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IRS Announces Higher 2020 Retirement Plan Contribution Limits For 401(k)s And More

How much can you save for retirement in 2020? The Treasury Department has announced inflation-adjusted figures for retirement account savings for 2020: 401(k) contribution limits are up; traditional IRA contribution limits stay the same; almost all the other numbers are up.

The amount you can contribute to your 401(k) or similar workplace retirement plan goes up from $19,000 in 2019 to $19,500 in 2020. The 401(k) catch-up contribution limit—if you’re 50 or older in 2020—will be $6,500 for workplace plans, up from $6,000. But the amount you can contribute to an Individual Retirement Account stays the same for 2020: $6,000, with a $1,000 catch-up limit if you’re 50 or older.

So super-savers age 50-plus can sock away $33,000 in these tax-advantaged accounts for 2020. If your employer allows aftertax contributions or you’re self-employed, you can save even more. The overall defined contribution plan limit moves up to $57,000, from $56,000.

Today In: Money

Sounds unreachable? During 2018, 13% of employees with retirement plans at work saved the then maximum of $18,500/$24,500, according to Vanguard’s How America Saves. In plans offering catch-up contributions, 15% of those age 50 or older took advantage of the extra savings opportunity. High earners are really saving: 6 out of 10 folks earning $150,000+ contributed the maximum allowed, including catch-ups.

Want to join in? We outline the numbers below; see IRS Notice 2019-59 for technical guidance. For more on 2020 tax numbers: Forbes contributor Kelly Phillips Erb has all the details on 2020 tax brackets, standard deduction amounts and more. We have all the details on the new higher 2020 retirement account limits too.

401(k)s. The annual contribution limit for employees who participate in 401(k), 403(b), most 457 plans and the federal government’s Thrift Savings Plan is $19,500 for 2020—a $500 boost over 2019. Note, you can make changes to your 401(k) election at any time during the year, not just during open enrollment season when most employers send you a reminder to update your elections for the next plan year.

The 401(k) Catch-Up. The catch-up contribution limit for employees age 50 or older in these plans is $6,500 for 2020. That’s the first increase since 2015 when the limit rose to $6,000. Even if you don’t turn 50 until December 31, 2020, you can make the additional $6,500 catch-up contribution for the year.

SEP IRAs and Solo 401(k)s. For the self-employed and small business owners, the amount they can save in a SEP IRA or a solo 401(k) goes up from $56,000 in 2019 to $57,000 in 2020. That’s based on the amount they can contribute as an employer, as a percentage of their salary; the compensation limit used in the savings calculation also goes up from $280,000 in 2019 to $285,000 in 2020.

Aftertax 401(k) contributions. If your employer allows aftertax contributions to your 401(k), you also get the advantage of the $57,000 limit for 2020. It’s an overall cap, including your $19,500 (pretax or Roth in any combination) salary deferrals plus any employer contributions (but not catch-up contributions).

The SIMPLE. The limit on SIMPLE retirement accounts goes up from $13,000 in 2019 to $13,500 in 2020. The SIMPLE catch-up limit is still $3,000.

Defined Benefit Plans. The limitation on the annual benefit of a defined benefit plan goes up from $225,000 in 2019 to $230,000 in 2020. These are powerful pension plans (an individual version of the kind that used to be more common in the corporate world before 401(k)s took over) for high-earning self-employed folks.

Individual Retirement Accounts. The limit on annual contributions to an Individual Retirement Account (pretax or Roth or a combination) remains at $6,000 for 2020, the same as in 2019. The catch-up contribution limit, which is not subject to inflation adjustments, remains at $1,000. (Remember that 2020 IRA contributions can be made until April 15, 2021.)

Deductible IRA Phase-Outs. You can earn a little more in 2020 and get to deduct your contributions to a traditional pretax IRA. Note: Even if you earn too much to get a deduction for contributing to an IRA, you can still contribute—it’s just nondeductible.

