Hills Bank and Trust Company issued the following announcement.
Respect your elders. Don’t talk with your mouth full. Say please and thank you. Our parents have taught us many things, but what about how to balance managing debt – specifically, student loan debt– with saving money for retirement, our own children’s college, or a rainy day fund? If you feel overwhelmed in trying to navigate this conundrum, you’re not alone.
Paying off debt, especially higher interest debt, is a good idea. However, it’s important not to overlook the importance of saving for your future and taking full advantage of your employer’s 401(k) plan. Most employers who offer 401(k) plans also provide a matching contribution. For example, if you contribute a certain percentage of your wages, say 6%, the employer agrees to match up to 50% of your contributions. Think of that match as a return on your investment – in this example, a return of over 50%!
Annual Salary = $50,000
You contribute 6% = $3,000
Employer matches 50% = $1,500
If you’re not participating already, you should! If you are participating, make sure you are taking full advantage of any employer matching contributions. If you don’t know what your employer offers, check with your human resources department to determine what retirement savings benefits might be available to you.
What if your employer does not offer a matching 401(k) contribution? Saving money is still a good habit to develop. If you saved and invested $50 per week, in 30 years you could accumulate over $300,000!
Assumes 8% growth compounded annually at the end of the year. Actual returns and growth are subject to market fluctuations, and future investment performance is not guaranteed.
Assumes 8% growth compounded annually at the end of the year. Actual returns and growth are subject to market fluctuations and future investment performance is not guaranteed.
If you’ve got high-interest loans–say, higher than 8 or 9%–you’re better off trying to pay them down as quickly as possible. For example, if you paid $50 extra every month on a 15 year $20,000 student loan with an 8% interest rate, it could be paid off in 10 years – five years ahead of schedule!
If paying extra isn’t an option for you, look into any opportunities to reduce the interest rate on your loans: you may be able to refinance at a lower rate. Some companies also offer interest rate discounts for “going paperless” and signing up for automatic payments. Every little bit helps.
Life is about choices and finding a balance. Don’t make paying off debt or saving for your future an either-or strategy. Take advantage of programs available to you to maximize your savings and minimize your debt. Make a plan to allocate to both in a way that works for you.
If you’re looking for additional guidance, our Wealth Management Group has officers in both Johnson and Linn counties. We invite you to schedule a meeting with one of our experienced Trust and Wealth Management Officers by calling 1-800-899-8858. We look forward to serving you as your trusted advisor.
Investment products are not a deposit, not FDIC insured, not insured by any government agency, carry no bank guarantee, and may go down in value.
Original source can be found here.