The demographic composition of the United States is undergoing a seismic shift. Life expectancy at age 65 is now 19 years, up 50% over the last several decades. As a result, there are over 50 million retirees in the United States today and that number is expected to grow to 72 million by 2035.
While the size of the US retiree pool continues to balloon, the infrastructure that has traditionally supported them financially is fracturing. Social Security, which is a “very important” source of retirement income for approximately half of retired or soon to be retired Americans, is forecasted to deplete cash reserves by 2033. Pensions and defined benefit plans, which provided support to 4 in 10 Americans at the peak of their prevalence, are now held by just 1 in 10 of the next wave of retirees (Americans age 50-64).
As guardrails falter, retiring Americans are currently unprepared to assume the burden of their extended retirements. Ten thousand Americans turn 65 each day and 1 in 3 baby boomers have $0 saved for retirement. Even among those who save, 58% rate the quality of their preparation at “C” or lower. Retirees are anxious about retirement and know that they need to do more to successfully manage their finances.
This is a large, important, and complex problem that has rightly drawn the attention of Entrepreneurs and Venture Capitalists for several years now. Several waves of solutions have come to market, and we believe Sagewell represents the next wave.
The first wave of innovation has been focused on preparation. Startup entrants and incumbents alike have worked to help middle-aged Americans (40-60), who are increasingly aware of the fact that they’ll need to support their own retirements, develop and manage more robust plans. Companies like eMoney Advisor support financial advisors who help their clients prepare while other startups like Silvur go directly to consumers. While small businesses and other employers are holding less retirement risk in the form of pensions and defined benefit plans, they are stepping up in other ways via startups like Origin to support retirement planning both directly and indirectly.
A next wave of startups is building new structured financial products to help seniors monetize assets they do have to fund and support retirement. The most significant asset to most seniors is their home. Several innovative companies have popped up to help seniors better utilize their home equity to fund retirement. At 25madison we helped launch Truehold, a startup focused on simplifying the sale-leaseback process. Other startups are focused on reverse mortgages, fractional home ownership, and more. Beyond the home, there are startups focused on monetizing asset bases via annuities.
We believe the third wave of financial solutions for older Americans will be focused on real-time navigation. Seniors need help funding retirement and managing their finances TODAY. Successfully doing so will require shrewdly cobbling together various sources of cash from income (work, social security), assets (401ks, pensions, home equity), savings (underutilized age specific benefits, health insurance), and loans. Market driven declines in financial service physical footprints, coupled with increased tech literacy amongst seniors due to the pandemic (AARP reports a dramatic increase in favorability towards technology and smartphone usage rates over the past two years) have softened the ground for a new and innovative digital solution.
Enter Sagewell Financial. Sagewell Financial is a retiree-centric digital banking and benefits platform that offers new financial products, access to experts, and a personalized service model designed to improve the lives of older adults. Sagewell’s proprietary offering, MyPaycheck, is a no-cost feature that offers an exclusive solution for retirees in the form of a familiar, bi-weekly paycheck that consolidates fixed-income streams (e.g. pensions, social security, annuities) and pays recipients their income early. Think earned wage access for fixed income.
Sagewell’s customer service model pairs each retiree with a dedicated, U.S. based, Retirement Advocate, who supports their banking needs, finds unclaimed savings, facilitates hassle-free insurance quotes, and helps protect against fraud. The company also provides access to trusted partners who can help assess home equity scenarios, create plans for “aging in place”, or support retirees looking to move across the country to start new chapters. Customers also have access to experts who specialize in Medicare, Social Security, and other topics important to older adults.
In the past we have written about the emergent viability of segment specific financial services. We see the Senior segment, with its unique user experience needs and distinct set of financial service offerings, as a solid fit for such a strategy. The US government generally relies heavily on employers as a last mile deliverer of personal finance behavioral nudges (W-2 construction, pre-tax benefits, employer healthcare enrollment). Seniors, being largely retired or non-traditionally employed, have suffered accordingly. They are subject to unnecessary fines (750k seniors paid Medicare Part B penalties tied to enrollment timing), leave benefits and money on the table (57% of Americans take Social Security before reaching the recommended retirement age) and make other poor financial decisions without these nudges. We see an opportunity to help seniors better manage their money, benefits, and retirements.
Sam Zimmerman and Jeff Wright, the founders of Sagewell, are the ideal team to execute on this vision. Sam is a product and engineering heavyweight with a successful track record of disrupting sleepy consumer financial services markets with novel user-focused products (Freebird, acquired by Capital One). Jeff has a deep understanding of the insurance industry through his time at Liberty Mutual, TrueMotion, and Plymouth Rock. Most importantly they are both supremely passionate about helping fixed income seniors and have spent years living and breathing the problems these users face via their personal lives.
At 25madsion Ventures we couldn’t be more excited to co-lead Sagewell Financial’s $5 million seed round with Primetime Partners and to also partner with PJC, SixThirty, TTV, and Clocktower Ventures to help Sam and Jeff continue to build their vision into a reality.
Building a new FinTech company and want to chat? Shoot me a note at Merrill@25madison.com