Automated Debt Payment Allocation System for Retirement Savings

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Solution Overview

Problem

The growing student loan debt burden in the United States hinders individuals' ability to save for retirement, as they often prioritize debt repayment over retirement contributions, leading to potential retirement insecurity and increased economic challenges.

Innovation Solution

A computer-implemented system and method that automatically allocates a portion of periodic debt payments between a debt obligation and a savings fund, leveraging behavioral finance concepts to simplify the process and encourage retirement savings by automatically redirecting funds from loan repayments to savings accounts, such as 401(k) contributions, while adjusting based on interest rates and tax impacts.

Engineering Contradictions & Design Principles

VSEngineering Contradiction Analysis

1Reliability

If individuals prioritize debt repayment over retirement contributions, then debt obligation is reduced, but retirement savings capability deteriorates

Engineering Contradiction:

Improvedebt repayment reliabilityVSAvoidretirement savings amount

Core Design Contradiction:

ReliabilityVSQuantity of substance

Solution Approach 1:

The system segments the periodic payment into two distinct portions: a debt service portion applied to loan repayment and a savings portion automatically transferred to retirement accounts. This segmentation allows simultaneous progress on both debt reduction and retirement savings without requiring manual allocation decisions from the user.

Inventive Principle:

Principle #1Segmentation

Solution Approach 2:

The system performs preliminary action by automatically allocating the savings portion of each payment to retirement accounts before the user can change their mind or spend the money. This pre-emptive transfer overcomes the typical sequence where debt payment is made first and savings is an afterthought, ensuring retirement contributions are secured in advance.

Inventive Principle:

Principle #10Preliminary action

2Adaptability or versatility

If manual allocation of payments between debt and savings is implemented, then flexibility is maintained, but user effort and complexity increase

Engineering Contradiction:

Improvepayment allocation flexibilityVSAvoiduser effort required

Core Design Contradiction:

Adaptability or versatilityVSEase of operation

Solution Approach 1:

The system implements self-service by automatically performing the payment allocation without requiring ongoing user intervention. Once the user sets their preferences for debt-to-savings allocation ratios, the system autonomously divides each periodic payment according to those preferences, adjusting automatically as debt balances change or user preferences are modified.

Inventive Principle:

Principle #25Self-service

Solution Approach 2:

The allocation structure is dynamic rather than static. The system automatically recalibrates the split between debt service and savings portions based on changing conditions such as remaining debt balances, interest rate variations, and updated user preferences, maintaining optimal flexibility without requiring manual reconfiguration.

Inventive Principle:

Principle #15Dynamics

3Reliability

If automatic payroll deductions for student loans are implemented, then payment consistency is improved, but retirement savings opportunity is reduced

Engineering Contradiction:

Improvepayment consistencyVSAvoidsavings potential

Core Design Contradiction:

ReliabilityVSQuantity of substance

Solution Approach 1:

The system merges two previously separate functions into a single integrated payment process: automatic debt repayment and automatic retirement savings contribution. By combining these functions, the system maintains the payment consistency benefits of automatic deduction while simultaneously capturing savings opportunities that would otherwise be lost to manual intervention delays or oversights.

Inventive Principle:

Principle #5Merging (Combining)

Solution Approach 2:

The payment deduction system becomes multi-functional, serving both debt service and retirement savings purposes through a single automated mechanism. This universal approach eliminates the need for separate manual processes for each function, ensuring both payments are made consistently while maximizing savings potential from the same payment stream.

Inventive Principle:

Principle #6Universality (Multi-functionality)

Data Source

PatentUS11138577B2System, method, and computer program product for automatically managing periodic debt payments and savings contributions

Publication Date: 2021.10.05 COREBRIDGE FINANCIAL INC

AI summary

Systems, methods, and computer program products for automatically managing periodic debt payments and savings contributions are constructed to determine an allocation structure for each periodic payment between a debt obligation and a savings fund via a non-transitory computer-readable medium including a payment management program, a benefit management processor, and a data storage device in operable arrangement therewith. The payment management program includes a payment allocation module having a computer executable allocation code segment configured to apportion the payment election into a debt portion and a savings portion and a fund disbursement module having a computer executable disbursement code segment configured to electronically disburse the debt portion of the payment election to the lender in a periodic manner according to a loan repayment schedule and to electronically disburse the savings portion to the savings account of the lendee in a periodic manner according to a savings contribution schedule.