Monthly Archives: July 2014

4 Retirement Savings Strategies when You Have Student Debt

Mounting tuition costs, fewer jobs after graduation, and lower wages for available jobs – it’s no wonder most millennials have done little to develop their retirement savings, if at all.

The average 2014 college graduate takes $33,000 of student loan debt with them into the real world (Edvisors), and only 28 percent of Generation Y thinks that investing will make a significant financial impact (UBS).

Fortunately, two-thirds of this group also thinks they will do better than their parents did in achieving a better standard of living (Wells Fargo).

Student Loan Debt and Retirement Savings Infographic

 

For the hopeful, here are four ways to work toward greater retirement savings:

  • Workplace Retirement Plans – It’s worth the time to check out your company’s 401(k) or equivalent retirement savings plans. Often, the organization will match your contribution up to a certain percent. We recommend putting away at least the amount that will be matched, especially if you are just starting out with investments.
  • Lower Interest Rates – See if you can get a lower interest rate on your federal student loans. The money you save can be directed toward retirement in an IRA or 401(k) plan, or in a similar fund that you set up with your financial advisor.
  • Diversify Your Investments – While there are certainly stocks, bonds, and index funds that become ripe for the picking, you may be better off with a less risky approach. Consider talking with a retirement advisor who can select an appropriate menu of investments that fit your lifestyle.
  • Create a Financial Plan – Working with a Certified Financial Planner (CFP) isn’t just for the 1 percent. The upfront cost of creating a plan can layout the path you should follow to pay off student loans, buy your first new car, save for your first house, and begin saving for your own children’s college. It has been said many times, “Those who fail to plan, plan to fail.” Those words ring painfully true when it comes to savings and retirement.

Taking these first steps toward retirement savings isn’t only beneficial for your financial health, but also for your mental health as you plan and prepare to retire on your own schedule.

Related Posts:

Retiring on Time: What It’s Going to Take

A Surprising Truth about Higher Education

Retiring on Time: What It’s Going to Take

Guidant Wealth Advisors reminds future retirees that planning is the only way to arrive at your destination on your own schedule.

Man Considering Retirement

Many of us romanticize the season of retirement with visions of lying on a remote beach, reading a few hundred good books, or sailing the seven seas with an interminable travel agenda.

It’s an enviable picture we paint, and certainly one that may be achievable – but only if we plan for it.

The Younger, the Wiser

“Save early and often” is the advice often directed at post-college graduates, and there’s no denying that the sooner the savings start, the better.

But what if we told you that saving alone is most likely not going to allow you to retire at the age you want? Or if it does, that it won’t be enough to allow you to live the life you want throughout the golden years?

When clients are in their 30s and 40s, it’s easy to push retirement planning to the backburner.

I’ll start planning for retirement when I get a promotion.

I have tons of credit card bills and student loans, so I can’t even think about retiring.

Retiring? What’s that?

There’s no doubt the circumstances that often occupy these prime years can be blinders to the reality of our situations: we’re not even close to retiring on time.

So what can we do about it?

When we plan for a road trip, for example, we have to know how much time it’s going to take to get there, how much money it’s going to cost to pay for gas and food, and whether or not our vehicles are capable of handling the travel. Without this information, we wouldn’t end up in the right location – or even out of the garage.

To get where we want to go, we have to plan ahead.

Whether you’re dreaming of retirement in five years or 25, let’s talk about what it’s going to take to get there.

A Surprising Truth about Higher Education

To invest, or not to invest – that is the question when it comes to pursuing a master’s or other advanced degree.

Turns out, achieving a higher education may not equate to a higher salary, which is often the carrot for many students who return to school.

But if we’re talking numbers – which, of course, is what we do for a living – then the long-view of this career goal should be, “Is it a good fiscal decision?”

Does higher education really equal a higher salary?

On average, the difference between annual earnings for an employee with a bachelor’s degree and an advanced degree is $29,000.

Higher Education Costs vs Earnings

At first glance, this may seem like a worthy investment, but then you have to consider the price tag of hitting the books again.

According to FinAid.org, the average cost of a master’s degree program is between $30,000 and $120,000.

Now, we know that this seems plausible on paper, especially because you could essentially pay off the low end of the average education cost within a year of receiving the average salary increase.

But, we also know that these are averages, and salaries vary greatly by industry, experience, and location.

On the same token, the cost of an advanced degree varies by university and program.

If you end up paying a high-end educational bill and getting a low salary bump, then you may spend years recovering.

And that’s assuming a salary increase really exists by the time you’re done with the program.

How to Decide if a Master’s or Advanced Degree is Right for You

First things first, do your research. What will the salary increase, if any, be with an advanced degree? Does the increase justify your investment of time and money?

Will you need to attend a more expensive university to attain the degree, or can you find a better value at another institution? Will the degree programs be equivalent in quality and recognition?

All of these questions are important considerations for your financial wellbeing.

After all, a degree that doesn’t drive career and financial growth is, quite frankly, a poor return on investment.

To see how educational decisions will impact your personal situation, please contact Guidant Wealth Advisors. We are here to help.