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As student loan payments begin, it can be difficult to balance paying off debt with saving for retirement. Teresa Ghilarducci, retirement expert and professor of economics at The New School, joined TheStreet to discuss how to navigate this financial tightrope.
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Full video transcript below:
Conway Gates: So tell me, what strategy, tools or advice would you offer? I mean, you have a lot of people with student loan debt. So how do you pay off student loan debt and also keep in mind building that retirement nest egg where you can get that compound interest?
Teresa Ghilarducci: Yeah, so I want to talk to people who are alone right now. Congress should do a lot, but we need to do a lot ourselves before we wait as long as we wait for Congress to do the right thing. If you’re in debt, you’re paying off student debt, but you’ll also be paying off the credit card because you were sick or loaning money to your sibling or your parents. We have a lot of societies where a child going to college is a source of money for his or her parents. Actually, when I think about it, I’ve been in that position. I was loaning money to my mother from my student loan. Many people have this type of network, so you need to put your savings into pools.
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I’m a financial advisor to scouts and this is what I’ve learned. You have to learn that, out of your paycheck should go into short-term savings or debt, and paying it off out of your paycheck should go into medium-term savings and out of your paycheck should go into your lifecycle savings or your retirement savings. So you have to have little envelopes and you have to put the money in those envelopes. So the only answer is that you have to take it out of your current consumption. This is the only way to get savings. There’s a lot of advice in my new book that we forgot to mention called Work, Retire, Redundate, and I even have a section on what to do while you wait for Congress. But people can’t do it alone. There is no worker on this planet but Americans who are expected to go it alone and plan for their retirement. Other countries that are no less capitalist and free market like us have a different and better system. It won’t take much for us to get from here to there.
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