How Technology Is Transforming Retirement Preparation

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By Due. Originally published at ValueWalk.

Retirement Preparation

People often say it’s never too early to start when it comes to retirement planning. However, many individuals feel a bit taken aback by the overall process and find it overwhelming. Fortunately, just as technology has caused a revolution in many parts of society, it has similarly affected how people get ready for retirement. Here are some specific ways technology assists them and those specializing in financial planning.


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It Expands the Possibilities for Making Money

The internet has significantly broadened and altered how people can make their incomes. Someone only needs a good connection to find work they can do from home.

That might mean going onto an online job board and finding people willing to pay top dollar for your skills. It could also entail setting up an Etsy store, selling collectible items on eBay, or making small amounts of money by completing short, simple tasks for businesses. Many people pursue such possibilities because they want flexibility beyond what more conventional sources of income offer.

However, others use side hustles to help them put aside more money for retirement. Some freelancers charge $100 per hour or more, depending on their specialties and the market demand. If you take a freelance role, you’re most likely self-employed and will need to periodically submit tax payments rather than having them taken out of your earnings.

Earning money through a side project also gives you the freedom to capitalize on trends. Drone technology is one example of an area with numerous business opportunities. One market report expected this industry’s worth to climb from $8.5 billion to $12 billion between 2016 and 2021.

You could take advantage of that progressively increasing interest by starting a business related to drones, such as one offering aerial photography or security. Online technology could help by enabling you to promote the company to a wider audience.

Goal-Setting Helps Side Hustles Succeed

The most appropriate way to use the internet to make money to put toward retirement depends on numerous factors, including your interests and abilities and the amount of time you can spend on the endeavor. However, in any case, it’s best to set some parameters for how you’ll use what you earn.

You might decide that anything you earn on the side will go toward your retirement or that just a certain percentage will. Setting out those specifics from the start should help you stay committed.

Another thing to be aware of is that it often takes longer than a person expects to make a business profitable. That’s why you may want to look for side hustles with few or no expenses at first. Launching a product-based business will likely mean you need to budget for supplies, shipping costs, and other essentials. However, your costs will probably be substantially lower if doing something like copywriting or transcription tasks.

It Opens Opportunities for Automation

Automation is like the internet in that it has been a game-changer for many industries and consumers. People using automated email platforms enjoy features that sort incoming messages by priority, sender, and message type. The tools used by many businesses allow workers to move away from tedious manual tasks and spend more time on highly rewarding activities.

Automation is also starting to positively impact people interested in retirement planning and the professionals that assist them with it. However, it’s important not to view automated tools as replacements for humans but as additional options that might suit your retirement preparation needs.

Additionally, people should not think of automation as a “set it and forget it” option. Most algorithms running these solutions are incredibly advanced, but they’re not guaranteed to be error-free.

That’s why it’s smart to periodically monitor all settings and activities associated with financial automation. Then, you’ll have a better chance of catching anything amiss if it crops up. It’s also necessary to revisit any automated tools if your financial situation or goals change. Doing these simple things limits the possibility of surprises.

Auto-Portability Could Reduce Cashouts

Changing jobs could cut into your retirement savings, even if you don’t realize it at the time. U.S. federal law lets companies initiate mandatory distributions for people with retirement account balances of less than $5,000. Individuals have a set period to coordinate rollovers into a new employer’s plan in such cases.

However, that process can be prohibitively complicated. Research indicated that more than 54% of workers with account balances under $5,000 chose to cash out those amounts rather than roll them over. However, doing that incurs penalties and taxes.

People are increasingly advocating for auto-portability features built into employers’ retirement plans. In short, they would automatically transfer savings to new, active savings accounts in cases where the funds are subject to mandatory distributions.

Some financial experts also believe the blockchain could be instrumental in helping people track their retirement accounts. Blockchain-based solutions may not be automated themselves, but they could complement others that are. For example, a person could use a blockchain tool to verify that an auto-portability tool worked as expected and that their funds are in the correct account.

