Most workers hope to be free from financial responsibilities such as debt by the time they reach retirement age. But for a growing number of employees in the U.S., debt is proving difficult to shake. Just like younger employees, older workers are experiencing increasing levels of debt, including credit card balances and, surprisingly, student loan debt.
Nearly three in four Americans age 50 and over carry some form of debt, according to the 2023 AARP National Debt Survey. Among those surveyed that carry debt, 61% feel it is a problem and 16% feel it is a major problem. For borrowers ages 50 and older, debt not only inhibits retirement savings but can also mean needing to work far longer than they had planned. Taking debt into retirement can be particularly problematic, since retirees may have fixed incomes that make repayment more difficult.
Understanding Good and Bad Debt
Of course, some debt can be essential to smart financial planning for your employees. Taking out a low-interest mortgage for a home, for example, can be a wise investment that increases an individual’s net worth, while increasing their quality of life.
But high-interest credit card debt can significantly hamper an employee’s financial wellness, including retirement readiness. Unfortunately, 60% of Gen Xers (ages 44 to 59) and 48% of boomers (ages 60-78) have credit card debt, and more than half of those borrowers have been carrying it for over a year, according to a June 2024 Bankrate survey.
For a growing number of employees, student debt is also standing in the way of retirement planning — and not just for recent grads. More than 2.2 million people over the age of 55 have outstanding student loans, significantly impacting how much they are able to save for retirement, according to a study by the Schwartz Center for Economic Policy Analysis, a think tank within The New School’s department of economics.
The Center also found that half of all debtors over age 55 who are still in the labor force are in the bottom half of income-earners, making their situation particularly precarious. These borrowers may struggle to achieve financial stability later in life and be forced to delay retirement.
What HR Pros Can Do for Older Employees Carrying Debt
The good news? It’s likely you already have plenty of benefits on hand that can help with the debt/retirement readiness dilemma. It’s a matter of making sure these benefits are flexible enough to be targeted toward and communicated to older workers. The following steps can help ensure that your organization is offering the benefits your employees — of all ages — need to adequately prepare for retirement.
Beef Up Your Debt Counseling Services
Effective debt management is crucial for the financial well-being of any employee. But for older employees, who have less time to save for retirement and may soon be facing a decline in income, debt can be an even more pressing concern.
Review your financial planning and debt counseling services — whether they are implemented in-house or through a vendor. Make sure that debt counseling is delivered in a way that addresses employees at different ages and stages of life. You may even want to consider segmenting debt counseling by age so the solutions accommodate older employees with a different debt payback and retirement planning time frame.
Review Your Student Loan Repayment Benefits
Student loan repayment benefits are often geared toward recruiting and retaining younger employees. And that’s great. But these benefits can also be a secret weapon for your 50-plus crowd too. Let’s take a closer look.
• Employer-sponsored student loan repayment. Under the Coronavirus Aid, Relief, and Economic Security (CARES) Act, employers can contribute $5,250 annually per employee toward tuition reimbursement or student loan payments on a tax-exempt basis through 2025. This can be a big bonus for recent grads. But do your older employees know this benefit is available for their own long-term student debt too?
• Matching 401(k) contributions for student debt repayment. The Secure Act 2.0, formally authorizes matching contributions for student loan repayment, allowing companies to match employees’ qualified student loan payments with contributions to their retirement accounts, including 401(k)s, 403(b)s, SIMPLE IRAs, and government 457(b) plans. This program may seem designed to benefit young employees, who may be choosing between paying off their student loans and contributing to their retirement accounts. But don’t overlook the fact that older employees (who still carry their own student debt or took out Parent PLUS loans to help pay for a child’s college education) could get a boost from this benefit as well.
Recommended: IRS Issues Guidance on Student Loan Retirement Match
Keep Employees Up to Date on Student Loan Forgiveness
What will happen to the income-driven repayment plan Saving on a Valuable Education (SAVE), currently on pause, is still unclear. But no employer wants their employees to miss out on these and other lucrative benefits, or fall behind on the latest student loan news.
Consider offering online education tools and personalized counseling support to help employees — from recent grads to older borrowers — navigate the ever-changing landscape of repayment and forgiveness programs. At the same time, it’s crucial to make sure your team has the resources to stay current and relevant to your employees.
Recommended: Helping Employees Make Smart Student Debt Decisions: The Urgent Need for HR Support
Tailor Retirement Counseling to 50-Plus
Whether your older employees are worried about debt or not, retirement planning changes once your employees enter their fifties and beyond. Consider offering access to retirement advisors who can assess older employees’ retirement preparedness and offer strategies to help them accumulate retirement savings, while paying down debt.
Educating employees on retirement savings catch-up opportunities — and encouraging them to take advantage of them — can further boost employees’ retirement readiness. Currently, adults age 50 and older can make additional contributions to their retirement accounts. Under SECURE 2.0, individuals making at least $145,000 annually can make a catch-up contribution with after-tax dollars starting in 2026.
The Takeaway
Understanding the connection between debt and retirement readiness among all of your employees, but especially those nearing retirement, is a top challenge for benefits pros.
Sofi at Work is here to help with financial education resources, platforms, and tools you need to make sure your older employees are retirement ready.
Photo credit: iStock/LaylaBird
Products available from SoFi on the Dashboard may vary depending on your employer preferences.
SoFi Relay offers users the ability to connect both SoFi accounts and external accounts using Plaid, Inc.’s service. When you use the service to connect an account, you authorize SoFi to obtain account information from any external accounts as set forth in SoFi’s Terms of Use. Based on your consent SoFi will also automatically provide some financial data received from the credit bureau for your visibility, without the need of you connecting additional accounts. SoFi assumes no responsibility for the timeliness, accuracy, deletion, non-delivery, or failure to store any user data, loss of user data, communications, or personalization settings. You shall confirm the accuracy of Plaid data through sources independent of SoFi. The credit score is a VantageScore® based on TransUnion® (the “Processing Agent”) data.
Advisory tools and services are offered through SoFi Wealth LLC, an SEC-registered investment adviser. 234 1st Street San Francisco, CA 94105.
SoFi Student Loan Refinance Loans, Personal Loans, Private Student Loans, and Mortgage Loans are originated through SoFi Bank, N.A., NMLS #696891 (Member FDIC), (www.nmlsconsumeraccess.org ). The Student Debt Navigator Tool and 529 Savings and Selection Tool are provided by SoFi Wealth LLC, an SEC-registered investment adviser. For additional product-specific legal and licensing information, see SoFi.com/legal. 2750 E. Cottonwood Parkway #300 Cottonwood Heights, UT 84121. ©2024 Social Finance, LLC. All rights reserved. Information as of April 2024 and is subject to change.
Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
External Websites: The information and analysis provided through hyperlinks to third-party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.
Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.
SOAW-Q324-007