Human Interest — a 401(k) provider — just rolled out a cashback incentive program which gives savers up to $250 back. This represents a first-ever offering enabled by the changes enacted by the SECURE 2.0 Act, a spokesperson said.
The new offering aims at incentivizing workers to start saving for their golden years and “fits into a larger movement focused on hourly and lower-income workers,” according to a spokesperson.
The program offers a 3% cash back reward to participants who start saving for retirement and is valid for individuals who enroll in a 401(k) or 403(b) plan sponsored by their employer as administered by Human Interest.
To be eligible, participants must earn $60,000 or less and make a payroll contribution to the plan between June 1, 2023, and January 1, 2024. They must also set their total contribution rate at 8% or more for a year, according to the Human Interest website.
Human Interest’s new program became possible thanks to a provision in the SECURE 2.0 Act, which Congress passed in December 2022. Now, employers may offer low-dollar incentives, such as gift cards, to “boost employee participation in workplace retirement plans,” according to the text of the act.
“We see the urgent need for more working Americans to save for retirement,” Jeff Schneble, CEO of Human Interest, said in a press release. “We are using the same rewards model that people enjoy in their daily lives, akin to cash back credit cards, to encourage employees to actively save for a healthy retirement. That is why we are now the first and only retirement provider to offer a cash back program to incentivize individuals to save.”
According to the spokesperson, among Human Interest’s clients, 35% of workers don’t currently save for retirement.
This is in line with other findings, such as a recent Allianz survey, which noted that 40% of Americans say they don’t have a financial plan for retirement and will just figure it out when they get there. In addition, 56% said they don’t know where to start planning beyond having a basic retirement account such as a 401(k) or IRA.
Incentives for Enrolling in Retirement Plans a Net Positive
Finally, while many employers offer matching contributions, some experts say that these types of additional incentives might push workers to start a retirement plan. However, it might be too early to tell.
“Incentives for enrolling in retirement plans are a good place to start,” said Jay Zigmont, founder of Childfree Wealth. “It reminds me of Robinhood’s 1% match on IRAs. Fintech and financial companies are trying everything they can to make retirement savings more accessible. We just don’t know which efforts will work.”
Zigmont added that more than half of Americans are living paycheck-to-paycheck, and that is before student loans are set to restart.
“If they don’t have enough money to pay their regular bills, saving for retirement is just a dream. I am most interested to see companies adopting the other provision from SECURE Act 2.0 that allows them to match student loan payments,” he said. Zigmont added that under said program, employers can match someone’s student loan payment just as if they had made a 401(k) contribution.
Human Interest’s Schneble told The Wall Street Journal that the company will likely continue the incentives, if they prove effective.
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