Two-thirds of employees say student loan repayments will derail retirement plans

Columbus, OH – Today, employees face myriad challenges that impact their long-term financial planning, with the timeliest one being the resumption of student loan payments in October. While many assume younger employees are impacted the most, a new survey by the Nationwide Retirement Institute® finds that even seasoned employees are experiencing significant financial pressures due to the resumption of payments. Over one in 10 (12%) employees ages 45+ currently have student loan debt and most of these individuals (61%) agree the reinstatement of student loan payments has negatively impacted their financial stability and long-term planning. Another two-thirds (66%) agree repayments will significantly affect their ability to save for retirement.

Employees ages 45+ with student loan debt have or are considering taking several steps to manage upcoming repayments — with some being more detrimental to their long-term financial strategy than others:

• 29% are planning to adjust their retirement plan contributions in order to keep up with their student loan payments. 18% have already adjusted their retirement plan contributions.
• 49% are reconsidering the feasibility of their retirement goals in light of their student loan debt.
• 59% are considering additional sources of income or side gigs to offset the financial strain caused by student loan payments and maintain their retirement savings contributions.

According to U.S. Census data* there are 140 million Americans ages 45 or older. With 12% of this group having student loans according to this survey, there is a potential for nearly 17 million older Americans making financial decisions as a result of student loan payment resumption.

Due to the impact of student loan repayments on their long-term strategy, 85% of employees ages 45+ with student loan debt would be interested if their employer offered a match to their loan repayments for retirement savings. However, only 16% have sought professional advice to determine the best course of action in managing both their student loan payments and retirement savings.

“It’s impossible to ignore the long-term financial impact student loan repayments can have on employees across all generations. The good news is SECURE 2.0 Act now allows employers to provide matching retirement plan contributions based on the amount of an employee’s student debt repayments — a provision Nationwide advocated for and is excited to further innovate on,” said Eric Stevenson, President of Nationwide Retirement Solutions. “Between student loans, interest rate increases and inflation, employees have a lot to navigate when planning for retirement. There is a strong business imperative for employers to help.”

Employees are concerned about their financial futures – and employers can help
About a quarter (24%) of employees ages 45+ are now expecting to retire later than they planned to a year ago, and about one in 10 (9%) don’t think they will ever be able to retire, with primary concerns about not being able to live the life they want in retirement (61%), a future recession (52%), and outliving their retirement income (50%).

For employees ages 45+, this is exacerbated by concerns about the cost of healthcare (65%), inflation/rising living costs (62%), and Social Security not being there when they’re ready to retire (59%).

Because of these concerns, eight in 10 businesses (81%) say many of their employees have asked them about the steps they can take to better prepare for retirement. Failure to fill this gap may lead to attrition — nearly two-fifths (39%) of businesses have observed an increase in employees leaving for companies with better benefits over the past year as a result of economic uncertainty.

Employee interest in retirement solutions that offer pension-like income remains high
To hedge against an uncertain future, employees are interested in predictable sources of income in retirement. Nearly three-fourths (73%) of employees ages 45+ who participate in 401(k) plans wish they were offered a pension-like income stream within their employer-sponsored plan – such as a guaranteed lifetime income investment option. Additionally, when asked what would most increase their confidence in their retirement plan and financial investments, 55% of respondents said guaranteed income options – the top response selected.

Employees are ready to act if employers provide these solutions. Nearly nine in 10 employees ages 45+ (87%) say they would be at least somewhat likely to rollover their retirement savings into a guaranteed lifetime income investment option if they had the ability.

“In today’s age of volatility, protected retirement income solutions can provide employees the financial security they need to feel confident in their futures,” continued Stevenson. “By offering a steady stream of predictable income for life, employees can stay on track toward their retirement goals and ensure they don’t outlive their income. Employers can play a critical role in minimizing delayed retirements by offering these solutions to create a world-class benefits package.”

Nationwide introduced a suite of in-plan protected income solutions to help plan sponsors offer plan participants guaranteed income for life and protection against market volatility. Plan sponsors can work with their financial professionals and visit Nationwide’s resources  for more information. Nationwide also offers educational resources for financial professionals, advisors and consultants.

For more information on the findings of this survey, view this infographic or complete survey results.

Methodology
Edelman Data and Intelligence (DXI) conducted a national online survey of n=600 US retirement plan sponsors and n=1,200 US retirement plan participants on behalf of Nationwide from August 10 – August 28, 2023.

As a member in good standing with The Insights Association as well as ESOMAR Edelman Data and Intelligence conducts all research in accordance with local, national and international laws as well as in line with all Market Research Standards and Guidelines.