the end of the of

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

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<v Speaker 2>half above, was a little over twenty seven thousand dollars.

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<v Speaker 2>Flip over to Fidelity Investments, the average four oh one

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<v Speaker 2>K balance JESS was one hundred eighty two hundred dollars

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<v Speaker 2>in the first quarter of twenty twenty three. So a

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<v Speaker 2>little perspective on kind of what the general public who

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<v Speaker 2>have four oh one ks our retirement plans.

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<v Speaker 1>And as Bloomberg Susian Wooley recently noted, workers are finding

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<v Speaker 1>it harder to save for retirement even as the amount

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<v Speaker 1>they need keeps rising. Bloomberg actually crunched the numbers from

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<v Speaker 1>a Charles Schwab survey showing that the average savings target

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<v Speaker 1>in the US is now one point eight million from

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<v Speaker 1>one point seven million a year ago. But that's kind

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<v Speaker 1>of an eye popping number there when you see that guy.

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<v Speaker 2>Yeah, and that's certainly our audience right right in terms

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<v Speaker 2>of the scale. So let's get into it what you

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<v Speaker 2>really kind of need to be thinking about and some

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<v Speaker 2>of the concerns and trends we're seeing when it comes

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<v Speaker 2>to retirement planning with us, And she certainly is thinking

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<v Speaker 2>about individuals and their financial wellness is Betterment CEO, Sarah Levy.

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<v Speaker 2>She joins us in New York City or from New

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<v Speaker 2>York City. Sara, good to have you here with us.

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<v Speaker 2>Let's do the big picture. You know, certainly the Bloomberg

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<v Speaker 2>audience and our surveys show a higher number when it

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<v Speaker 2>comes to retirement planning. But you know, we gave you

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<v Speaker 2>some perspective from Vanguard and Fidelity in terms of, you know,

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<v Speaker 2>average retirement plans. What are you guys seeing when it

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<v Speaker 2>comes to retirement planning, savings and stresses?

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<v Speaker 3>So I think I'll start with your last word, stresses,

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<v Speaker 3>because I think that's really the operative word. And you

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<v Speaker 3>know your framing is exactly right right, which is pensions

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<v Speaker 3>are no more and there's uncertainty around social security and

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<v Speaker 3>so sort of the employees are being left holding the bag,

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<v Speaker 3>and the opportunity that we see is that this stress

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<v Speaker 3>can be alleviated by employer support. And so, you know,

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<v Speaker 3>we do a lot of research. Our business covers both

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<v Speaker 3>retail consumers as well as a four to oh one

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<v Speaker 3>K product, and so we see sort of both sides

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<v Speaker 3>of the conversation. And when we talk to our retail customers,

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

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<v Speaker 3>I have a ton of you know, current demands, and

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<v Speaker 3>retirement feels really far away, and so I think, you know,

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<v Speaker 3>where we see the opportunity is almost what's old is

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<v Speaker 3>new again, which is employers have an opportunity really to

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<v Speaker 3>step in here and fill the gap and support their employees.

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<v Speaker 3>And more than an opportunity, I would actually say, you know,

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<v Speaker 3>a moral imperative to step in and really support employees,

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<v Speaker 3>not just with current compensation, but with long term kind

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<v Speaker 3>of financial support and planning and thinking.

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<v Speaker 1>Something that's been a big topic this fall has been

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<v Speaker 1>the resumption of student loan repayments on the federal side.

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<v Speaker 1>How do you think that is going to impact savers

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<v Speaker 1>when it comes to retirement.

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

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<v Speaker 3>trillion in student loan debt outstanding in this country, and

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<v Speaker 3>it is the top worry for most, certainly millennials and

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<v Speaker 3>Gen Z and so this is a really big issue.

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<v Speaker 3>You know, now that inflation has started to come down,

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<v Speaker 3>we're seeing some more optimism from the retail sector, and

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<v Speaker 3>particularly given that unemployment is remaining low. So, you know,

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<v Speaker 3>knock on wood, the FED is sort of threading the

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<v Speaker 3>needle there in a great way. But I think what

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<v Speaker 3>we're seeing is that the primary reason that employees don't

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<v Speaker 3>contribute to retirement plans is because they have student loans

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

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<v Speaker 3>And so I think the most interesting thing to watch

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<v Speaker 3>is going to be how the regulatory environment sort of

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<v Speaker 3>ties these two concerns for folks together, right, which is,

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<v Speaker 3>how do they link the four to one K and

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<v Speaker 3>student loans and help employers again support a journey for

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<v Speaker 3>employees that might be about paying down debt and might

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<v Speaker 3>be about saving for retirement. But wherever you are on

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<v Speaker 3>the personal journey, both the government and your employer should

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<v Speaker 3>be able to support you and meet you where you are.

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<v Speaker 2>If you've got an employer who's going to help you

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<v Speaker 2>with that. And the reason I bring that up, Sarah,

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<v Speaker 2>two individuals that I helped this week who are in

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<v Speaker 2>work situations. They're working, they make money, but they're basically

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<v Speaker 2>like independent contractors, and so they aren't with a company

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<v Speaker 2>that helps them with a four oh one K. And

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<v Speaker 2>I feel very blessed to be with companies that do

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<v Speaker 2>or have done. And you know, I look at your background.

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

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<v Speaker 2>had plans that kind of helped you along the way.

