May 6, 2019:
Q: Many of our employees are young and carrying debt related to their education. As we implement our financial wellness and retirement communications, we’d like to address the question we sometimes hear about whether it’s better to channel income toward paying off loans or into the 401(k) plan. What are your thoughts?
A: Like so many other choices in life, this one is complicated. The best answer is, of course, to do both. But you don’t want to overwhelm employees so they give up and fail to take any action. We all know that, when it comes to saving for retirement, the earlier the better. But carrying student debt into retirement isn’t smart, and paying it off can free up funds to save for the future. You’re on the right track by educating employees about their overall financial health. As you develop the program, these suggestions may help employees struggling with competing priorities. Tell them to: find out if your bank offers an interest rate reduction for automatic payments on your loan; check for tax breaks you could receive on your student loan repayments; pay down the balances of your highest-rate debts first; and watch out for pre-payment penalties if you do manage to pay your student loans ahead of schedule.
Provided by Doug Fletcher - Prepared by Kmotion, Inc. Copyright 2019.
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