Robo-Advisers Provide Potential Investment Solutions

So-called robo-advisers offer another possibility. Research from 2021 indicated that 3.5 million adults in the United States would try them that year. First, the customers that use them fill out a survey. Then, automated tools make investment decisions based on that data. Brian Walsh, a senior manager of financial planning at SoFi Technologies, said, “I think there’s value humans provide. But on the investment side, I think robos have a huge advantage in being cost-efficient.”

Elsewhere, Vanguard polled 1,500 people to find out more about their loyalties regarding human-based and robo-advising methods. One of the survey questions asked participants to estimate their annual portfolio returns when using either a human adviser or an automated one. The people only using digital tools estimated returns of 24%. They also believed their returns would drop by 3% without using an automated advising platform.

The customers who’d hired human advisers estimated their returns at 15% and perceived a 5% value-add to annual performance if they had not received that input. The results also showed that only 7% of people with human advisers would consider switching to an automated-only solution.

It Provides Improved Visibility and Empowerment

Even as people remain aware of their retirement years gradually nearing, many don’t take the necessary steps to get themselves as prepared as possible. As a case in point, a U.S Department of Labor study found that only 40% of Americans had calculated how much they’d need to retire.

However, technology has made it extremely straightforward to figure out that all-important information with tools like free retirement calculators. These options vary slightly in how they work, but most give users an idea of how much they need to save per year to reach their goals by the time they retire.

Calculators and similar tools can help people become more decisive about the specific things they do to plan for retirement. That’s useful since not all methods are equally lucrative. For example, high-yield savings accounts average just 3% in returns, while the stock market’s returns are often higher over time.

Technology can help you make smarter financial decisions, even if you don’t plan to retire for decades. Some tools can track unusual changes in spending, such as if your cellphone bill is double the usual average amount. In such cases, you become alerted to possible issues so they don’t cause unforeseen problems. Other providers also sell specialized solutions that monitor for identity theft or other matters that could derail your retirement plans if left unchecked.

Chatbots Make Investing More Accessible

People often want to explore how investing could help them get closer to their retirement goals. However, they may fall short of those aspirations because investment opportunities seem out of reach. Some professionals in the retirement planning and investment world believe artificial intelligence (AI) and chatbots could break down some existing barriers. However, they wouldn’t necessarily make the automatic investment decisions like the previously described robo-advisers.

Some chatbots might take questions on behalf of professionals who provide retirement planning services and are looking for new clients. They are already well-established options for supporting an organization’s customer service needs.

Alternatively, they could provide answers to questions people might prefer posing to a chatbot. Employees at one retirement plan provider analyzed three years’ worth of questions customers asked the company’s chatbot. They categorized the queries to determine the most common reasons individuals utilized the service.

The results showed that matters related to 401(k) plans were the most frequent, which was somewhat of a surprise. Grant Easterbrook is a co-founder of Dream Forward Solutions, which offered the chatbot. He said, “We assumed a lot of the questions the AI would get would be around investing, financial concerns, and priorities. Actually, the complexities and headaches of managing your own 401(k) is a much bigger burden than people give credit for.”

Chatbots for Personal Banking and Budget Management

It’s increasingly common for banks to have chatbots for customers, too. Maybe you have a goal to set a certain percentage of your monthly earnings aside for retirement. You might also want to curb a certain type of spending, such as dining out or getting beverages in coffee shops.

Cleo is a chatbot that links with numerous popular banks. The tool lets you ask questions to keep your monthly spending on track. You could say something like, “Can I afford a meal delivery tonight?” The chatbot would respond based on your monthly budget and what’s left of it.

Sticking to a budget can help you form better financial habits that help with retirement preparedness and overall stability. Plus, chatbots make it easier to weigh the pros and cons of potential purchases, getting valuable visibility before those transactions happen. You might say, “I wish I would have realized beforehand that the outfit I splurged on would wreck my budget for the rest of the month.” Chatbots can prevent such scenarios.

These easy-to-use tools help people get budgetary recommendations and bank account visibility in ways that were not available before. They can feel more prepared for what will happen in their retirement years, even if that period of their life is still decades away.

Specialty Websites Help People Get Need-To-Know Information

It’s also important to recognize the impact technology has had on information accessibility overall. Before the internet was so widespread, people got retirement advice in person or by reading books. Those methods are still valid, but the online realm opens additional opportunities to learn and plan.

