Heading into retirement with student loans has become a disturbing trend that can mean economic hardship for millions of individuals later on. Many individuals tend to push away the idea of even saving for retirement if they’re still trying to pay off their student loans. While paying off student debt can prove to be a significant challenge, it’s not impossible. Saving for retirement is critical even when you are paying off student loans. We understand how overwhelming and impossible it may seem, so we put together a list of steps to take to ensure the best possible outcome for your retirement.
Pay Off High-Interest Debt
Some types of debt are more challenging to pay off than others. Push the low-interest student loans towards the bottom of your list since they will take up less of your income and are usually tax-deductible. If you have a loan with an interest rate higher than 6%, you will want to go ahead and take care of those first. Loans with higher interest rates can quickly snowball into severe financial hardship.
Have an Emergency Fund
Creating an emergency fund will support you during any financial setback, such as injuries or losing your job. A good, stable fund should be able to cover three to six months of living expenses. By preparing beforehand and working hard to set money aside, you can rest easy and take on whatever life throws at you. The most effective way to build your fund is to automatically transfer money directly from your paycheck into a separate savings account.
Hold Detailed Discussions Before You Borrow
Before taking out loans, make sure to determine exactly how much you need to borrow and discuss a realistic timeline for making payments. Being honest and transparent about your current financial situation will prevent any possible financial hardships from occurring. Also, be sure to consider any possible scholarships, less expensive colleges, or other options to lighten the debt burden.
Monitor the Loan
Once you’ve signed and started borrowing, be sure the loan servicer supplies regular statements. These statements should show the payments made, balance due, interest rate, and payoff date. It’s their responsibility to make sure you have all the necessary information and tools to stay up to date with your loans, and it’s your responsibility to make sure that you keep up with payments. If, for some reason, you don’t receive this information on a timely basis, file a complaint with the United States government’s Consumer Financial Protection Bureau (CFPB). (Helpful tip: You can also contact the CFPB if you become unduly bombarded with harassing debt collection calls or letters.)
Know Your Repayment Options
Your repayment options will vary depending on whether your loans are federal or private. Private loans usually come with fewer repayment options than federal loans. With private loans, you will need to contact your lender or loan holder to determine your repayment option. You can refinance several types of private loans to lower your interest rate. With federal loans, you’re usually put on a 10-year plan unless you specify otherwise. However, you have the option to switch to a different plan at any time to best suit your current financial situation.
Many graduates choose to go with an income-based repayment plan. This plan essentially calculates your monthly payment based on your current income. On these plans, any debt that remains after 20 or 25 years is forgiven. Several other repayment plans can be adjusted to best suit your needs. Be sure to reach out and learn all your options.
Hire a Pro
You can’t get better advice than from a professional. Finding the right financial advisor that fits your needs is the best decision you could make for your future. There are multiple free financial tools available online, but they can prove hard to manage and accurately calculate. A financial planning expert has all the tools and expertise to help you develop the best plan for your future.
When you select a self-directed IRA custodian through the Retirement Industry Trust Association (RITA), you can get assistance with all of your self-directed retirement needs. Federal or state banking authorities regulate all regular RITA members, are required to have regular audits, carry multiple insurance policies, and operate according to IRS and Department of Labor requirements. If you’re ready to get financial assistance and expert advice, click here. Saving while you’re in debt can feel impossible and overwhelming, but it doesn’t have to be.