When a person starts working in any job, one of his or her ideal priorities is to start saving for the future. No, we do not just mean your future house or car, we meant saving for your 401 (k) or your retirement plan. We often hear advice such as “live in the now” or “let tomorrow worry about tomorrow”, but in the society we live in, the reality is that we can sleep better at night knowing our farthest future is secured financially. Or at least you are working towards building that secured financial future. Nevertheless, graduates or the fresh workforce are facing a hard choice these days, because most of them carry enormous student loans in thousands and thousands of dollars. They have the difficult choice, having to pick between contributing to their 401 (k) or direct money towards the payment of their student debts.
EMPLOYERS STEP UP
When workers with college loan debt begin to lose hope, employers begin to intervene on their behalf. Abbott, a pharmaceutical and medical goods corporation, is one such employer. The aforementioned business recently revealed a new benefit that will be available to all of their current workers. The new perk from the aforementioned brand will specifically address the financial difficulties that the company’s younger employees are currently facing, namely the challenging decision of whether to save for retirement and old age or to pay off their school loans and the rapidly accruing interest on them.
HOW IT WORKS
The new benefit, known as the Freedom 2 Save program, helps employees pay off their student debts by making contributions to their retirement plan. Workers who pay back their college loans with at least 2% of their salary are eligible for the Freedom 2 Save benefit. Following verification of this information, Abbott will “match” the employee’s 401(k) by 5%.
Assume, for instance, that an Abbott employee makes $80,000 a year and contributes 2% of that amount to repaying their college loans. This works out to $1,600 annually. Abbott’s customary 5% match will contribute $4,000 annually to the employee’s 401(k) or retirement plan. The good news doesn’t stop there, either. According to Abbott, if you continue with the company for a long time, this fantastic new benefit could go up. The company claims that an Abbott employee can contribute more than $50,000 to their retirement savings in just ten years without even making a single investment.
THE PRACTICE IS NOT BRAND NEW
Abbott is not the first business to assist its workers in repaying their education loans. While it may not happen often, certain businesses have been engaging in this practice for some time. But those firms’ policies are not the same as Abbott’s proposal for handling employee student debt. Rather than providing funds for employees’ 401(k) plans, employers contribute cash to their workers’ debt. Furthermore, the assistance programs may not always translate into extra money for people to invest in retirement plans because these aforementioned cash distributions are subject to taxes.
WHY ABBOT AND OTHER COMPANIES ASSIST WITH PAYING EMPLOYEES’ STUDENT LOANS
The corporation will undoubtedly incur higher costs as a result of the Freedom 2 Save program, so why do they continue with it and what potential benefits may they be reaping? According to Abbott’s senior vice president of human resources, Steve Fussell, the rationale is straightforward: investing in talent yields a higher return on investment. Not to mention, it’s a method for the business to express gratitude to staff members for their contributions and to let them know that it genuinely values them.
Offering excellent perks to employees can both aid those who are already working there, guaranteeing the retention of talent, and motivate new hires to apply their abilities for the company’s advantage. It’s essentially a mutually beneficial process of giving and taking. However, we hope that other businesses would take a hint from Abbott as this approach is quite uncommon—it’s safe to say that it’s not particularly popular. After they do, the weight for many workers across the nation will be lifted from them to simultaneously save for their retirement and pay off their college loans.
