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Cracking the Code: Balancing Student Debt and Retirement Savings for Millennials

Cracking the Code: Balancing Student Debt and Retirement Savings for Millennials

February 27, 2024

Millennials express a strong desire to retire early, as demonstrated by a recent Charles Schwab survey which found that the average age millennials expect to retire is 60.[1] This goal is seven years earlier than the current Social Security full retirement benefit eligibility for their age bracket and significantly younger than the average retirement age.

However, the reality for many millennials is that this dream may not be attainable due to the burden of student loan debt and limited savings. Approximately 66% of individuals aged 21–32 have not saved anything for retirement.[2]

Furthermore, millennials are facing a perfect storm of challenges, including high student debt and a lack of preparation for future financial responsibilities. It is important for millennials to prioritize saving for retirement, even if it means making difficult choices regarding their student loan payments.

One option for millennials to consider is refinancing their student loans to lock in a lower interest rate. This can potentially save them money over the lifetime of their loans. However, they must also consider the downsides of refinancing, such as the loss of flexible payment options offered by federal loans.

There is no one-size-fits-all approach to maximizing retirement savings. Millennials should consider current and future potential tax consequences with their tax professionals relative to their incomes when determining which retirement vehicles to fund, along with considering potential match incentives from their employers. Cash flow considerations relative to contribution amounts can be most effectively worked through with a coordinated financial team made up of at least a financial professional and tax professional.

Overall, millennials should consider striving for a savings rate of 20%-25% of gross income to stay on the balance sheet. The way that percentage gets broken up and directed into different financial instruments (savings accounts, cash value life insurance, investments, retirement, real estate, etc.) is completely dependent on the necessity for liquidity relative to financial and personal objectives and can be best worked through with your financial advisory team, so long as all financial, legal, and tax drivers are assessed in a coordinated fashion.

In conclusion, millennials face unique challenges when it comes to saving for retirement; however, by making coordinated financial decisions as early as possible, there’s potential for an early and sustainable retirement.



Financial Representative of The Guardian Life Insurance Company of America® (Guardian), New York, NY. WestPac Wealth Partners LLC is not an affiliate or subsidiary of Guardian. Insurance products offered through WestPac Wealth Partners and Insurance Services, LLC, a DBA of WestPac Wealth Partners, LLC. CA Insurance License Number - 0M56081. | 2024-169921 Exp. 02/26. This material is intended for general use. By providing this content The Guardian Life Insurance Company of America and your financial representative are not undertaking to provide advice or make a recommendation for a specific individual or situation, or to otherwise act in a fiduciary capacity. Guardian and its subsidiaries do not issue or advise with regard to student loans. Guardian, its subsidiaries, agents and employees do not provide tax, legal, or accounting advice. Consult your tax, legal, or accounting professional regarding your individual situation.