401(k) Specialist Issue 3 - 2023 - 7

401(k) NEWS YOU CAN USE
Older Workers Sense Impact of Student Loan
Repayments
THE RESURGENCE of student loan
payments won't just fall on younger
workers-a small group of seasoned
employees are also set to feel its repercussions
as well.
New data from the Nationwide Retirement
Institute finds that 12% of employees
ages 45 and up currently hold student loan
debt, and 61% believe the reinstatement
of student loan payments has negatively
impacted their financial stability and longterm
financial planning. Sixty-six percent
expect the payments to have an adverse
impact on their retirement planning.
To offset negative impacts, 29% of individuals in this age group
say they will adjust their retirement plan contributions to keep up
with payments, while 18% have already done so.
Others are already seeing the effects of the repayments. Twenty-four
percent of employees ages 45 and over are expecting to retire
later than they planned to a year ago, and
9% do not believe they will ever be able
to retire. Of those 9%, 61% are nervous of
not being able to live the life they want in
retirement, 52% are worried over a future
recession, and 50% are scared of outliving
their retirement income.
The survey notes how provisions
offered through SECURE 2.0 now allow
employers to provide matching retirement
plan contributions based on the
amount employees defer towards their
student loan repayments.
Additionally, with a growing number
of employees expressing interest in pension-like income streams
within retirement plans, as reported by Nationwide, more employers
might consider looking into guaranteed lifetime
income products to help with retirement and financial
confidence.
ONLINE
EXTRA
Millennials Surpass Older Workers with
Retirement Savings
Millennials (ages 37-41); mid-Generation X (ages 49-53); and late Baby
Boomers (ages 61-65). For each, Vanguard estimates generational readiness
at four points from the national income distribution-the 25th, 50th,
70th, and 95th percentiles.
The research found that early Millennials at the 50th income percentile
DESPITE FACING financial retirement planning hurdles, Millennials are
coming out on top with their retirement savings.
That's the latest finding from Vanguard's newest Retirement Readiness
report, which finds Millennials workers are set to replace 58% of their
prior earnings during retirement, and eight percentage points over what
was estimated for Baby Boomers.
Using its new forecasting tool, the Vanguard Retirement Readiness
Model (VRMM), Vanguard divides its cohorts into three generations: early
were on track to reach a sustainable replacement rate of 66%, and 15
percentage points higher than median-income late Baby Boomers. This
level will also allow the younger cohort to meet their projected spending
needs in retirement, Vanguard said.
The research also assessed retirement readiness outlooks between
higher and lower-income households, finding that among late Baby
Boomers, high-income workers are on track to meet their retirement
spending needs, while low- and middle-income workers were off track.
Vanguard says its research underscores the progress still needed for
workers to reach their retirement income needs and urges policymakers
to connect employees-like low-income workers-with capital market to
reduce projected retirement readiness gaps.
On the other hand, employers can help workers save adequately by
adopting best practices that include automatic features and diversified
equity and fixed income portfolio investments.
ISSUE 3 2023 | 401kSpecialist.com
7
© Artur Szczybylo | Dreamstime.com
© Andrii Yalanskyi | Dreamstime.com
http://www.401kSpecialist.com
401(k) Specialist Issue 3 - 2023

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