Politics in the U.S. is more vitriolic than ever, funny how getting rid of Trump didn’t change much did it? I know it was all him it wasn’t anyone else… lol. To the point, our government is still working or trying to work it is the government after all. Sarcasm aside, there is something on the radar that maybe very impactful in a positive way. It pertains to the horrific government policies on student loans. They are finally doing something to remedy this problem and it’s a very good proposal.
There is something floating around congress right now called the “Secure Act 2.0” You can find a decent summary here Without going into great detail on the legislation, what it does is beef up retirement options for all Americans. Specific to the topic there is one provision that can help younger workers with student loan debt.
“5. Student Loan Payments and Employer Matching
The Secure Act 2.0 permits an employer to make matching contributions under a 401(k) plan, 403(b) plan or SIMPLE IRA with respect to “qualified student loan payments.” The provision is intended to assist employees who may not be able to save for retirement because they are overwhelmed with student debt, and missing out on available matching contributions.”
Many people with student load debt are unable to save for retirement while they are paying off these debts eliminating the single biggest multiplier of compounding interest over time. What this provision allows is for companies to provide a % match of your loan payments to their retirement plan allowing for some retirement savings. This is huge because it allows you to forgo the 401K contribution but still get the match. You’re going to pay your student loans anyway so while not perfect it way better then what we have now.
If you have student loan debt you should be contacting your federal representatives and telling them, you want the secure act to pass. This will enable you to now and in the future select workplaces that offer this benefit, and they will, they will have to to be competitive. One of the biggest factors in accumulating wealth is dollar cost averaging or simply put, the accumulation of principal + interest reinvested over time. IF you are spending all your money on debt you lose out on this critical aspect of investing, you lose time.
This is a great addition to the retirement 401K,403B portfolio of offerings and should really help some of our younger workers see some light at the end of the student loan tunnel. Watch for this, if it is passed you should be asking your employer if they will be adopting this benefit and extending it to you. This is an example of good governance and a good law. This should help millions of young workers, its welcome news.
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