BISMARCK, ND (KFYR) — Taking out a loan to pay for college expenses is something many students can relate to.
The cost of tuition, books, room and board over a two to four year period adds up quickly. Once they graduate, they face the challenge of not only repaying their student loans, but also whether or not to save for a retirement plan. But the big issue to keep in mind is that new graduates have time on their side when saving for retirement.
“You can have a student loan that can take two years or twelve years to pay off. My feeling is that you don’t want to waste those twelve years of not contributing to a 401(k),” said Michael Senechal, certified financial planner at Dakota Community Bank and Trust.
Even if you have student loan debt, contributing as much as your budget allows to a 401(k) can help get you started on your retirement savings goals. Even just putting a minimal amount aside can get worse over a few years. Some students already have a plan to address this challenge.
“I’ll probably throw away as many paychecks as I can right now, barely live…Ramens…pay right now, I don’t like interest,” said Dylan Koloeakken, an HVAC student at Bismarck State College. .
“It would depend, some jobs match 401(k) contributions, so if I end up with a job that matches 401(k), I mean why not if they match 3% contributions, but other than that , my priority would be student debt,” added BSC student Jack Steffes.
Other students haven’t really thought about it, but have already started saving.
“Actually, I’ve already set up a 401(k) so I’m already starting my retirement before I even start paying back my loans. I think, I’m not sure, I guess, I haven’t really thought about it. to the correlation between the two, but obviously I’ve already started on one,” said BSC rookie Reya Dawn.
A ROTH contribution is another benefit that people in early retirement should consider. This allows the contribution to be taxed as it is paid and withdrawn tax-free at a later date.
The advantage of being early in your career is that you can be assumed to enter a lower tax bracket than when you retire. Whatever your plan, the important thing is to start saving.
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