Student Loan Payments Threaten Retirement for Many Older Americans

Not only young professionals but seasoned employees are feeling the weight of student loan payments, which are resuming in October

By Rethinking65

Not only young professionals but seasoned employees are feeling the weight of federal student loan payments, which are resuming in October after being suspended for three years because of the Covid-19 pandemic.

Two-thirds of older employees with student debt believe the repayments will negatively impact their retirement plans, say results of a Nationwide survey released Sept. 27.

The Nationwide Retirement Institute found that 12% of employees aged 45 and older still shoulder student loan debts, and a staggering 66% of them acknowledge that these repayments could severely hamper their retirement savings.

According to U.S. Census data, Nationwide says, there are 140 million Americans ages 45 or older. With 12% of this group having student loans based on the survey, there is a potential for nearly 17 million older Americans making financial decisions as a result of student loan payment resumption.

Surprisingly, 61% of employees 45 and older stated that the upcoming resumption of student loan payments has jeopardized their financial stability and long-term fiscal plans.

Other findings

According to the survey, of these older employees with student loan debt:

• 29% may alter their retirement plan contributions to manage student loan payments, with 18% already having done so.
• Nearly half (49%) are reassessing the viability of their retirement objectives in light of their student debt.
• A significant 59% are weighing additional sources of income or side jobs to counter the financial strain induced by these loan payments and to uphold their retirement savings.

Furthermore, 85% of these employees expressed interest in employer assistance, such as matches to their loan repayments for retirement savings. Only 16% have actively sought professional guidance on balancing student loan payments with retirement savings.

Eric Stevenson, President of Nationwide Retirement Solutions, highlighted the importance of addressing these concerns. “The impact of student loan repayments on long-term financial strategies cannot be overlooked,” he said in a press release. “Fortunately, provisions like the SECURE 2.0 Act now let employers match retirement plan contributions based on an employee’s student debt repayments.”

Employees are increasingly anxious about their financial futures. Notably, 24% of those over 45 now anticipate retiring later than they had previously planned, while 9% doubt they’ll ever retire. Primary concerns include living desired lifestyles post-retirement (61%), possible recessions (52%), and outlasting retirement savings (50%). Healthcare costs, inflation, and potential insolvency of Social Security exacerbate these worries.

On the solution front, 73% of older employees with 401(k) plans desire pension-like income streams. The top confidence booster, as indicated by 55% of respondents, would be guaranteed income options, the survey said.

Edelman Data and Intelligence (DXI) conducted the national online survey of 600 U.S. retirement plan sponsors and 1,200 U.S. retirement plan participants on behalf of Nationwide from August 10 – August 28, 2023.

Nationwide, a Fortune 100 company based in Columbus, Ohio, offers an extensive range of insurance and financial services.

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