In 2020, the deduction for taxpayers making contributions to a traditional IRA is phased out for singles and heads of household who are covered by a workplace retirement plan and have modified adjusted gross incomes (AGI) between $65,000 and $75,000, up from $64,000 and $74,000 in 2019. For married couples filing jointly, in which the spouse who makes the IRA contribution is covered by a workplace retirement plan, the income phase-out range is $104,000 to $124,000 for 2020, up from $103,000 to $123,000.

For an IRA contributor who is not covered by a workplace retirement plan and is married to someone who is covered, the deduction is phased out if the couple’s income is between $196,000 and $206,000 in 2020, up from $193,000 and $203,000 in 2019.

Roth IRA Phase-Outs. The inflation adjustment helps Roth IRA savers too. In 2020, the AGI phase-out range for taxpayers making contributions to a Roth IRA is $196,000 to $206,000 for married couples filing jointly, up from $193,000 to $203,000 in 2019. For singles and heads of household, the income phase-out range is $124,000 to $139,000, up from $122,000 to $137,000 in 2019.

If you earn too much to open a Roth IRA, you can open a nondeductible IRA and convert it to a Roth IRA as Congress lifted any income restrictions for Roth IRA conversions. To learn more about the backdoor Roth, see Congress Blesses Roth IRAs For Everyone, Even The Well-Paid.

Saver’s Credit. The income limit for the saver’s credit for low- and moderate-income workers is $65,000 for married couples filing jointly for 2020, up from $64,000; $48,750 for heads of household, up from $48,000; and $32,500 for singles and married filing separately, up from $32,000. See Grab The Saver’s Credit for details on how it can pay off.

QLACs. The dollar limit on the amount of your IRA or 401(k) you can invest in a qualified longevity annuity contract is increased to $135,000 from $130,000. See Make Your Retirement Money Last For Life for how QLACs work.

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I’m an associate editor on the Money team at Forbes based in Fairfield County, Connecticut, leading Forbes’ retirement coverage. I manage contributors who cover retirement and wealth management. Since I joined Forbes in 1997, my favorite stories have been on how people fuel their passions (historic preservation, open space, art, for example) by exploiting the tax code. I also get into the nitty-gritty of retirement account rules, estate planning and strategic charitable giving. My favorite Forbes business trip: to Plano, Ill. to report on the restoration of Ludwig Mies van der Rohe’s Farnsworth House, then owned by a British baron. Live well. Follow me on Twitter: http://www.twitter.com/ashleaebeling Send me an email: aebeling@forbes.com

Source: IRS Announces Higher 2020 Retirement Plan Contribution Limits For 401(k)s And More

The IRS announced changes to contribution and benefit limits for 2019. CSIG’s Alison Bettonville, CFA highlights the limit changes that affect various qualified retirement plans. Highlights include: -402(g) limit increased to $19,000 -415 or the Total Annual Additions limit increased to $56,000 -Catch up contributions limit remained at $6,000 -Compensation limit increased $280,000 -Highly Compensated Employee definition increased to $125,000 To the extent that any portion of the information submitted by CSIG contains material that is copyrighted, the recipient shall observe the protection of such material as provided under applicable copyright laws. Past performance does not guarantee future results. Diversification does not guarantee investment returns and does not eliminate risk of loss. We believe the information provided here is reliable, but do not warrant its accuracy or completeness. Opinions and estimates offered constitute our judgment and are subject to change without notice, as are statements of financial market trends, which are based on current market conditions. This material is not intended as an offer or solicitation for the purchase or sale of any financial instrument. The views and strategies described may not be suitable for all investors. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, accounting, legal, or tax advice. References to future returns are not promises or even estimates of actual returns a client portfolio may achieve. Any forecasts contained herein are for illustrative purposes only and are not to be relied upon as advice or interpreted as a recommendation. The price of equity securities may rise or fall because of changes in the broad market or changes in a company’s financial condition, sometimes rapidly or unpredictably. International investing involves a greater degree of risk and increased volatility. There is no guarantee that companies that can issue dividends will declare, continue to pay, or increase dividends.

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How GE Shafted Its Retirees

Remember “defined benefit” pensions?

That is the kind of plan in which the employer guarantees the worker a set monthly benefit for life. They are increasingly scarce except for small closely held corporations.

