84% of borrowers or 8 in 10 adults with student loans say that loans are tanking their retirement savings. This according to a report on the impact of student loans by the MIT AgeLab, sponsored by TIAA.
Are you one of those borrowers? One in four Americans has student loan debt. And, three out of four (73%) of borrowers report they are putting off maximizing their retirement savings. They say they expect to begin or increase their contributions once their student loans are paid off.
It’s not just the young student—borrowers of all ages are making financial sacrifices to repay student loans.
40% of borrowers with loans for themselves have reported never having spoken with their family about their student loans. So, it’s important to discuss what a student loan is and the potential ‘payback’ amounts after college. There are two critical times to have this family discussion:
- Before your child chooses their course of study and heads off to college.
- Just before your child graduates and begins looking at job opportunities.
We acknowledge that the subject can be complex. So, here’s a link to help with the conversation: https://studentaid.ed.gov/sa/types/loans. This site offers answers to many common questions.
If you’re someone who’s been putting off or stopped funding your retirement, remember, you can’t really borrow for your retirement needs. While it’s tempting to put all you have toward that student loan debt, it’s also important to learn more about whether or not it’s best for you to pay-off the debt while you save for your future.
Here are two important areas to save along the way:
- Emergency reserve cash account: equal to 3 to 6 months of your monthly expenses.
- Retirement savings plan: Get into a habit of paying yourself first. Not, of course, at the expense of your basic needs. But, even an amount from 1% to 3% of your income can, over the long-term, make a difference in your retirement.
For both you and your kids, understanding the huge benefit of automating your savings is a critical piece to success. Because the advantage of time and something called dollar-cost-averaging (investing regularly through a payroll deduction) is what we’d call nothing short of amazing! And, one of the most effective ways to save.
If you still aren’t sure how you’ll find the money to save, spend the time now to create a simple spending plan. Email us at email@example.com for our free White Paper on How to Create a Spending Plan.
For more on this topic visit:
Lenity Financial, Inc. – College Costs – Facts & Tips
TIAA – MIT AgeLab Study
Important Note:. Please note that nothing in this post should be construed as an offer to sell or the solicitation of an offer to purchase an interest in any security or separate account. Nothing is intended to be, and should not be taken to be, investment, accounting, tax or legal advice. If you would like investment, accounting, tax or legal advice, you should consult with your own financial advisors, accountants or attorneys regarding your individual circumstances and needs. No advice may be rendered by Lenity Financial, Inc. unless a client service agreement is in place.