Why Student Loans and Retirement Cripple Each Other

a business woman looking at a coin next to a piggy bank

Student loans and retirement are two major financial topics at the heart of employees’ financial concerns, and they not only have a crippling effect on each other but cause a ripple that negatively effects all other financial goals and challenges.

Who is affected?

About half of Millennials have student loans, and 79% of them say that paying off student loans negatively impacts their other goals.1  On top of that, Millennials not only have their own loans hanging over them; they’re also worried about paying for their kids’ college education.

Older generations, like Gen X and Baby Boomers, feel the same way; so much that many are giving up their retirement contributions to pay for their kids’ schooling.

To give you some context, over a third of the workforce is made up of Millennials,2 and the average student loan debt is around $30,000 per person.

How is it affecting employees?

Basically, employees are minimizing their retirement contributions because they’re focusing on paying off student loans, and 48% of employees aren’t saving for retirement at all because of debt.3  Unfortunately, less than half of employees have some kind of savings vehicle for future education expenses, so when they get to the point where their kids need help with education costs, they’re dipping into what little retirement savings they have because they didn’t plan ahead.  Of those saving for retirement, 1 in 5 have already made withdrawals for non-retirement expenses.3

It’s no surprise then that a major concern for employees is “running out of money” in retirement, and over a third (36%) of employees plan on postponing retirement.3

But wait, there’s more.

In addition to the weight of paying off debt and worrying about financial security in retirement, employees find themselves dealing with a plethora of other problems.  According to a recent survey shared by EBN, employees who have student loans (when compared to those who don’t) are more likely to be…

  • Financially stressed
  • Unable to meet monthly expenses
  • Carrying credit card balances and struggling to pay the monthly minimum

When student loans become a hindrance, other financial responsibilities become a burden as well.

How is it affecting you, the employer?

If you have employees who are overwhelmed by financial concerns, you’re dealing with consequences that seriously hurt the bottom line.  Employees who are dealing with student loans are more likely to be distracted and less productive at work.

When you look at finances overall, it gets worse.

About half of employees spend at least three hours of work time “thinking about or dealing with issues related to their personal finances” each week.1  That’s roughly 156 hours of lost time per employee per year.

What can you do?

Any financial concern, if left unattended, can cause major damage, and goals without action will probably never happen, so how do you tackle the issue before it becomes a problem for your workforce and your business?

Give your employees the opportunity to engage in a financial wellness program that helps them do the following:

  • Establish a solid financial foundation by strengthening best financial practices
  • Determine current challenges and financial goals
  • Create and implement an action plan for success

Through the My Secure Advantage (MSA) Financial Wellness program, employees can work one-on-one with a Money Coach and a whole team of specialists who carry multiple financial credentials and can help them with virtually any financial topic.  They also get access to online resources like a personalized website with their goals and action plan, a financial library, calculators, educational videos, personal financial management software, and more.

Real Life Examples

Sarah entered the MSA program, offered by her employer, with $80,000 in student loan debt and another $20,000 in credit card debt.  Her Money Coach, Dave, helped her create a budget and consolidate her student loans under a federal loan program that will allow her to be debt free in less than ten years.  Effectively addressing her debt opened new doors for her: “I have savings for the first time in my life!  I have around $3k in my savings account!!!  Also, I saved up enough money to move into a new (and better) apartment (putting down security and 1st month no worries) and to buy a new car!  These accomplishments are directly related to working with Coach Dave!”

Anthony wanted to retire in ten years, but he was anticipating very little help from Social Security, and he didn’t have a pension.  Through his employer, he got access to the MSA program where he started working with a personal Money Coach and Retirement Specialist.  His coach walked him through a retirement analysis that helped determine (1) how much income he might need in retirement, (2) how much his current retirement savings will amount to in the future, and (3) how to adjust his contributions to meet the difference.  From there, Anthony increased his 401(k) contributions from $250 a month to $400, and he opened a Traditional IRA for additional savings.  Now, he’s on track to retire comfortably.

Hundreds of employees like Sarah and Anthony use the MSA program each day and see amazing results.  And they are truly grateful that their employer offers such a benefit:

  • “I noticed that my employer offered [MSA] services through its employee assistance program…. It turned out to be one of the best phone calls I’ve ever made.”
  • “The bottom line is that this service − having your [Money Coach] available to help over a 90-day period − is every bit equal in benefit and importance to the health benefit my employer offers.”
  • I know that I am in a better position since I’ve used the service.  I continue to tell everyone what a great service MSA provides.  I was also happy to know that my company provided this service for me…not many can say they have a Money Coach.”

Keep financial concerns from negatively affecting your workforce and your bottom line.  Talk to a MSA Customer Success Manager today by calling 888-724-2326.

 

1Employee Financial Wellness Survey: 2016 Results.  PwC, Apr 2016.  Web.  22 Apr. 2016.

2Fry, Richard.  “Millennials Surpass Gen Xers as the Largest Generation in U.S. Labor Force.”  pewresearch.org.  PewResearchCenter, 11 May 2015.  Web.  4 May 2016.

3Employee Financial Wellness Survey: 2015 Results.  PwC, Apr 2015.  Web.  22 Apr. 2016.