The same rules apply for small closely held businesses as for large corporations.

These plans can be great tools for independent professionals and small business owners. But if you have thousands of employees, DB plans are expensive and risky.

The company is legally obligated to pay the benefits at whatever the cost turns out to be, which is hard to predict.

The advantage is you can use some hopeful accounting to set aside less cash now and deal with the benefit problems later. The problem is “later” comes faster than you would like, and procrastination can be a bitch.

That Brings Us to the Lesson for Today

In October 7, General Electric (GE) announced several changes to its defined benefit pension plans. Among them:

Today In: Money
  • Some 20,000 current employees who still have a legacy-defined benefit plan will see their benefits frozen as of January 2021. After then, they will accrue no further benefits and make no more contributions. The company will instead offer them matching payments in its 401(k) plan.
  • About 100,000 former GE employees who earned benefits but haven’t yet started receiving them will be offered a one-time, lump sum payment instead. This presents employees with a very interesting proposition. Almost exactly like a Nash equilibrium. More below…

The first part of the announcement is growing standard. But the second part is more interesting, and that’s where I want to focus.

Suppose you are one of the ex-GE workers who earned benefits. As of now, GE has promised to give you some monthly payment when you retire. Say it’s $1,000 a month.

What is the present value of that promised income stream? It depends on your life expectancy, inflation, interest rates and other factors. You can calculate it, though. Say it is $200,000.

Is GE offering to write you a generous check for $200,000? No. We know this because GE’s press release says:

Company funds will not be used to make the lump sum distributions. All distributions will be made from existing pension plan assets in the GE Pension Trust. The company does not expect the plan’s funded status to decrease as a result of this offer. At year-end 2018, the plan’s funded ratio was 80 percent (GAAP).

So GE is not offering to give away its own money, or to take it from other workers. It is simply offering ex-employees their own benefits earlier than planned. But under what assumptions? And how much? The press release didn’t say.

If that’s you, should you take the offer? It’s not an easy call because you are making a bet on the viability of General Electric.

The choice GE pensioners face is one many of us will have to make in the coming years. GE isn’t the only company in this position.

Unrealistic Assumptions

When GE says its plan is 80% funded under GAAP, it necessarily makes an assumption about the plan’s future investment returns.

I dug around their 2018 annual report and found the “expected rate of return” was 8.50% as recently as 2009, when they dropped it to 8.00%, then 7.50% in 2014, to now 6.75%.

So over a decade they went from staggeringly unrealistic down to seriously unrealistic. They still assume that every dollar in their pension fund will grow to almost $4 in 20 years.

That means GE’s offered amounts will probably be too low, because they’ll base their offers on that expected return.

GE hires lots of engineers and other number-oriented people who will see this. Still, I doubt GE will offer more because doing so would compromise their entire corporate viability, as we’ll see in a minute.

Financial Engineering

GE has $92 billion in pension liabilities offset by roughly $70 billion in assets, plus the roughly $5 billion they’re going to “pre-fund.”

But that is based on 6.75% annual return. Which roughly assumes that in 20 years one dollar will almost quadruple.

What if you assume a 3.5% return? Then you are roughly looking at $2, which would mean the pension plan is underfunded by over $100 billion—and that’s being generous.

GE’s current market cap is less than $75 billion, meaning that technically the pension plan owns General Electric.

This is why GE and other corporations, not to mention state and local pension plans, can’t adopt realistic return assumptions. They would have to start considering bankruptcy.

If GE were to assume 3.5% to 4% future returns, which might still be aggressive in a zero-interest-rate world, they would have to immediately book pension debt that might be larger than their market cap.

GE chair and CEO Larry Culp only took over in October 2018.

We have mutual friends who have nothing but extraordinarily good things to say about him. He is clearly trying to both do the right thing for employees and clean up the balance sheet.

He was dealt a very ugly hand before he even got in the game.

GE needs an additional $5 billion per year minimum just to stave off the pension demon. That won’t make shareholders happy, but Culp is now in the business of survival, not happiness.

