Prudential tackles implications student debt has on retirement with DC event

Firm also releases new white paper as issue becomes a focus of
millions of households

WASHINGTON–(BUSINESS WIRE)–Prudential Financial, Inc. (NYSE:PRU) and The Center for Retirement
Research at Boston College, at an event today at the Capitol, jointly
unveiled the latest National Retirement Risk Index research, which
highlights and examines the implications of student debt on Americans’
retirement readiness.

The event, The
Impact of Student Debt on Financial Preparedness
, was held at
the U.S. Capitol in the Capitol Visitor’s Center. Panelists including
James Mahaney, vice president of Strategic Initiatives at Prudential,
highlighted that the median worker with a bachelor’s degree earned
$57,252 in 2014, while the median worker with a high school diploma
earned $34,736.* “There is no doubt that a college education is
valuable,” Mahaney said. “However, families need to borrow wisely when
financing a college education, as increased borrowing can impact the
future retirement security of students as well as parents.”

The Center for Retirement Research at Boston College yesterday issued a
new Issue in Brief: “Will
the Explosion of Student Debt Widen the Retirement Security Gap?”

The analysis utilizes the National Retirement Risk Index (NRRI),
which measures the percentage of working-age households “at risk” of
being unable to maintain their pre-retirement standard of living during
retirement.

“Our new study addressed whether student debt could have a big impact on
retirement preparedness, and the answer was a definitive ‘yes!’” Alicia
Munnell, director of the Center for Retirement Research at Boston
College and a panelist at the event, said.

According to the brief, if NRRI households had started out with today’s
student debt levels, the Index would be 56.2 percent instead of the
already alarming 51.6 percent.

“Attending a good college is a dream of students and their parents
alike. However, households are often faced with the issue of paying down
student loan debt versus saving for retirement,” Mahaney, who
authored the companion paper,
said. “As this research shows, student loan repayments may impact a
household’s future retirement security if the ability to contribute to a
401(k) is affected. If at all possible, the presence of student loan
debt should not preclude saving for retirement, at least at a
contribution rate that allows an individual to receive the full employer
matching contribution.”

Prudential’s companion paper
offers considerations for individuals/families, employers and financial
advisors dealing with this topic.

For Individuals and Families

  • Prior to selecting a college, carefully consider how to approach
    financing an undergraduate degree, including becoming familiar with
    how specific schools provide financial aid. Prudential’s publication, Paying
    for College: A Practical Guide for Families
    , provides some
    guidance.
  • If loans must be taken to finance a degree, consider how those loans
    will be paid back, given career earning potential and available
    federal loan repayment and forgiveness programs.
  • Whether a parent or young graduate, give careful consideration before
    contributing to a 401(k) plan at a rate less than the contribution
    percentage an employer is willing to match; the match is “free money”
    that, once foregone, can never be recaptured.

For Employers

  • Recognize that student loan debt is top of mind with young employees,
    especially new hires.
  • Consider ways to help employees pay off student loans as well as save
    for retirement.
  • Help parents save for college by providing payroll deduction savings
    vehicles and planning tools.

For Financial Advisors

  • Assist individual clients in setting aside enough assets so as to
    minimize student loan debt once college is at hand.
  • Help clients understand the different ways that various schools
    approach financial aid, especially merit aid and grant awards, which
    can lessen the amount of debt a family will take on.
  • Ensure that clients are saving adequately for retirement based on
    their circumstances; at a minimum, contributions should be set at a
    rate that takes full advantage of an employer’s 401(k) matching
    contribution.

Prudential is the exclusive sponsor of the National Retirement Risk
Index.

*U.S. Bureau of Labor Statistics (http://data.bls.gov/cgi-bin/print.pl/emp/ep_table_001.htm)

Prudential Financial, Inc. (NYSE: PRU), a financial services leader with
more than $1 trillion of assets under management as of September 30,
2015, has operations in the United States, Asia, Europe, and Latin
America. Prudential’s diverse and talented employees are committed to
helping individual and institutional customers grow and protect their
wealth through a variety of products and services, including life
insurance, annuities, retirement-related services, mutual funds and
investment management. In the U.S., Prudential’s iconic Rock symbol has
stood for strength, stability, expertise and innovation for more than a
century. For more information, please visit www.news.prudential.com.

0287820-00001-00

Contacts

Prudential Financial, Inc.
Josh Stoffregen, 973-802-3996
josh.stoffregen@prudential.com