by Daleona Davisin 19th
Starting this year, employers can match an employee’s student loan repayments with 401(k) contributions. Experts say the policy could be a “game changer” for black women, who on average have the most student loan debt.
When someone pays off their student loans, the employer can contribute the same amount to the employee’s retirement plan based on: Article 110 This is a federal law known as the SECURE Act 2.0. This policy, which stands for Setting Every Community Up for Retirement Enhancement, states that “if an employer makes matching contributions under her 401(k) plan, 403(b) plan, or SIMPLE IRA for “qualified student loan payments.” I permit you to do so.”
The contribution option, signed into law in 2022, comes at a time when many Americans, especially women, are carrying student loan debt. According to the magazine, up to 61.4% of women with a bachelor’s degree take out federal student loans, compared to 52.2% of men with a bachelor’s degree. education data initiative. The research organization, which focuses on collecting and distributing U.S. education system statistics, reported that black women have the most debt ($29,051) compared to other groups of women.
Senator Benjamin L. Cardin said, “This massive student loan burden, combined with the wage disparity between men and women, especially women of color, is contributing to the already existing gap between these groups in retirement, savings, and self-confidence.” “This is further exacerbating the disparities that exist.” The Maryland Democrat is a member of the Senate Finance Committee and has supported similar legislation in the past.
This latest provision “will help people who are missing out on matching contributions available to their retirement plans because they have to prioritize student loan repayments,” Cardan said on Monday. Ta.
According to the report, up to 72% of non-retirees had a retirement savings account as of 2022, but only 31% felt their retirement savings were on track and expected to increase in 2021. This is down from 40% in 2019. data From the Federal Reserve System. Although 60% of Black non-retirees have a retirement account, only 22% feel they are on track for retirement.
Financial advisers say debt is contributing to that. Through her company, Raya Reeves provides financial coaching to women and creates personalized budget plans for them. city girl saving. After creating a budget, she works with her clients to use the remaining funds to pay off their debts.
“Some of my clients spend 25% of their income on debt payments. What if that money could go back into their budget and put toward savings, investments, or retirement? Just imagine what that would be like,” Reeves said.
Once living expenses and debts are covered, she focuses on getting her clients to think about wealth building, and says, “Contributing to a retirement plan is one of the best ways to do that.”
data Despite increases in Black home, stock and business ownership from 2019 to 2022, racial wealth disparities remain, according to a Federal Reserve study. . Median wealth (the amount of assets owned by a typical family) was $536,000 for Asian families. $285,000 for white families; $61,600 for Hispanic families; $44,900 for black families; According to the data, Native American families “have similar median wealth to typical black and Hispanic families, but not to typical white or Asian families,” although the specific amounts are Not shown.
According to the US, contributions to retirement plans grow assets tax-free and earn interest over time. Internal Revenue Service – Small, regular contributions can lead to “significant retirement savings.” There are also beneficiaries of retirement plans and people who take over the account when the original owner dies, allowing you to build wealth for generations.
Reeves said the SECURE Act is a strong benefit and he expects more employers to adopt it in the future.
“This is still a form of investing and saving for retirement, which is amazing, although it’s not as much as basically doubling the amount of money you’re putting into your retirement plan. At least your employer has something in place for you so you don’t have to feel like you’re being held back when it comes to retiring,” Reeves said.
This policy only applies to companies that already provide matching contributions. Gloria L. Blackwell, CEO American Association of College Womenpraises the positive impact this policy could have, but recognizes that its scope is limited.
“If more employers adopted this, it could certainly be a game-changer for many women who are actually locked out of retirement savings, but essentially it’s already a gendered “It doesn’t really help address what’s going on with the pay gap,” she said. Blackwell also explained that even with this policy in place, there are limits to what employees can expect. “It is voluntary and depends on the ability, decisions, values and even whims of the employer.”
The founder of Erica Hines is Leadership at all levelsThe diversity, equity, inclusion and workplace culture consulting firm believes this policy supports equity and is particularly beneficial for Black women. She recommends concerned employees navigate conversations between co-workers before bringing it up to upper management.
“Let’s build a coalition. Let’s have a coalition speak up so that more voices are heard than just one. Have data,” Hines explained, explaining how student loan debt impacts different types of people. We suggested that employers understand, at a detailed level, how this will affect them. “Student loan issues aren’t just a problem for people in their 20s. People from their 20s to their 60s and 70s are still making loan payments that are impacting their Social Security benefits. ”
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