That is why GE wants to buy out its defined benefit plan beneficiaries. Right now, the company is on the wrong side of math.

It doesn’t have anything like Hussman’s 31X the benefits it is obligated to pay. Nor do many other plans, both public and private. Nor does Social Security.

Tough Choices

To be clear, I think GE will survive. Its businesses generate good revenue and it owns valuable assets. The company can muddle through by gradually bringing down the expected returns and buying out as many DB beneficiaries as possible. But it won’t be fun.

Pension promises are really debt by another name. The numbers are staggering even when you understate them. We never see honest accounting on this because it would make too many heads melt.

If I am a GE employee who is offered a buyout? I might seriously consider taking it because I could then define my own risk and, with my smaller amount, take advantage of investments unavailable to a $75 billion plan.

I predict an unprecedented crisis that will lead to the biggest wipeout of wealth in history. And most investors are completely unaware of the pressure building right now. Learn more here.

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I am a financial writer, publisher, and New York Times bestselling-author. Each week, nearly a million readers around the world receive my Thoughts From the Frontline free investment newsletter. My most recent book is Code Red: How to Protect Your Savings from the Coming Crisis. I appear regularly on CNBC and Bloomberg TV. I’m also Chairman of Mauldin Economics, a research group that provides monthly analysis and recommendations to thousands of readers around the world. I was previously CEO of the American Bureau of Economic Research. Today I am President of the investment advisory firm Millennium Wave Advisors, LLC. I am also president and registered principal of Millennium Wave Securities, LLC a FINRA and SIPC registered broker dealer. When I’m not traveling to speak at conferences and events, I live in Dallas, TX. I’m also the proud father of seven children.

Source: How GE Shafted Its Retirees

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A Recession Won’t Wreck Your Retirement…But This Will

Here is what matters if you’ve made it and want to keep it.Do the financial markets have your attention? I assume so. After all, Wednesday’s 800-point drop in the Dow was the worst day in the U.S. stock market this year. And while many investors missed it, the December 2018 plunge in stock prices capped off a 20% decline which started in October. That could have put a big divot in the plans of folks recently retired or in the late stages of their careers.

Stumbling at the finish line?

Demographics tell us that there is massive group of people who are between 55 and 70 years old. They are the majority of the “Baby Boomer” generation. Many of them have built very nice nest eggs, thanks to a robust U.S. economy over the last 40 years. That period of technological innovation and globalization of the economy also produced four decades of generally falling interest rates. That’s provided a historic opportunity to build wealth, if you saved well and invested patiently.

But now here we are, with a stock market near all-time highs and interest rates crashing toward zero. The tailwind that lifted Baby Boomers in their “accumulation” years may flip to a headwind, just in time for them to start using the money.

Focus on what matters

At this stage of their investment life, Baby Boomers are tempted from all directions. They are told to bank on index funds, 60/40 portfolios, structured products and private partnerships. And, while there are merits to each, I am telling you what I see as someone who has been hanging around investment markets since this Baby Boomer was a Wall Street rookie in the beloved World Trade Center in NYC: much of it is bunk. It’s a distraction. It’s a sales pitch.

Take these over-hyped attempts by wealth management firms to boost their bottom line and scale their businesses, and bring your attention to your own priorities. Today, as much as any time in the past 10 years, your focus should be on true risk-management.

That does not necessarily mean running to cash. That is an outright timing move, and it borders on speculation. But it does mean that the intended use of your accumulated assets (when you need it, how much you need, and how you will navigate the markets of the future) should be

inward-looking. It should not be based on trying to guess what the stock market is going to do.

Rate cut? Check. Inversion? Check. Giant stock market drop? We’ll see.

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Source: ycharts.com

The big news on Wednesday was the “inversion” of a closely-watched part of the U.S. Treasury yield curve. Translated to English, that means for the first time since 2007, U.S. Bonds maturing in 10 years yielded less than those due in 2 years. This is far from the first inversion we have seen between different areas of the Treasury market. However, it is the one that is most widely-followed as a recession warning signal.

