It will be a good thing (generally) if even a portion of the retirement proposals floating around Washington come to pass.
The latest, introduced by Senate Finance Committee Ranking Member Ron Wyden, D-Ore., and four colleagues, would give American workers the ability to save for the future while repaying their student loans.
Under current law, employers may only make matching contributions to a 401k-retirement plan if employees are also making contributions.
The Retirement Parity for Student Loans Act would allow employers to make matching contributions to a retirement plan while their employees make student loan repayments.
The proposal
Under the proposal, recent graduates who cannot afford to save money for retirement above their student loan repayments would no longer have to forego the employer match.
For example, if an employee’s student loan payment is $500 and his or her employer matches 50 percent of retirement plan contributions, the employer would contribute $250 to the employee’s retirement account.
The bill is cosponsored by Senators Maria Cantwell, D-Wash., Ben Cardin, D-Md., Sheldon Whitehouse, D-R.I., Maggie Hassan, D-N.H., and Sherrod Brown, D-Ohio.
“Millions of college grads are buried under tens of thousands of dollars in student loan debt that prevents them from building their future—buying a home, saving for retirement and starting a family,” Wyden said in a statement. “The sooner workers start to save for retirement the better, and paying down student loans shouldn’t stop them from building their nest egg. While a comprehensive response to the student loan debt crisis is needed, this policy change is an important piece of the puzzle.”
According to the Employee Benefit Research Institute, households headed by a person age 35 or younger with a college degree and no student loan debt report median defined contribution account balances of $20,000—compared to $13,000 for similar families that have student loan debt.
With more than 20 years serving financial markets, John Sullivan is the former editor-in-chief of Investment Advisor magazine and retirement editor of ThinkAdvisor.com. Sullivan is also the former editor of Boomer Market Advisor and Bank Advisor magazines, and has a background in the insurance and investment industries in addition to his journalism roots.
