Millennials Struggle to Save for Retirement
In our recent financial survey, we found that 48% of respondents under the age of 40 have less than $5,000 saved for retirement, and 19% have no savings at all. At their current rate, they are unlikely to be able to retire at the traditional age.
Millennials are struggling to contribute to their retirement. According to research by the Pew Charitable Trusts, 52% of Millennials participate in their company retirement plans. Young adults with student debt are even less likely to be saving for retirement. According to a June 2018 study by the Center for Retirement Research at Boston College, college graduates with student debt accumulate 50% less retirement wealth by the age of 30 when compared to non-graduates or graduates without debt. This isn’t surprising considering how student debt levels have risen exponentially in the last ten years.
Companies Are Stepping Up to Help
Earlier this year the IRS released a private letter ruling (PLR) allowing 401(k) contributions to be tied to student loan payments. This move makes perfect sense. Employees that can’t afford to contribute to their retirement have cited their student loan payments as the reason. The IRS PLR should act as guidance for companies wishing to help their employees save for retirement. Contributions can be made to their employees’ retirement plans if the employee agrees to make payroll deductions towards their student loans.
In total, employees fail to collect on $24 billion worth of 401K matching amounts. Employees are too overwhelmed with other forms of debt, specifically student loan payments, to be able to contribute to their retirement. The IRS has blessed new policy to be enacted that would tie student loan payments to retirement contributions.
Companies Can Create Policy
The private letter ruling should motivate companies to develop similar benefit programs. Contact IonTuition to view a demo and see how student loan benefits can help your organization.