The chart above shows 3 things that were essentially in sync around the time the last 2 stock bear markets began. The 10-2 spread inverted, but then quickly reverted to normal. The Fed cut interest rates for the first time in a while. And, the S&P 500 peaked in value, and fell over 40% from that peak.

Let that sink in, given what we have witnessed in just the past 2 weeks. Then, fast-forward to today, where we find ourselves in a very similar situation regarding inversion and the Fed. See this chart below:

uncaptioned
Source:ycharts.com

What stands out the most to me in that chart is how the spread between the 10-year and 2-year yields is almost perfectly opposite that of the S&P 500’s price movement. That is, when the 10-2 spread is dropping, the S&P 500 is usually moving higher. But when that spread starts to rise, at it is likely to soon, the S&P 500 falls…hard. As a career chartist, I just can’t ignore that.

I have been writing about the threat of an eventual “10-2 inversion” in Forbes.com since April, 2017. It finally happened this week, 19 months into what increasingly looks like a period of muted returns for investors. That is, if they follow rules identical to those they followed for the past 10 years.

Recessions are bad, but this is worse

We saw on display this week what I have been talking about since early last year: that it will not take the declaration of a recession to tip the global stock market into a panic-driven selloff that rips through retirement efforts. All that is needed is for stock prices to follow through to the downside is to actually see the market react to the preponderance of evidence that has been building for a while now.

In other words, it is the market’s fear of the future (recession) and not the actual event that is most important. By the time a recession is officially declared, you won’t need to react. The damage will already be done.

Specifically, a slowing global economy, excessive “easy money” policies by the Fed and its global counterparts, and a frenzied U.S. political environment. This has shaken investor confidence, and now the only thing that ultimately matters in your retirement portfolio: the prices/values of the securities you own, is under pressure.

What to do about it

First, don’t fall prey to the hoards of market commentators whose livelihood depends on progressively higher stock prices. Corrections are not always healthy, diversification is often a ruse, and long-term investing is for 25 year-olds!

For those who have “fought the good fight” to get to the precipice of a retirement they have darn well earned, the last thing they want is to have this inanimate object (the financial markets) knock them back toward a more compromised retirement plan.

The best news about today’s investment climate is that the tools we have to navigate through them are as plentiful as ever. Even in a period of discouragingly low interest rates for folks who figured on 4-6% CDs paying their bills in retirement, bear markets in stocks and bonds can be dealt with, and even exploited for your benefit.

Bull or bear? You should not care!

Maybe this is not “the big one” that bearish pundit have been warning about. Perhaps it is just another bump in the road of a historically long bull market for both stocks and bonds. But again, market timing and headline events like 10-2 spreads, recessions and the like are not your priority.

What your priority is, if you want to improve your chances of success toward and through retirement, is something different. Namely, to get away from the jargon and hype of financial media, simplify your approach, and take a straightforward path toward preserving capital in a time of uncommon threats to your wealth. I look forward to sharing insight on that in the coming days.

Comments provided are informational only, not individual investment advice or recommendations. Sungarden provides Advisory Services through Dynamic Wealth Advisors

To read more, click HERE

Follow me on Twitter or LinkedIn. Check out my website.

I am an investment strategist and portfolio manager for high net worth families with over 30 years of industry experience. A thought-leader, book author and founder of a boutique investment advisory firm in South Florida. My work for Forbes.com aims to break investment myths and bring common sense analysis to my audience. Connect with me on Linked In, follow me on Twitter @robisbitts. Visit our website at www.SungardenInvestment.com

Source: A Recession Won’t Wreck Your Retirement…But This Will

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Fintech Firm Solves Number One Retirement Fear—Outliving Your Money

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Ken Henderson, a traveling Pickleball pro, has taped out two 22-by-40-foot courts on an East Harlem gym floor. Today, instead of the usual Florida retirees, he’s teaching a crew of youngish engineers, Web designers and financial planners who have taken the subway up from the Chelsea offices of their fintech startup to play the paddle sport many Baby Boomers favor because it requires less running than tennis and is easier on aging joints. One of the older players today is 41-year-old Rhian Horgan, the founder and CEO of Kindur. She has arranged the outing as a tongue-in-cheek way for her staff to get in touch with their inner Boomers—and their clientele.

