Savvly, The Private, Market-driven Social Security Of Your Future

In our previous articles, we explored the features and limitations of existing retirement planning options and introduced Savvly as an innovative solution to complement those options and bridge the current gaps for late-life financial security. Now, let’s dive deeper into the concept of “Private Social Security” and why it’s so important.

The American financial landscape is shifting, with prevailing retirement saving and planning norms no longer aligning with the changing realities faced by many. Social Security is facing long-term financial challenges due to an aging population, decreasing birth rates, and rising life expectancy. The program relies on payroll taxes from current workers, and as the ratio of workers to retirees decreases, there may not be enough funds to sustain the program in the future - unless the government steps in. 

According to the University of Vermont, the ratio of workers to retirees will decrease from 3:1 to 2:1 by 2050. The minimum age to qualify for Social Security may also increase along with the rising pressure on the system. Social Security may only be available to those who show the need for it in the future.  In this context, Savvly’s Private Social Security emerges as a compelling solution. By offering a private pension separate from an employer and the Government, Savvly can provide individuals with reliable late-life payouts during their late retirement years. Unlike the traditional Social Security system, which relies on government funding, Private Social Security is market-driven, allowing participants to benefit from the potential growth of their investments, and it’s designed to be always solvent.

Through a private pension pool, participants can make modest investments (say, 5-10% of their retirement assets maximum). Investors with Savvly may be able to retire early and earn multiple late-life payouts that can be used however investors see fit.  Investors can live with the peace of mind that they will receive payouts in the future and won’t be a financial burden to their family. Plus, Savvly incorporates tax efficiency, optimizing returns for investors and their heirs.

Why would anyone decide to invest a small fraction of their money in Savvly rather than on their own? Because if this person lives a long life, with Savvly they are protected. In fact, the Savvly pension pool is designed to exceed the market return for those participants who live the longest. In fact, a unique and valuable aspect, called the “Savvly bonus” allows for additional returns above those achievable by markets alone via a pension pool mechanism that rewards clients who live the longest. That is exactly what happens with Social Security: retirees who live the longest receive more income than those who pass away earlier.

One of the key advantages of Savvly’s Private Social Security, is the ability to optimize a small portion of assets, so investors pair it with their existing retirement products such as annuities and their investment portfolio. 

While the U.S. system provides a safety net, it’s not always sufficient to meet the financial needs of retirees. By incorporating Savvly, individuals can enhance their retirement plans, fill the gaps left by traditional options, and secure their financial future.

For example, let’s assume my sister, Betty, who is 50, decides to invest $100 a month in Savvly for 5 years which invests in the stock market.  Her friend Tiffany, who is the same age, invests the same amount of money alone. Starting when Betty is 80, she can receive payouts every 5 years from Savvly.  Tiffany plans to take out the same amount as Betty receives payouts.  The estimated Savvly payouts for Betty are $27K, $39K, $61K, and $92K (assuming an 8% market growth rate and no significant changes in life expectancy)*.  Tiffany takes out $27K, then can only take out $31K before her investment runs out. With Savvly, Betty earned around an extra $161K and received payouts up until when she was 90 years old when she needed it the most.

However, the path to innovative retirement solutions is not without barriers. The emergence of new products has been relatively limited due to regulatory constraints and a lack of resources. Fortunately, advancements in technology and significant industry experience have opened avenues Savvly to offer novel and effective solutions previously unattainable, providing certainty for a more secure and prosperous retirement future.

Interested in learning more about Savvly? Visit Savvly.com or reach out to me at dario@savvly.com. Secure your financial future with Savvly and pave the way for a prosperous retirement journey!

PS: I would like to thank the Techstars and AARP Collaborative team for their support, and  Gary Mettler , Bruno Caron, David Blanchett,  Jeff Leonard , Allen Steinberg, Michael Sowa, CFA, FRM, CAIA, Michael Hughes, Tony (Antonio) Derossi, Paul Tyler, Marc Glickman, FSA, CLTC and many, many others for the numerous discussions about the value prop of Savvly combined with other products.

* What if life expectancy goes up by, say, eight years? If that is the case, the government will probably raise the minimum Social Security age, you will most likely retire later, and Savvly’s payouts should be scheduled later.