Treasurer Curtis Loftis Says You Can Still Save While Paying Off Student Loan Debt
December 8, 2017
South Carolina Treasurer Curtis Loftis recognizes that most millennials have a reason for not putting aside much money for retirement. Many recent college graduates are finishing school with tremendous debt, an average of more than $35,000 per borrower, according to the Institute for College Access and Success.
"But student loan debt, while appearing daunting, does not mean you can’t put aside money for the future," Treasurer Loftis said.
The website Student Loan Hero recommends ways to start saving for retirement even when you have student loans.
Don’t put extra money toward loans, even if it seems counterintuitive not to pay down debt early. Consider the difference between paying off a student loan early and putting that money into a retirement account if you have, say, $62,000 of student loans at a 5.70% average interest rate and $1,000 in retirement savings. If you get a raise and have an extra $300 each month and put that extra $300 toward your loans, you’d pay them off in 6.3 years and save $7,558 in interest. Pretty great, right?
Not compared with what would happen if you put that extra money into a retirement account instead. If you invested that $300 a month for those 6.3 years and then let it sit for 35 years, earning a 6.00% return, you’d have a whopping $153,774 by the time you retired.
Automate your savings as much as you can. If you have an employer-sponsored 401(k), contribute enough to get a full match. Then, create an automatic withdrawal into a Roth IRA each month. At the very least, start saving in incremental amounts with an app like Acorns or Stash.
Start your retirement fund now. Instead of just thinking "I should really start saving for retirement,” just go ahead and start.
“When it comes to money, time is on your side,” Treasurer Loftis said. “If you start at age 25, and you’ll need to save about $690 a month to have $1 million if you want to retire at 65, based on a conservative rate of return. But if you wait until you’re 35, that amount jumps to $1,250 a month.”