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READER POLL: Are Retirement Savings Being Stressed by Debt?

Seems that the headlines are full of concerns about debt, particularly college debt, and the implications for retirement savings. This week we asked NAPA Net readers what impact, if any, it seems to be having on retirement savings.

Nearly two-thirds (62.5%) said the topic was “quite a bit more prevalent than it used to be,” while the rest said it was a growing part – but still only a “bit.”

The situation was, however, a little different when it came to conversations with plan sponsors; on that front, a quarter said it was about what it had always been, about the same said it was “quite a bit more prevalent,” but just over half said that while it was a “growing” part of the conversation, it was only a bit.

“There has been some discussions about the recent private letter ruling that allowed Plan Sponsors to make 401k matching contributions for their employee's student loan payments,” noted one reader. Another said, “As employers are looking to staff up their next generation and replace retiring staff, student loan debt management along with tuition reimbursement programs are benefits attracting younger workers that put emphasis on the drag their debt or future debt and are more willing to consider an employer not only at time of hire, but increase length of employment tenure.”

Conversation’s one thing – but how is it impacting retirement savings? About two-thirds (63%) said it was impacting that for “some, not all,” with the remaining responses split nearly evenly among:


  • Yes.

  • For some, not most.

  • It’s an issue, but not really anything new/different.


“I find most participants with college debt still save, just at a lower level,” observed one reader. “The level of student debt that age 35 and under have in the DC area is pretty astounding,” noted another.

And yet, as one reader commented, “Frankly most new career hires have been told they MUST enroll in their 401ks/ 403bs by their parents – that's been the last decade of 401k younger hires, they're in, but potentially to the detriment of accumulating more debt or bad spending habits while managing payments to student loans. I find all employers and participants bring debt of many kinds into the larger financial wellness conversation and we see the barbell effect around student loans and student debt. On one end, parents in their late 30s-early 50s are figuring out how to pay for college and how much is their financial burden and on the other end, 20-somethings are figuring out for the first time how to budget and balance savings, credit card debt and student loans, which can be in tens of thousands, if not hundreds of thousands.”

Personal Perspectives

As it turns out, three-quarters of this week’s respondents said they hadn’t run up college debt on their own – and yet, of those who did, (just?) 40% said it affected their retirement savings. One reader explained: “Went to in-state university. Everything (room/board, books, food, etc.) was WAY more expensive than the advertised sticker price. Almost 10 years removed and my wife and I still have $75,000+ combined in student debt.” Another noted, “I know first-hand the difficulties in managing income vs expenses and saving early career. I had no knowledge of personal finance when I graduated college, but I had a lot of personal financial issues with credit card debt and student loan debt when I started my first post-college job. Up until college all I had was a savings account and no knowledge of credit cards or budgeting. I went to an out of state private college, which the ROI on that didn't make sense… in the end that was negative ROI as my earning potential wasn't any better or more for having gone to the more expensive, out of state school. But I got to rack up some nice student loan debt by driving 3 states away at a really nice school. Reality based conversations are extremely hard to do with parents who only want the best despite the personal cost to them. This can be financial disaster for now both the parents and their kids. And now this conversation has come full circle and looking at schools for my oldest and trying to justify $50k a year for just about anything out of state is just crazy. Unless my son is going to be a CEO first year out, I just can't see spending $200k+ as a good investment. I've even had friends who offered up a large sum to their kids when they graduate if they choose an in-state school. Not one kid so far has taken their offer... all have decided to go out of state at colleges/universities that are at least 2x the cost. Answer to all of this is better personal finance discussions at all ages about prioritizing savings and setting a budget.”

“Initially, the math simply didn't work...” noted one reader who “…wasn't making enough and was definitely living paycheck to paycheck with no room for error or savings. Just had to make ends meet, including the student loan repayments. Even deferred for a little bit when I could my Federal loans. Then with a little boost in income after a few years was able to start with a disciplined savings program... the 401k! This was a tremendous value and had the fortunate timing of starting my investing in the mid 90s so accumulated savings quickly.”

Debt ‘Counselling’

So, what advice did readers put forward for those dealing with college debt?

“It's definitely an issue. Some employees have what amounts to a mortgage payment worth of student loans. We advise for them to look at different options for consolidating and paying it down.”

“To parents: there are no loans for retirement, but there are loans for higher education. And encouraging a frank discussion about the ROI of a degree from various schools, is the hiring ability and future salary worth the cost of the degree? In-state vs of state may not even be an option. Parents need a reality check to not help create a future debt problem, either for themselves or their child by allowing them to attend an expensive school they'll spend at a minimum 5 years post-college paying off. To Student Debt Participants: There should be a prioritization of spending and saving – budgeting first, then seeing how much they have for saving, including 401k/403b. And instead of pre-tax contributions, I highly consider only contributing as Roth.”

“I am a proponent of having little to no debt. However, taking advantage of an employer match is important. It’s always a balancing act.”

“Encourage some retirement savings, especially up to the company match, if possible.”

“Look into debt consolidation. Consider paying down the highest interest debt first.”

“Get the match. Develop a safety savings account of 3-6 months living expense. Then pound the debt starting with the highest interest rate.”

Other Comments

“Examining one particular issue is a one-dimensional discussion, which gets one-dimensional solutions. Our industry's favorite buzz words of the last 5 years, ‘financial wellness’ is reality based, not something made up to line corporate pockets. Retirement Advisors have to remember we're still financial advisors. We must still take a holistic and 3-dimensional view of someone's financial picture, which also evolves over time. You must include in any conversation: debt of any kind, savings for future goals, savings for emergencies, budgeting, insurance (life, disability, long-term care), which all impact a household's level of financial success at various life stages.”

“In my opinion debt is one of the greatest enemies (along with inflation) for retirement savings.”

“I'm hoping our legislators and retirement plan providers will consider creative ways to help employees with debt pay it off and still save for retirement. Prudential and Abbott Labs paved a way in 2018 with their favorable IRS ruling to allow contributions to 401(k) plans to offset student debt.”

“I think that a lot of Millennials received pretty bad advice from their parents and college financial aid departments that it was a good idea to take on $100k+ in student loans! Education is important, but will only get you so far and plenty of people without degrees have gone great places. I want to wring their parents' necks for (presumably) supporting those decisions.”

Thanks to all who participated in this week’s NAPA Net Reader Poll!

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