Struggling to pay off your student loan debt? According to statistics from the Federal Reserve, Americans owe more than $1.4 trillion in student loan debt. That’s nearly double the amount Americans carry on credit cards. More than 40 percent of Americans have student loans, and 11 percent of them are in delinquent status on those obligations.1
If you’re dealing with student loans, you may not be focused on other financial goals such as retirement. If you have years or even decades until retirement, it may not seem like an urgent priority. Your student loans might consume much of your focus.
You could be making a big mistake by ignoring retirement, though. Retirement may be years away, but it’s also a sizable financial challenge. You may need to fund decades of living expenses in retirement. That kind of financial challenge requires a substantial amount of savings.
The only way to accumulate the necessary level of assets is to start saving as soon as possible, even if you’re still paying for student loans. Fortunately, with careful planning, you can tackle both objectives. Below are a few tips to help you do so:
Stick to a budget.
According to a recent study, nearly 60 percent of Americans don’t use a budget, even though it’s a highly effective financial tool.2 You can use it to inform your spending decisions and monitor your progress toward your goals. Without a budget, it’s hard to know whether you’re on track.
Your budget may illuminate poor spending habits, like spending too much on discretionary items such as travel or shopping. You may find that your debt level is holding you back. Cuts in those areas may give you the extra money you need to put toward retirement while you’re paying off your student loans. Plenty of apps and software can help you budget, but a spreadsheet or pen and paper can also be effective.
Take advantage of your employer’s 401(k) match.
Employer-sponsored 401(k) plans can be very effective retirement savings vehicles because they offer an easy savings mechanism and tax-deferred growth. And they can be especially effective if your employer offers a matching contribution. Many employers will match up to a certain percentage of their employees’ contributions. For example, your employer may match contributions up to the first 3 percent of your salary.
Find out your employer’s matching policy, and then contribute at least enough to get the full match. Those matching funds could substantially increase your savings rate. They could even double your retirement contribution amount. That’s an easy way to save more money without impacting your budget.
Put your savings on autopilot.
Many people struggle to save for retirement because they choose to allocate their funds toward other goals. They may think that other bills, such as student loans, are a more urgent priority. A helpful strategy is to remove choice from the process and make your savings automatic. Consider savings to be a mandatory expense, like utilities or your mortgage.
Automate a contribution from your paycheck or bank account to your IRA. You may notice the hit to your budget at first. Over time, however, you will likely adjust your spending to accommodate the contribution.
Ready to develop your retirement savings strategy? Let’s talk about it. Contact us today at Benefit Resource Partners. We can help you analyze your needs and implement a plan. Let’s connect soon and start the conversation.
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17601 – 2018/4/19