Your student loans could cost you more than you think
Bill and Robin are both starting their careers and they both want to save $500 a month in their retirement plans. However, Robin needs $333 a month to pay her student loans and can only save $169 a month. Once her loan is paid in full, she can start contributing the same amount as Bill.
You can see that Bill, who was able to contribute more at an earlier age, has considerably more money waiting for him at retirement. But if Robin were able to reduce or eliminate her loan obligations, her retirement savings outlook could be as good as Bill’s.
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Assumptions: Assumed growth rate is 7% annually. Please keep in mind that rates of return will vary over time, particularly for long-term investments. Investments offering the potential for higher rates of return also involve a higher degree of risk. This example does not take into account the effect of investment management fees, product-related fees, or taxes.
