spot_img
Thursday, October 3, 2024
HomeINVESTINGHow to keep saving for retirement when student loan payments restart

How to keep saving for retirement when student loan payments restart

-


Francisco Javier Ortiz Marzo | Istock | Getty Images

In a month or so, millions of Americans will have to adjust their budgets to once again put hundreds of dollars a month toward their student debt.

Their retirement savings may suffer as a result, experts warn.

“Workers are already facing obstacles to saving for retirement, especially inflation and market volatility,” said Adrian Miguel, director of advice at Schwab Retirement Plan Services. “The resuming of student loan repayments poses another challenge.”

Before the pandemic-era pause on federal student loan payments, which has now been in effect for over three years, research showed the debt was making it harder for borrowers to salt away money for their old age.

More from Personal Finance:
81% of full-time workers want a 4-day work week
How much people really tip post pandemic
Why Americans are struggling with car loans

Around a third of employees who had student debt were not contributing to a workplace retirement plan for which they were eligible, according to findings by Fidelity. The share of student loan borrowers saving at least 5% of their salary in their 401(k) retirement plan swelled to 72% during the payment pause, from around 63% prior to the Covid-19 pandemic.

“The payment pause is the first time that many borrowers received any sign of relief since they took on their loans, which for some could mean 10 or more years,” said Jesse Moore, senior vice president and head of student debt at Fidelity Investments.

Experts shared tips on how borrowers can pay down their student debt and keep growing their retirement nest egg.

‘Every little bit helps’

It’s understandable to be eager to get out of debt, but if you delay saving in favor of accelerating your student loan repayment, you’ll miss out on the decades of compounding growth it takes to accumulate a healthy retirement savings. In fact, the younger you begin saving, the less you need to put away each month to meet your retirement goals.

“Remember, every little bit helps,” Moore said.

Starting in 2024, many companies will start to offer retirement match contributions when employees make their student debt payments.

“Be sure to check in with your employer on any updates to your benefits,” Moore explained.

Try to get full employer match

Paying down your debt is a form of saving, said Boston University economist Laurence Kotlikoff. That’s because it’ll free up more money for you down the road.

“So don’t worry excessively about saving less in the short term” for retirement, Kotlikoff said.

At the same time, you want to at least contribute enough to your workplace retirement account to get your employer’s full match, if they offer one, he said. The most common matching formula is 50 cents for each dollar contributed by the employee, up to 6% of pay, according to research from the Plan Sponsor Council of America.

You won’t be able to get that kind of return anywhere else, experts say. If you don’t contribute, you miss out on those matching dollars.

Consider lifestyle changes



Source link

Related articles

LEAVE A REPLY

Please enter your comment!
Please enter your name here

Stay Connected

0FansLike
0FollowersFollow
3,912FollowersFollow
0SubscribersSubscribe
Trump campaign reports raising more than  million after Georgia booking

Latest posts