Does the debt from your student loans bog you down?
Do you worry that paying them off will delay saving for retirement? Or even worse, force you to save less than you should?
Worry no more, because there’s a new solution behind the scenes in Washington D.C. that will help you out of your funk.
Now, trust me I know, you can’t trust the government to fix your money problems.
But with this new bill circling Congress’s floor, I’m going to tell you how to pay off your student loans while saving for retirement AT THE SAME TIME.
Talk of retirement savings often pops up in the same conversation bubbles as the growing problem of student loan debt in the United States.
Americans owe over $1.56 trillion in student loan debt.
That crippling number takes the wind out of anybody trying to be optimistic about setting aside a little money here and there for retirement.
When the monthly bill for student loan repayments comes to sock you in the gut, you shouldn’t have to jeopardize your salary reduction contribution, or the money you put into an account like a 401(k).
On that note, nearly one-third of baby boomers had no money saved for retirement at an average age of 58.
If you’re on schedule to retire, that leaves less than 10 years to set aside your target goal for retirement funds, which most marked at around $100,000 to $250,000.
So, you’re probably wondering how to navigate paying back your loans while contributing enough to a retirement account to generate a quarter of a million dollars.
What if I told you that payment could be the same one?
In December of 2018, Senator Ron Wyden proposed the Retirement Parity for Student Loans Act.
It has since grown into the Retirement Enhancement and Savings Act, or RESA, with a counterpart making its way through the House of Representatives under the name Setting Every Community Up for Retirement Enhancement Act, or SECURE.
But why should you care about these bills?
Currently, the IRS allows certain companies to perform this service for their employees on a permission basis.
A laboratory company in Illinois was the first to request this payback program, and they now pay 5% towards the 401(k) plans of those who pay 2% towards student loan debt.
Likewise, Travelers Companies Inc. has just received the same permission to entirely match employee contributions when they are paying off student loans.
The RESA and SECURE acts will allow every company that offers their employees a 401(k), or a similar account, would be able to match that employee’s contributions to their student loans AS IF that was how much they were contributing to their retirement account.
Say you make $75,000 a year. You pay, for example, 5% of your salary towards your student loans. With this program, your employer would match that 5%, or $3,750, and deposit it into your 401(k) account.
You’ve just added free money into your retirement savings while paying off student debt.
Although Washington can be up to some shady stuff on that Hill, this bill would be beneficial for employees in the companies that do not already have special permission from the IRS.
My advice is to keep an eye on RESA in the coming weeks. SECURE has already plowed through the committee votes and made its way to center stage in Congress.
Soon enough, the President’s drying ink could be the end of your student loan and retirement worries.