Millennials—the generation of Americans born between 1982 and 2000—now outnumber Baby Boomers. Many in this younger generation are tackling a dilemma few before them have had to face: Save for retirement or pay off student loans? Paul Fain, President of Asset Planning Corporation joins us with advice for your money.
WE KNOW THAT COLLEGE TUITION HAS INCREASED A LOT OVER THE YEARS, WHAT ABOUT STUDENT DEBT?
- Annual tuition in 1980: $2,000
- Annual tuition in 2018: $13,000
- With the increase in college tuition, many Millennials have resorted to loans averaging about $37,000.
IF YOU ARE TRYING TO REPAY STUDENT LOANS, IT IS TEMPTING TO POSTPONE SAVING FOR RETIREMENT ISN’T IT?
- An estimated 56% of Millennials age 18 and 29 postpone retirement saving.
- When you delay saving, you miss out on the benefits of compounding during those years—even small amounts can add up to significant accumulated savings.
- You probably miss the bonus of employer matching contributions!
WHAT ARE SOME TIPS FOR TACKLING STUDENT DEBT AND ALSO SAVING FOR RETIREMENT?
- Make the minimum loan payments. Don’t miss payments.
- Take advantage of your company’s 401(k) match: “Free money.”
- No workplace retirement plan? Consider opening up a Roth IRA.
WHEN DOES IT MAKE SENSE TO MAKE EXTRA LOAN PAYMENTS?
- Put any extra income against your highest-interest-rate loan.
- Use windfalls wisely: gift, bonus, inheritance.
