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5 Ways to Save for Retirement When You Have Student Loan Debt

Graduation caps have landed, tassels have been switched to the other side, and mom has all the pictures she could ever want. Graduation day is one of the most memorable occasions in a person’s lifetime, but as seventy percent of new grads know, it also starts the countdown to one of life’s most-dreaded evils: paying back student loans. Recent research suggests millennials are now spending one fifth of their annual salaries on student loans alone, and now expect to be making payments well into their forties. At the same time, most millennials know they need to start saving for retirement in their twenties – from their first day at their first job if possible – but when Sallie Mae comes knocking it can seem impossible to both pay back debt and save for retirement on an entry level salary.

 

So how can you manage your student loan debt and also make sure you have enough to retire comfortably?

 

Here are a few tips to get started:

1. Create a budget

Your first step should be to come up with a plan outlining your long-term financial priorities, including everything from paying off student loans and contributing to retirement to having immediate funds for an emergency. You can’t focus on realizing long term goals when you’re trapped lurching from one immediate crisis to the next. Take some time to breathe and focus on the future.

 

2. Manage your payment plans

While getting out of debt can seem like a more urgent priority, make sure you are on track to meet your retirement goals before accelerating your student loan debt payoff date. According to a Morningstar report, every dollar of student loan debt creates a 35 cent decrease in retirement savings. Try to put at least 10-20 percent of your income throughout your working years aside for retirement. This enables you to take advantage of compounding interest and the time value of money, so you’ll actually end up with more money by the time you retire. Automation makes managing this process easier, so you don’t need to think twice about it!

 

3. Take advantage of employer matching policies

Does your employer match contributions or participate in a pre-tax retirement saving plan? You could be earning a higher rate of return by making sure you’re participating in and capitalizing on those policies. New company, new plan? No problem! Look into rolling over your 401(k) to maximize your benefits. Sometimes money does grow on trees.

 

4. Refinance your existing debt

If you have good to excellent credit and a steady cash flow you’re a prime candidate for loan refinancing. Look for a new loan with a lower interest rate, and make sure you use all the money from the new loan to pay off the old one. Some banks and loan providers also offer loyalty and automation discounts, so you should also make sure you’re familiar with all the options available to you before you sign on the dotted line.

 

5. Keep an eye on pesky fees

Three in four Americans have no idea what they’re paying in 401(k) fees, and nearly 40 percent believe they’re not paying any fees at all. When’s the last time you checked what you’re paying in fees? It’s not enough to just save money if you end up losing thousands of dollars in fees you don’t even know you’re paying. Signing up for Blooom’s 401(k) robo-advisor to manage your 401(k) and minimize those pesky fees costs a flat fee of $10 per month, no matter how much you have saved. No small print, no tricks.

 

Still feel like you’re drowning in debt? Check out blooom’s free 401(k) checkup tool to see how you’re doing with your retirement savings plan.

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401k Q&A

Q: It seems like most people are saying this AT&T/Time Warner deal is going to get approved soon and I’m thinking their stocks are going to get a nice boost if it does. Is there a way I can invest in those companies in my 401k?

A: Awesome question! Sure feels like this dance has been going on for the last decade, right? Cost analysts seem to think the deal will go through, but then again, analysts are wrong all the time. And, even if it seems likely they’ll get this right, it still doesn’t guarantee a positive outcome for both stocks or either of them. Individual stocks are tricky and it’s nearly impossible to know how a stock is going to react to headlines like this, especially when the story has been drawn out for such a long time. When we talk about mergers, sometimes both stocks react positively, sometimes both react negatively, and sometimes one goes up and one goes down. Over time, things tend to get sorted out, but the bottom line is that investing in individual stocks is simply too risky/stressful for most people, in our opinion. And unless you work for either of them, odds are you won’t be able to invest solely in one or the other inside your 401k. Don’t fret, since it’s probably best for most folks in the long run anyways, regardless of what you think of these two companies and what the deal may or may not mean for their future.

Got a question for us? Ask away!


The information is provided for discussion purposes only and should not be considered as advice for your investments. The information does not represent a recommendation to buy or sell securities. Please consult an investment advisor before you invest.

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Pig playing soccer goalkeeper

Kick in More Now for Retirement: That’s the GOOOOOAAAALLLLL

Right now, in the thick of the FIFA World Cup, teams from across the globe are vying for the coveted gold trophy with the World Cup Final match taking place on July 15th. While these world-class soccer players aren’t likely focused on making any (ahem) BIG saves for retirement right now, they should be. According to the Telegraph, the average soccer career lasts only eight years with a standard retirement age of 35.

A More Offensive Game Plan

Considering the average World Cup player right now is in their mid-to-late 20s, according to Statista, these professional athletes need to be kicking in as much savings as they can to set themselves up for a successful financial life and a sustainable retirement. There’s only one Ronaldo, one Messi, one Beckham, so establishing the financial security needed to retire after a less-than-a-decade career can feel too far out of reach for most others.