In 2016, after 17 years with JPMorgan, Horgan ditched her business suits for jeans and reinvented herself as a fintech entrepreneur. She pitched Kindur as a one-stop digital financial advisor for those nearing or in retirement. It would manage clients’ investment portfolios using a basket of low-cost index ETFs (from Vanguard, BlackRock and Schwab); offer them advice on when to take Social Security; determine which of their retirement accounts to draw down first; and, in many cases, sell them a fixed annuity­—all with the goal of making sure they didn’t run out of money or pay more taxes than necessary during retirement. For simplicity, Kindur would even consolidate a client’s income sources into a monthly “retirement paycheck.”

But venture capitalists who have thrown hundreds of millions at a slew of robo-advisors and personal finance apps targeting Millennials were not wowed by Horgan or her pitchbook. “There was nothing in their portfolio targeting people ages 55 to 70,” she says. “It was a demographic they didn’t understand.”

Adding to her problems, Horgan believes, was her own identity. “I wasn’t viewed as investable. I was old for the industry, almost 40, didn’t have a cofounder, and I worked [previously] for a bank.” In addition, the notion of selling annuities online without high-pressure commissioned salesmen has been met with wide skepticism—from VCs and especially within the insurance industry itself.

After months of fruitlessly knocking on U.S. doors, Horgan found a believer at a fintech retreat in the French Alps. Anthemis, a London-based VC firm that was in on the first 2010 funding round of Betterment—the largest of the independent robo-advisors—agreed to lead a $1.25 million seed funding in September 2017, with billionaire Steve Cohen’s Point72 Ventures chipping in. Why mess with Boomers? “That’s where the money is,” answers Anthemis cofounder Sean Park, who sits on Kindur’s board.

Horgan hired an engineer, a designer, a general counsel (from Citi) and a few fellow financial wonks. They set up shop in a WeWork office. Across the hall, a sixtysomething woman was using WeWork’s online Meetup service to organize mah-jongg games, which gave them encouragement whenever naysayers suggested Boomers just weren’t that into the internet.

Still, their challenge was daunting: designing a “decumulation” or spend-down plan is more complicated (and requires more individualization and sets of calculations) than determining a proper asset allocation in the accumulation or saving phase. Yet to retain a broad appeal, the look and feel of the site couldn’t be too wonky, they believed.

The result: Kindur’s site, which launched in April, takes a low-key approach to both the details and the sales pitch. After setting up a free account, you answer a handful of specific questions (age, recent salary, planned retirement date) and guesstimate your assets and current spending. You get a preliminary free plan providing spending, Social Security and other advice based on these guesstimates or by linking to your actual accounts.

Prospective customers can play with their assumptions (retire later? spend less?) and ask questions of Kindur’s “coaches” via phone or online chat. Turns out, Boomers love chatting online and half use Kindur’s smartphone app, instead of its website, Horgan reports.

So far, more than 1,000 potential clients have gotten free plans. It’s a slow sales process, so we don’t yet know how many of them will buy Kindur’s services. But those who do will transfer their IRAs and investment accounts to its platform (custodied by Apex Clearing) and be charged an annual management fee of 0.5% of investment assets.

One of the most closely watched parts of Horgan’s approach is her use of fixed annuities to ensure clients don’t outlive their money. In contrast to the complicated (and commission-heavy) variable annuities insurance salesmen pitch, these are relatively plain vanilla products: You hand over a lump of money—say, $100,000—and get a fixed monthly income beginning either now or at some date in the future. Some financial planners and policymakers argue fixed annuities are a good idea, particularly for those middle-class folks who have savings but no regular pensions (outside of Social Security) they can count on.

Not surprisingly, annuity sellers are aggressively pursuing the Boomers’ business. In fact, the Alliance for Lifetime Income, an industry group, is the sole sponsor of the Rolling Stones’ current concert tour—the one that was delayed by Mick Jagger’s heart surgery.

