Match Program Pays Student Debt AND Saves for Retirement

Americans collectively owe $1.5 trillion in student loans, about $39,400 for a typical 2017 college graduate

401k, workers, retirement, student loansWorkers no longer have to choose.

Whether it’s paying down student debt, saving for a child’s education or assisting with a parent’s elder care, competing investment priorities too often push retirement saving from the planning picture.

Abbott Laboratories is doing something about it. The health care giant has introduced a new program to help employees tackle student loans while encouraging participation in its 401k.

Noting that historic levels of student debt have forced many people to choose between saving for their futures and paying off school loans, Abbott’s Freedom 2 Save program will enable full-time and part-time employees who qualify for the company’s 401k—and who are also contributing 2 percent of their eligible pay toward student loans—to receive an amount equivalent to the company’s traditional 5 percent “match” deposited into their 401(k) plans.

Program recipients will receive the match without requiring any 401k contributions of their own.

The benefit is pitched as a way to respond to recent “financial challenges facing young employees” with undergraduate and advanced degrees, as well as a competitive advantage in recruiting and retaining employees.

“We see our young professionals coming to us with a problem: Student loan debt payments keep them from setting aside the money they’d like to put in savings for retirement,” Steve Fussell, executive vice president of Human Resources with Abbott, said in a statement. “With every decade you wait to start saving for retirement, the amount you need to save roughly doubles.”

Americans collectively owe $1.5 trillion in student loans, about $39,400 for a typical 2017 college graduate, or $620 billion more than the country’s total outstanding consumer credit card debt, the company notes.

Federal statistics show the average borrower aged 20 to 30 owes $350 a month to service their student loans; those payments often mean there’s nothing left for traditional retirement plans.

In fact, about 66 percent of millennials don’t have anything saved for retirement, with many resigned to working longer to help make up the gap.

However, someone who joins Abbott with starting annual pay of $70,000 and takes advantage of this program could see $54,000 accumulate in his or her 401k account over a 10-year period, assuming a 6 percent average annual return and yearly merit pay increases of 3 percent—without any 401k contribution of their own. That amount could be worth hundreds of thousands of dollars in additional retirement savings by age 60.

“Our employees have invested a lot in themselves to earn their way into Abbott, and we don’t want student loans to prevent them from beginning to save when time is on their side,” Fussell said. “With this program, we’re changing the retirement savings formula.”

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