Goldman Sachs’ Investment Management Division announced Monday that it will acquire digital retirement savings platform Honest Dollar for an undisclosed sum. The Austin, Texas based startup brought its platform live just last summer with the goal of providing small- and medium-sized businesses with an affordable 401(k) alternative.
Approximately 45 million Americans do not have access to an employer-sponsored retirement plan, according to a Goldman Sachs GroupGS -0.29%release announcing the acquisition. This massive savings gap is due in large part to the high cost–both in time and money–of offering such plans. Honest Dollar says its individual retirement account-based program can cost as little as $8 per employee per month and that employers can sign up in just 90 seconds.
“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.
The platform recommends one of six portfolios to each employee, based on his or her answers to questions during the sign up process (which the company says takes 60 seconds). The portfolios are made up of four Vanguard ETFs, which are known for being low cost. Like with an IRA opened independently, employees can contribute up to $5,500 to an Honest Dollar IRA pre-tax ($6,500 if they are over 50 years old). With an 401(k) the contribution limit is $18,000.
“Honest Dollar has created a simple solution to a complex retirement savings problem,” noted Timothy J. O’Neill and Eric S. Lane, co-heads of Goldman’s investment management group in the same release. “Together, we have the potential to help millions of people achieve their investing goals.”
Honest Dollar is one of several startups looking to upend the traditional employer-sponsored retirement business. Among the most visible has been New York-based Betterment, which in September announced it was moving beyond retail accounts into 401(k)s, with a platform that incorporates investment advice and seeks to be a less costly alternative to traditional plans.
Goldman, for its part, has made a number of investments in financial technology startups, including financial data provider Kensho, lender OnDeck and broker Motif Investing.
Goldman expects the deal to be finalized in the second quarter on 2016. Terms of the deal were not disclosed.