But the insurance industry is still resistant to selling annuities online. Complicating matters, Horgan wanted a custom-designed product that fit her vision of a good annuity. She interviewed more than 40 insurers to find one willing to work with her and finally teamed up with American Equity, a West Des Moines, Iowa-based $51 billion in assets company started just 24 years ago.

“We’re partnering with Kindur because it’s a distribution channel of the future,’’ says Ron Grensteiner, the president of American Equity Investment Life Insurance Co. “There’s a segment of the population now, and there will be even more so in the future, who want to do retirement planning digitally—and anonymously, to a certain degree.”

Horgan resolved to start Kindur after watching her own parents struggle to make sense of their retirement options. Her physician father and piano-teacher mother immigrated from Ireland when she was 9. Her dad worked at six different U.S. hospitals, accumulating six workplace retirement plans, as well as sundry other financial assets. Her mom, who died in late 2017, had two retirement accounts. “The list of accounts went on and on. They never had a financial advisor, and most of the info was in my dad’s head,’’ says Horgan, who has decorated Kindur’s offices with framed photos of parents—her own and those of her staff.

Before taking the Kindur site live, she raised another $10 million, including $1 million from Inspired Capital, a new fund run by billionaire Penny Pritzker and Alexa von Tobel, who founded Learnvest, a financial site for Millennial women. (It was acquired by Northwestern Mutual and later ended as a brand.) “She’s extremely ahead of the competition in recognizing what an opportunity this is,” says Von Tobel.

Not quite all the competition. United Income, a similar comprehensive online service aiming at the 50-to-70-year-old getting-organized-for-retirement crowd launched in September 2017 and already has $780 million in assets under management, with an average account size of $833,000. Unlike Horgan, founder Matt Fellowes didn’t have to fight the VCs’ anti-Boomer bias—he used his own and his family’s money, plus funds from Morningstar, which backed his first fintech startup, Hello Wallet, an automated budgeting and financial education tool aimed at Millennials.

United Income is a bit pricier. It charges 0.5% of assets a year for robo-only management and 0.8% for a “concierge service” with access to a personal financial advisor. And it doesn’t recommend annuities. Why not? Fellowes says fewer than 10% of his customers face an “essentials gap”—meaning their basic living expenses aren’t covered by Social Security and pensions—and he views bond ladders and other low-risk investment strategies as a more cost-effective method than annuities to fill such a gap.

How big a role annuities will ultimately play in Boomer retirements is still unclear.

What is clear, however, is that digital money management is not just for Millennials anymore.

In fact, the bigger challenge for Kindur, United Income and the inevitable similar startups to come may be that Boomers will simply opt to get their robo-advice from the established financial companies that helped them build their nest eggs in the first place.

Charles Schwab & Co.’s robo-human hybrid advice service, Schwab Intelligent Portfolios Premium, launched in 2017. It includes spend-down advice and costs just $300 up front, plus $30 a month. So far, two thirds of users are 50 or older.

And then there’s the blue whale of robo-human hybrids: Vanguard’s Personal Advisor Services, which launched in 2015 and charges 0.30% of assets (and less for those with $5 million or more under management).

 The Vanguard service not only allocates clients’ investments, but also offers advice on claiming Social Security and how much (and from which accounts) clients should spend in retirement. So far, 85% of Personal Advisor’s users are 50 or older, and it has grown to $130 billion in assets under management—way more than all the robo startups combined, no matter what age clients they serve.

I’m an associate editor on the Money team at Forbes based in Fairfield County, Connecticut, leading Forbes’ retirement coverage. I manage contributors who cover retirement and wealth management. Since I joined Forbes in 1997, my favorite stories have been on how people fuel their passions (historic preservation, open space, art, for example) by exploiting the tax code. I also get into the nitty-gritty of retirement account rules, estate planning and strategic charitable giving. My favorite Forbes business trip: to Plano, Ill. to report on the restoration of Ludwig Mies van der Rohe’s Farnsworth House, then owned by a British baron. Live well. Follow me on Twitter: http://www.twitter.com/ashleaebeling Send me an email: aebeling@forbes.com

Source: Fintech Firm Solves Number One Retirement Fear

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