Laments about the impact of student loan debt on the economy, and on young adults attempting to forge their own paths in the U.S. today, crop up nearly every day. At this point, it’s no surprise to anyone that student loan debt has been tied to lower rates of home ownership, lower savings account balances, later independence, and even delays in smaller purchases. Recently, there’s been some evidence that student loan debt has people marrying later.
With all that in mind, it should come as no surprise that student loan debt is also impacting retirement savings. But, the impact of those lower retirement savings could be significant, both for the individuals with smaller 401(k) and IRA accounts and for the economy as a whole, which may be faced with a generation of student loan borrowers who don’t have adequate savings to support themselves in retirement.
The percentage of U.S. households carrying student loan debt has increased steadily over the past several years, meaning the impact of student loan debt on retirement savings is more widespread than it might have been a decade ago. In addition, older Americans are increasingly carrying student loan debt, meaning that this impact is less likely to lessen or disappear as they approach retirement.
In a middle-aged (45-54) household, retirement savings average $80,000 among those without student loan debt, but just $46,000 among those burdened by student loans. According to experts, neither average is high enough. Investment brokerage Fidelity suggests that by age 50, a person should have four times his or her annual salary in retirement savings. But, the person with $80,000 in a 401(k) and no student loan debt inhibiting future contributions–and, perhaps, persisting into retirement–is obviously better positioned for a stable retirement than the one with $46,000 and ongoing student loan payments.
Tags: retirement, student loan debt
