Every year, millions of college graduates enter the workforce while millions of Baby Boomers begin the process of transitioning into retirement. For these new graduates, acquiring a post-graduation job is a celebratory milestone but it is not without some challenges. Younger generations are facing a major dilemma that other generations never had to tackle: pay off student loans or save for retirement? Why not both? There are numerous tips and tricks for saving for retirement with student loan debt, so you can experience maximum financial security in the future. It can be quite overwhelming figuring out where to begin with your financial planning, but thankfully, you have numerous options.
Where to Begin?
1. Prioritize student debt payments. Due to the interest rates, it is best to tackle your student loan debt before it becomes too uncontrollable. If you have multiple loans, put your additional funds towards the highest one. As you finish paying off your student debt, consider raising your monthly retirement contributions.
2. Commit a percentage of earnings to Retirement savings. This percentage can range with your comfort level, but it is recommended to commit at least 15%. Possibly automate your payments so that you do not skip out on or put off adding to your savings.
3. Take advantage of all employee benefits. Look into your 401(k) options and other benefits provided by your employer.
4. Maximize your company’s 401(k). Some companies match contributions up to a certain percentage, often 5%. This money adds up over time and can make a significant impact. If your workplace does not provide a retirement plan, consider opening an IRA account to begin individual savings for retirement.
5. Create a “rainy-day" fund. Whether it is for a flat tire or a broken arm, this fund will help support you in case of an emergency or unexpected expense. Setting this aside will protect your other funds from being spent during a significant financial setback.
6. Identify your financial goals. Do you want to buy a house? Start a family? Move to a big city? These are important things to consider when constructing a financial plan. Create a short-term and long-term financial plan, so you can appropriately budget your loans and personal costs.
Save or Spend?
It is important to remember that it is never too soon to start saving for retirement. Being financially conscious now will help ease long term financial stress. Juggling student debt can be difficult but investing in your future is extremely beneficial.
We hope that this blog was informative and provided helpful financial tips, but if you still have questions, our team is here to help. Contact RPCSI for more information on managing your retirement plan for a secure financial future.
