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Funding College and Retirement Together Just Got Easier
It ’ s a painful choice : to save either for college or retirement . But new saving rules make it easier to do both at the same time .
By Jennifer Lea Reed
MILLIONS OF AMERICANS FACE A conundrum — trying to save for retirement while also saving for a child ’ s college education . For those people , it would be hard to find a year as exciting as 2024 , when new rules have emerged designed to make their lives easier and ask “ either / or ” less often .
This is the year when retirement savings and college funding intersect in three significant ways — and give clients and their adult children or grandchildren more beneficial options than they ’ ve ever had .
The big changes : This year , 529 plan balances can be rolled into Roth IRAs for the beneficiary , which means account holders don ’ t have to worry as much about dollars being left on the table if unused . Also , a parent ’ s retirement contributions will no longer be considered income on the federal form used to determine financial aid for their children . Another biggie is that an employer 401 ( k ), 403 ( b ) or Simple IRA plan can offer a match for an employee ’ s student loan payments .
While these new developments won ’ t remake the retirement landscape completely , collectively they amount to a huge step in the right direction , sources say .
“ The data is dire , the crisis clear . The terrible retirement preparedness of America is unquestionable ,” says Laurel Taylor , founder of Candidly , a digital platform whose mission is to eliminate student debt so people can contribute to their retirement savings . “ Half of all households have zero in retirement savings . The average boomer has $ 106,000 in savings . But this is not an awareness problem , and it ’ s not an education problem . It ’ s a cash flow problem .”
Taylor says she founded her company because she herself was in the position of having to choose between paying off her student loans and making 401 ( k ) contributions . So was her mother , who was paying down a Parent PLUS loan . “ Mom and the millennial ,” she says , were $ 200,000 in debt .
“ The projection is that the average American worker who receives a 50 % retirement match just on the student loan payment , not putting a dime into retirement savings , would have $ 450,000 of retirement savings at the time of retirement . Four times what boomers have today ,” Taylor says . “ That ’ s the magic of compound interest . The student loan payment match has a transformative impact . It can break the cycle of intergenerational borrowing and indebtedness .”
Accessibility Is On Hold For Most As transformative as advisors believe the employer match will be , especially for employees who are not contributing to
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