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<v Speaker 2>There's got to be something better that we can do

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<v Speaker 2>as society to get individuals since at this point not

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<v Speaker 2>a lot of them are going to have pensions. Who

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<v Speaker 2>knows about social security some other type of planning for retirement.

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<v Speaker 2>How do we do that?

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<v Speaker 1>Well?

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

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<v Speaker 3>which is acknowledging and recognizing that fifty percent of workers

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<v Speaker 3>in this country work for small and medium sized businesses,

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<v Speaker 3>and that is the group that isn't supported. Exactly to

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<v Speaker 3>your point, I worked at major organizations where they supported

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<v Speaker 3>a four one K. But what we see is the

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<v Speaker 3>six million small and medium sized businesses, eighty or ninety

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

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

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<v Speaker 3>is one area where the government, I think is doing

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<v Speaker 3>great work, both at the federal level and at the

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<v Speaker 3>state level of really putting in kind of new markers

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<v Speaker 3>and new requirements sort of stayed by state to look employers.

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<v Speaker 3>This is no longer an optional benefit. This is a

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<v Speaker 3>required benefit, even if you have a small business. And

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<v Speaker 3>by the way, solutions like Betterment and they're a handful

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<v Speaker 3>of others who offer this in an incredibly affordable way,

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<v Speaker 3>subsidized by the government to get started, and there's really

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<v Speaker 3>no excuse, I think for employers not to be offering,

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<v Speaker 3>you know, a delightful, you know, digital affordable solution in

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<v Speaker 3>this area.

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<v Speaker 1>Many of your customers are affluent millennials. How are you

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<v Speaker 1>advising them in this market as well as this economy.

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<v Speaker 3>So year to date, I think what we've really seen

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<v Speaker 3>is that cash is king right. The good news, you know,

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<v Speaker 3>for us is we serve customers both on the investing

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<v Speaker 3>side and on the cash side, and savings has been

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<v Speaker 3>a really nice haven sort of high yield cash accounts.

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<v Speaker 3>A lot of the digital players, including betterment are offering

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<v Speaker 3>very high yields. We're currently offering a five point five

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<v Speaker 3>percent yield. What we've seen is we've said to customers,

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

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<v Speaker 3>let the money sit on the sidelines in cash and

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<v Speaker 3>get a guaranteed return with principal protection and with access

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<v Speaker 3>to that capital. So that's been really I would say

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<v Speaker 3>the theme for the first six months of the year.

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<v Speaker 3>Over the summer, we've started to see sort of signs

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<v Speaker 3>of life in the investing sector in particular. You know,

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<v Speaker 3>today was obviously an interesting day for the FED to say,

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<v Speaker 3>you know, maybe we're on a pause for a minute

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<v Speaker 3>here and let's see how the tightening had, you know,

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<v Speaker 3>plays through in the market. And so what we're seeing

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<v Speaker 3>is some beginnings of investor optimism as inflation has cooled.

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<v Speaker 3>And I would say the evidence for that is flows

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<v Speaker 3>into ETFs. So July and August in the market at

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<v Speaker 3>large saw fifty billion in inflows each month into ETFs,

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<v Speaker 3>which is up five x from January. So again just

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<v Speaker 3>to see that trend line, it's still, you know, it's

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<v Speaker 3>still relatively low from a historical basis. So I think

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

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<v Speaker 3>our recommendation and advice is always about long term diversification

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<v Speaker 3>and not to gain the market, not to try to

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<v Speaker 3>time the market. But the average investor, it should just

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<v Speaker 3>be invested. Our view is be invested and whatever you

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<v Speaker 3>can save is better than nothing. Don't be intimidated.

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<v Speaker 1>I'm curious because you we were talking about the flows

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<v Speaker 1>into those ETFs, and as people have been so hung

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<v Speaker 1>up on money market funds and higher yields there, do

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<v Speaker 1>you think that money is maybe bodes well for the

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<v Speaker 1>broader stock market if you're seeing flows like that.

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<v Speaker 3>Look, I don't like to predict the stock market. I

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<v Speaker 3>think what we what we preach. I know a lot

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<v Speaker 3>a lot of folks. Do you know again, what we

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

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<v Speaker 3>But I think that dollar cost averaging is always a

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<v Speaker 3>good idea. So, you know, for my for my money,

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<v Speaker 3>I think having a plan, sticking to your plan, remaining

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<v Speaker 3>diversified and being in the market is always sound advice,

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<v Speaker 3>sort of regardless of the uh, you know, of the

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<v Speaker 3>of the moment. Shall we say, all right, we're going.

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<v Speaker 2>To leave it On that note, listen, great to catch

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<v Speaker 2>up with you. Have a great weekend. I really appreciate it.

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<v Speaker 2>Better meant CEO Sarah Levy joining us there in New

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<v Speaker 2>York City. You are listening and watching Bloomberg Business Week

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

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<v Speaker 2>and I do think about I think it'll be interesting

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<v Speaker 2>to see if government, if officials start to look at

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<v Speaker 2>that connection between student debt, right and lack of retirement savings,

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<v Speaker 2>because there's got to be a connection.

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<v Speaker 1>There has to be, And it's astounding when you think

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<v Speaker 1>about just the average amount of debt debt Americans do

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<v Speaker 1>carry from obviously going to college.

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<v Speaker 2>Yeah, I'd remember with the tipping point when all of

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<v Speaker 2>a sudden, student debt was more than credit card debt,

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<v Speaker 2>and like it just caught everybody's attention,