Goldman Sachs is entering the small and medium-sized online retirement plan space through its acquisition of Austin, Texas-based Honest Dollar, a one-year-old startup.
The investment management division of Goldman Sachs is buying the Web- and mobile-based retirement savings platform to better serve individuals who either work for themselves or who work for companies that have traditionally been too small to offer workers a 401(k) or other workplace-sponsored retirement plan.
The company estimates that there are 45 million people in the U.S. who don’t have access to an employer-sponsored retirement plan.
“Honest Dollar has created a simple solution to a complex retirement savings problem,” said Timothy J. O’Neill and Eric S. Lane, co-heads of the investment management division at Goldman Sachs, in a statement. “Together, we have the potential to help millions of people achieve their investing goals.”
Honest Dollar offers employers two types of plans, the basic plan, which offers employees access to individual IRAs; or the flexible plan, which offers the same features as the basic plan but allows employers to define eligible employees for participation in an employer-sponsored Simplified Employee Pension Individual Retirement Account (SEP IRA). It also offers self-employed individuals access to either a Roth IRA or SEP IRA. Last November, the company reached a deal to provide Lyft drivers access to its plans.
Individuals answer questions online about the types of investments they are interested in and based on that they are funneled to either a Roth or a SEP IRA. Like most companies that have entered the online retirement plan space recently, Honest Dollar says that its platform is easy and quick to use.
Honest Dollar and Goldman Sachs did not respond to a request for comment.
Quote“We set out with a singular focus: to revolutionize the retirement industry and reach individuals who historically have been underserved."
With the acquisition, Goldman Sachs joins companies such as Betterment, Ubiquity and Captain401 that also have online platforms targeting the retirement space.
"We're excited about the growing interest in and variety of new technologies for retirement plans," says Roger Lee, co-founder and CEO of Captain401, a company based in San Francisco that uses technology to make it easy for small employers to set up and administer 401(k) plans. "There's an enormous opportunity to help more people save for the future, and we believe this is just the beginning."
According to Honest Dollar’s website, the company plans to offer the ability to contribute to SIMPLE IRAs, which allow contributions up to $12,500 and would allow employers to match 2-3%, in the future.
The Honest Dollar plans invest in four low-cost Vanguard exchange-traded funds: Vanguard Total Bond Market ETF, Vanguard Total International Bond ETF, Vanguard Total Stock Market ETF and Vanguard Total International Stock ETF.
“We set out with a singular focus: to revolutionize the retirement industry and reach individuals who historically have been underserved,” said William Hurley, CEO of Honest Dollar in a statement. “We look forward to being part of Goldman Sachs as we drive innovation across this space together.”
The acquisition is expected to close in the second quarter of 2016 and Honest Dollar will remain in Austin upon completion of the transaction. Terms of the acquisition were not disclosed.
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