Saving for retirement is essential for the accumulation of wealth and financial equality. Fintech makes it simple for SMBs to offer 401(k).
Attracting and keeping fintech staff is a primary goal in the wake of The Great Resignation. Therefore, after health insurance, the second most common perk provided to recruit talent is retirement benefits.
State and local government regulations also increase interest in 401(k) programs. More than a third of small firms that do not already offer 401(k) plans aim to do so within the following year. It’s becoming a social responsibility for small businesses.
A 401(k) retirement plan is also a strategy to protect workers’ financial well-being while simultaneously providing a tax advantage to businesses and employees.
However, traditional 401(k) providers avoid marketing to small enterprises since the market is unprofitable. Despite this, the great majority of businesses have less than 20 workers.
Penelope is a 401(k) platform that provides a cheap and simple solution for small companies to offer retirement benefits. Therefore, it is assisting small firms through The Great Resignation’s obstacles. At the same time, its CEO and creator, Jean Smart, is dealing with her own set of issues.
Meet Jean Smart
Smart is a co-founder of Chief, a private network for powerful women executives. She joined a peer-advisory network of female entrepreneurs and corporate leaders who have similar interests and concerns and collaborate to solve problems. One of Smart’s peers has already attained unicorn status with a billion-dollar value.
Smart has previously worked for Citi, Charles Schwab, TD Ameritrade, and, at the time, UBS. Consequently, she worked on 401(k) programs, employee stock options, and financial wellness for institutional employees. Smart began building her own company plan after being inspired by the female entrepreneurs in her Chief group.
Smart is the daughter of Korean immigrants who operate a grocery business and a restaurant. She saw her parents making sacrifices to support their children and workers but failing to prepare for retirement. They are vulnerable in their latter years since they did not save. With one in every four Americans lacking retirement funds, Smart’s parents represent an all-too-familiar narrative in the United States — equal parts inspiration and cautionary tale.
Smart is a Gen-Xer who has been told her whole life that we would run out of Social Security. For many Americans, Social Security is a critical source of retirement income. However, its funds are running short. Therefore, according to projections, the Social Security Administration will lower retirement payments beginning in 2034.
Smart’s personal and professional history led her to believe she was the best person for the job.
Smart said that she wished to work in the areas of fintech, education, and inclusive capital. She wanted to shatter the myth that there was a fast way to get wealthy.
Investing consistently in a 401(k) was the best method to save for retirement. She groaned. The fact is that communities build money over decades. It does not happen quickly, and it takes individuals 20, 30, 40 years of hard labor before they have enough money to pass on [to loved ones].
She wanted to devise a method for setting it and forgetting it.
Smart believes that enterprises with less than 20 workers, which constitute most small businesses, need assistance. Women, minorities, and immigrants own many of these enterprises. Therefore, fintech expedited procedures, simplified paperwork, and assisted her in cutting expenses. The method was to use a self-service company model, making it feasible for small firms to give retirement benefits to their workers.
However, making things simple is difficult, according to Smart.
There are around 50 to 60 thousand funds to pick from. Chief provides ten. The disadvantage is that there is no personalization.
An inexpensive subscription model called Penelope will automatically scrutinize the investments of employees. Therefore it simplifies red tape and eliminates PEP plans to function as they should.
Penelope is a user-friendly, cloud-based 401(k) program that debuted in January. There is no 30-to-40-page paperwork with a sophisticated language, and the material is concise, to-the-point, and written in clear English.
Finally, because various people have different learning methods, we gain knowledge in the form of text and FinTok videos.
Timing is important.
More and more states and municipalities are requiring firms to give benefits at retirement. Colorado, Oregon, California, Maryland, Illinois, Connecticut, New York City, New Jersey, Virginia, Seattle, and Maine are among the states that have done so.
The rules and laws differ based on where your company operates.
During The Great Resignation, Smart declared, we’re all trying to obtain the best personnel. However, she depends on references and, thankfully, she is well connected.
Her workers could surely earn more money working for bigger corporations than for a startup. Smart, on the other hand, stresses the company’s mission. She finds the notion that we are mission-driven incredibly appealing. It’s hitting home, not only with professionals in their twenties and thirties but also with those in their forties, fifties, and even their eighties.
Penelope was advised by Ted Benna, widely recognized as the “founder of the 401(k).”
According to Benna, providing a 401(k) was out of reach for many individuals because it was too pricey, too complicated, too full of jargon, and too time-consuming. Penelope offers simple solutions to comprehend and make financial sense for small businesses and startups.
Smart’s transition from a well-resourced attitude to a resource-constrained company has been a steep learning curve. You’re starting from scratch, she said. You make a lot of errors. However, you must be open. You must be an adaptable leader, and there are methods to increase your flexibility. It’s exhilarating after you’ve done it.
Consequently, Penelope has secured $2.1 million in pre-seed funding sponsored by Slauson & Co. Amplify LA, Black Jays, and officials from Wells Fargo, Citigroup, and U.S. Bank are among the other investors.