What If Student Loans Get in the Way of Retirement Savings

Student loans aren’t only a young person’s problem. Though they are one of the well-known culprits keeping young adults from hitting traditional financial milestones – buying a home, getting married, having children – older people are falling behind on student loans, too.

In fact, there are 9 million student loan borrowers over the age of 50 who owe a combined $400 billion, according to the Department of Education. That’s roughly $45,000 per borrower, on average. And that could translate into a minimum payment of several hundred dollars per month – enough to put a serious dent in a monthly budget.

Guidelines and Milestones

There’s a pretty good consensus on some of the basic guidelines for retirement saving. One of them is that people aged 50 and up should be contributing at least 15% of their annual income toward saving for retirement, according to Brian Walsh, CFP® at SoFi. But that could be a real challenge for borrowers who are already diverting hundreds of dollars every month to paying down student loans.

Here’s another one: Financial planners recommend that you have six times your annual income saved for retirement by age 50. But only about one-third of workers between the ages of 45 and 59 view their retirement savings as “on track,” according to 2022 data from the Federal Reserve.

The Struggle Is Real

One thing seems clear: As the government continues to wrestle with itself over student loan relief and forgiveness, student loan debt isn’t going away anytime soon. And student loans, unlike most other forms of debt, cannot be discharged in bankruptcy. In fact, the government can garnish your wages – as well as up to 15 percent of your Social Security benefits – to repay your federal student loans if needed, according to the the AARP.

Steps to Save Better

The best way to supercharge saving for retirement is to take advantage of an employer-sponsored retirement plan, such as a 401(k) – especially if a contribution match is available. It’s worth noting that SoFi offers a 1% match on contributions to a Traditional or Roth IRA, up to the annual contribution limits. And speaking with a financial planner – something that’s available for free to every SoFi member – may reveal new strategies and tactics to shore up your retirement accounts.

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