Should workers pay off student debt before saving for retirement?
Our daily roundup of retirement news your clients may be thinking about.
Should I pay off student debt before saving for retirement? Not exactly
Contrary to what many millennials think, some financial advisors say that clients need not pay off their hefty student loan debt before they start saving for retirement, according to this article on MarketWatch. “The advice I would give, walk the middle of the road — we have multiple goals in our life and a couple of things at the top,” says a wealth management advisor. “You can handle short-term debts and long-term goals, and not sacrifice one for the other.”
Fewer parents are using retirement funds to pay for college — thank goodness
A survey by Sallie Mae and research firm Ipsos has found that the percentage of parents who will not tap their traditional retirement accounts to cover their children's education costs increased to 69% in 2018 from 60% in 2016, according to this article on personal finance website Motley Fool. A smarter way to raise funds for college costs is to contribute to a Roth IRA, which is funded with after-tax dollars but provides tax-exempt growth on savings as well as tax- and penalty-free withdrawals in retirement. Another account to use to save for education cost is a 529 plan, which also offer tax benefits similar to a Roth IRA.
Millions of Americans don't think they will ever retire
A majority of Americans polled by Bankrate.com claimed they didn't know the amount of money they should save for retirement, according to this article on Fox Business. Some 19 million Americans also doubted whether they would be able to leave the labor force for good, with 61% of the respondents saying they were uncertain about their nest egg, the survey found. “The key to retirement savings is to actually save for retirement. Put away at least 10% of your pay, including any employer contributions, into your retirement account and do it yesterday," says an analyst with Bankrate.
This expert doesn't use the popular 50/30/20 budget rule
An expert has veered away from the traditional budgeting rule that requires clients to allot 50% of their after-tax income to needs, 30% to wants and 20% to savings and debt repayment, according to this article on Nasdaq. The expert says that they should not plan on spending income that they have yet to earn. "The best thing I did to boost my retirement savings was to contribute the maximum amount as often as possible — and to save extra money for retirement when I had it in a non-deductible IRA (or SEP IRA when I had self-employment income)."