Higher education employees continue to struggle in saving for retirement and financial goals due to short-term needs, as 80% say they carry debt, finds new research today from the TIAA Institute and the CUPA-HR, a compensation survey provider for higher education.
The report, Financial Well-being and Retirement Readiness in Higher Education, touches on the challenges higher education employees face with debt, especially as more earn less than prior to the pandemic when considering adjustments for inflation.
According to the report, over 70% say their debt and debt payments have prevented them from focusing on other financial priorities. One-third of employees who are “significantly debt constrained” said they were struggling to make ends meet compared to 4% of borrowers who are not debt constrained.
“Higher ed employees earn less today than before the COVID-19 pandemic after adjusting for inflation,” said Melissa Fuesting, associate director of research for CUPA-HR. “At the same time, many are debt constrained. Both are factors that would squeeze household finances in the near term, making it more challenging to make ends meet.”
Student loan borrowers are also more likely to feel this constraint, as they have the added factor of paying for student loans on top of retail debt. Twenty-three percent of higher education employees have outstanding student loans, and over 80% describe themselves as debt constrained, with 36% adding that the constraint is significant.
Dealing with such constraints could lead to participants avoiding other financial responsibilities and goals, including emergency funds, wanting to buy a home, and retirement savings. According to the findings, 34% of higher education employees who are significantly debt constrained say they lack emergency savings that could cover three months of living expenses.
TIAA notes how a combination of professional advice and employee benefits could relieve some of the financial stress employees face with debt. Despite their challenges, 93% of employees are saving for retirement, either through an employer-sponsored 403(b) plan (65%), or on their own (27%).
Still, even though they are saving for retirement, 20% are not sure if they’re allocating an adequate amount.
Others plan to annuitize their savings once they head to retirement. One-quarter of employees plan to incorporate an annuity in their long-term plan.
“Annuitization directly addresses the highest financial priorities for retirement among higher ed employees, so not intending to annuitize represents a planning disconnect,” said Paul Yakoboski, Senior Economist at TIAA Institute. “A fixed annuity provides stable income that is guaranteed to last for life, including the life of a spouse or partner.”
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Amanda Umpierrez is the Managing Editor of 401(k) Specialist magazine. She is a financial services reporter with over six years of experience and a passion for telling stories and reporting news. Amanda received her degree in journalism and government and politics at St. John’s University. She is originally from Queens, New York, but now resides in Denver, Colorado with her partner. In her free time, Amanda enjoys running, cooking, and watching the latest drama show.
