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Client Service April 16, 2024
NewRetirement, With $20M In Hand, Seeks Workplace Partners
A "turbotax" for retirement is leveraging recent funding to get deeper into the workplace financial wellness market.
Reported by Alex Ortolani
When financial entrepreneur Stephen Chen stepped in to help his mother with her finances, he had a light bulb moment: here was a person who had had a successful career as a white-collar worker, owned a home, and had retirement savings—but she still wasn’t in a position to hire a financial adviser to help her manage her future. And she wasn’t alone.
Chen and his brother ended up digging in to help their mother by building spreadsheets to tackle issues such as when to take Social Security, how to manage home equity, how to balance healthcare expenses before Medicare kicked in, and various other questions. In thinking about other Americans likely going through the same experience, he had an idea to create a financial planning system.
Stephen Chen
“There over 120 million Americans who are over age 50 in this country, and they have 80% of the money, but none of them, invariably, know how much money they need in retirement,” he says. “We’re trying to answer those questions of, are you okay? What are the decisions you should make and when?”
Chen founded his company, NewRetirement, in 2005. Today, roughly 300,000 people have signed up for the consumer version, about 70,000 are actively reusing it, and about 23,000 pay for monthly premium services. But more than half of NewRetirement’s business comes by being a white label or co-branded product for recordkeepers and registered investment advisories, according to Chen, with a recent push to working with plan sponsors directly.
In 2021, Nationwide started using NewRetirement to power a financial and retirement planning program on its recordkeeping platform to its more than 2 million participants. NewRetirement is also partnered with RIAs as a white label platform, with one of its largest partners overseeing $6 billion in assets.
This March, the San Francisco-based startup snagged a Series A fundraising round of $20 million led by Allegis Capital and including insurer investment divisions Nationwide Ventures and Northwestern Mutual Future Ventures. It’s a major boost to the firm, with the announcement noting a current funding level of $20.8 million.
It’s also fueling Chen and the team to reach more potential partners. The consumer-facing product “is the lab in terms of how we prove that this works,” Chen says. He believes NewRetirement is a compelling workplace benefit for a plan sponsors or the advisers that work with them as it can be an affordable financial wellness offering; he says the firm is in talks with one major such employer, with an announcement to come soon.
“The cost of a financial planner, on average, is $2,500,” Chen says. NewRetirement is “$10 a month retail, and it can be way cheaper at scale.”
But Chen argues that one of the unique elements of NewRetirement is that it is not pushing users to a wealth management product or specific investments. He also touts the technology behind the platform that runs “thousands of scenarios” on a person’s financial information to do accumulation and decumulation planning. Once the user adds their inputs, they can consider everything ranging from savings and investment to pensions, Medicare, Social Security, home equity, taxes, estate planning and other relevant areas.
“Everything hangs together,” Chen says. “People can create their own scenarios, such as ‘what if I sell my home and move to Florida?’ Or, ‘what if I want to retire early?’ A lot of the users will game stuff out just to see what’s possible.”
Correction: Fixes number of active and paying users.