Off the pitch, the savings a typical 35 year old should’ve netted at this point has received a lot of attention lately. A study published from Fidelity recommended having twice your annual salary saved for retirement by age 35. Considering the weight of student debt and the outsized cost of housing plaguing millennials, this number feels very out of reach for most of the population in or nearing their 30s.

While the amount you save is vital, what isn’t gameplanned enough is how you’re saving. You can argue that you can save all you want, but if you’re simply holding your savings in cash, it won’t be in the position to grow enough to enable you to retire. After you establish the habit of saving, you must maximize your ability to grow your investments.

More Coaching Required

Two big determinants of investment growth are derived from minimizing fees and maximizing returns, and Americans need help with both. Data from the Census Bureau suggests that 79 percent of Americans work for an employer that sponsors a 401k-style retirement plan, but only 27 percent know how much they’re paying in fees on their 401k accounts, according to a study by TD Ameritrade.

Fortunately, by hiring blooom as your trusted advisor, you can rest assured that we’re working on your behalf to reduce investment fees wherever we can. We make managing your 401k simple, smart and affordable by leveraging the right funds for your goals with lower fees to optimize your retirement savings, no matter what age you are. That’s our GOOOOAAAALLLLL.

Not a blooom member? Here’s your best shot … join now.

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The fees are falling! The fees are falling!

You might say our tried-and-true way to a healthier 401k is starting to catch on – partly through the leveraging of lower fund fees. According to a recent report from the Center for Retirement Research at Boston College, a growing number of lawsuits against plan sponsors (employers) are starting to put the spotlight on hidden fees hitched to high-cost funds.

This is obviously a good thing, but just remember: Although this is leading some companies to tweak their fund offerings with lower fees, they still may not have their employees’ best interests in mind, but rather to avoid getting hit with further litigation. What’s more, because of the lack of specific guidance from the Labor Department, employers may not even know of their rules violations until the agency comes after them or they’re greeted with a lawsuit.
Of course, the fallout from increased litigation could lead to lower fund fees for many employees, but it could eventually leave an opposite impact on those with a 401k plan who work at smaller companies.

That’s because the largest plans with the most assets are usually the ones more able to negotiate lower fees, with small employers least equipped to handle the complexities of fund fees. Plus, as the threat of litigation escalates, so too could the potential threat of a discontinuation of smaller 401k plans altogether.

Fortunately, with blooom as your trusted advisor, you can rest easy knowing we’re making the most of what’s available to you by reducing fees wherever we can. We make managing your 401k simple, smart and affordable by leveraging the right funds with lower fees to optimize your retirement savings.

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401k Q&A

The following questions are real, and we hope our answers are real helpful. See what’s on the enquiring minds of our actual members as we tackle anything and everything (you’ll see) happening with regards to their – and your – 401k.

 

“I’m on vacation and turned on the news this morning. I’m four years away from retirement and wondering what you’re going to do with my account if/when Trump starts WWIII.”

My first most important piece of advice for you while you’re on vacation, especially given everything going on in the world right now is to avoid the TV and as much access to the outside world as possible. Secondly, even in the unlikely event that we were to find ourselves in the middle of WWIII, no one knows what that would mean for stocks. I think we can be pretty certain that in the short term we’d see some significant volatility, but shockingly, stocks have actually done extremely well historically during just about every major war. History can be comforting, but there are of course no promises that another war would see the same results for stocks. Rather than trying to guess or panic and risking future growth on your account IN retirement, it’s important to remember that this is exactly why global diversification using both stocks AND bonds is so important. A heavy portion of your account should be held in fixed income, which potentially reduces any stress to your portfolio.

 

“Since Bitcoin is under $10k again, I want in. How can I do that in my 401k? And tell me why I shouldn’t. It is the future of money after all.”

Don’t mistake Bitcoin and other cryptocurrencies for an investment, especially in an account with a very high priority goal like retirement. First off, you’re not going to have a way to get exposure to cryptocurrencies in your 401k as things stand today. And even if you could, I wouldn’t put anything into Bitcoin or other cryptocurrencies that you wouldn’t be okay losing all of within your first 20 minutes of entering a casino.

 

“I was wondering if medical marijuana stocks are worth betting on in their current early stages. I would love some more insight on who to keep my eyes on.”

We’ll be blunt: Although individual stocks are outside our area of expertise, any investment in a single stock or sector is going to carry a higher risk than a diversified portfolio. So, it’s important to keep the investment to a small portion of your overall wealth. There may be some funds or ETFs targeted at the sector, and that would be a good way to diversify more than a single stock. In most emerging sectors, it’s very hard to predict which companies in that sector are going to succeed. You could be right on the success of the sector, but pick the wrong stocks within that sector and miss the gains entirely. A sector fund or ETF is a good way to minimize that risk.

 

*The information is provided for discussion purposes only and should not be considered as advice for your investments. Investing involves risk. Your investments are subject to loss of principal and are not guaranteed.

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