Student loans are quietly gutting your retirement — especially in your 40s

Student loans can silently erode retirement savings, particularly for people in their 40s, according to a recent study by the Employee Benefit Research Institute (EBRI). People with student debt had a median retirement account balance about 45% lower than those without debt. The impact of student loan debt on retirement savings is significant, with one in five 401(k) participants between 25 and 69 having student loan debt.

Younger workers are more likely to have student loan debt, but a surprising number of those over 50 are either paying off their own loans or their children's loans. One reason for the savings gap is that those carrying debt are less likely to contribute to their 401(k) plan or cut contributions if they stay enrolled. A new option, made possible by the Secure 2.0 Act, allows employers to count monthly student loan payments as contributions to a retirement account.

This benefit, which about 42% of US companies offer, can add $11.2 billion to $20.2 billion in annual 401(k) matching contributions if universally adopted. The biggest benefit is that employees can still accumulate retirement assets and benefit from years of investment growth even if they are focused on repaying student debt.