The internet gives people instant access to a gigantic assortment of information on any topic imaginable, including retirement preparation. Although users must learn to differentiate between reputable and faulty information, there’s no denying that the internet has had a tremendous impact on how and when people access content.

Someone could go on a site like Reddit and find firsthand perspectives from other individuals in similar situations trying various strategies to prepare for retirement. They might also decide to follow blogs from financial planning thought leaders or regularly visit websites that recommend hot stocks to add to their portfolio.

Technology can also help you narrow down retirement options on a more personal level. For example, maybe you’re interested in learning more about living in a continuing care retirement community (CCRC) as you age. Statistics indicate approximately 80% of these facilities are nonprofits. They usually provide three levels of care, ranging from independent living to total assistance with daily tasks. You might start researching which facilities have the amenities you want and offer desirable locations.

Online reviews from residents and loved ones can be beneficial for learning more about the experiences of living at one in your area or wherever you plan to retire. Similarly, maybe you’ve had your heart set on spending your golden years in another country. The internet provides a wealth of information about the cost of living, quality of health care, ease of immigration for retirees, and other specifics to help you learn about a future potential home.

It Helps Financial Professionals Market Their Services More Effectively

Technology has also greatly improved how people specializing in financial services and retirement planning promote their services to potential customers. Before the internet, people found out about options through word-of-mouth or maybe by opening the phone book.

The internet substantially changed that through websites and search engine listings. It only takes interested persons a few minutes to find advisers in their area and read about their experience and qualifications.

Advisers who use technology effectively are better able to market to different demographics. That’s crucial, especially since people start retirement planning at numerous stages of life.

One poll found that two-thirds of people from the millennial and Gen X generations have started planning for their retirements. That’s also true for 42% of the Gen Z population. The research also showed that people feel uncertain about the process regardless of age and need guidance. That sentiment opens possibilities for retirement planners to help. They’ll be best able to do that when they understand the needs of people from various age groups.

Study Shows the Pandemic Changed Tech Utilization for Advisers

Financial specialists have recently started viewing technology as essential for helping them meet clients’ expectations, especially during the COVID-19 pandemic. A study from Vestwell revealed that 85% of advisers were putting a bigger emphasis on technology to run their businesses.

While commenting about the study, Adam Schumm, Vestwell’s CEO, said, “In a lot of ways, the pandemic served as a tipping point for the industry. Advisers realized that they needed to adapt to the changing times by using tech, while personal finance and retirement became a hot topic amidst the pandemic, making it a perfect storm for the industry.”

Another finding from the study was that 45% of advisers found social media more effective now than in previous years. Plus, 25% said it was their most effective way of reaching out to customers. Brian Guerra, Vestwell’s vice president and head of marketing, explained that social media offers mutual benefits.

“When it comes to an adviser and their practice, it’s a two-way street: Advisers use tools like LinkedIn to find leads, and leads use these tools to vet and learn about advisers. And I don’t think we’re at a plateau yet ⁠— advisers know social media is important, but not all have fully leveraged it yet. Those who are able to incorporate it into their practices effectively will definitely have a leg up,” he said.

How Will Technology Help You Plan to Retire?

The examples here show you have no shortage of options when thinking about how you’ll apply technology to your retirement-planning efforts. If you’re already familiar with using technology in everyday life, seeing how it aligns with your retirement goals could help you feel more in control of your future.

Alternatively, if you don’t consider yourself tech-savvy currently, that’s no problem. Consider starting small, such as by using a retirement calculator or a budget tracker. Once you become accustomed to how those work, you’ll likely feel more confident about expanding your adoption of technology.

It’s important to remember that technology will undoubtedly keep transforming how people plan for retirement. Staying abreast of that continual progress can help you gauge which new solutions might be most valuable for you and your financial goals now and into the future.

Article by April Miller, Due


About the Author

April Miller is a writer, editor, and avid ongoing learner. Particularly, April is passionate about helping people learn how to use technology to save money, find financial opportunities, work smarter, plan for retirement, and live their best lives.

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