Start saving early for retirement

The earlier people start savings for retirement the better. The power of compounding over time is impressive. Yet many college graduates find it hard to pay down student loans and make substantial contributions into their employer-sponsored retirement savings plan (and pay for rent, utilities, and other bills). These employees often can't take full advantage of their employer's match — a critical part of their compensation.

Here's an illustration of why the match matters, courtesy of FINRA — the Financial Industry Regulatory Authority. Let's say you're 22 years old and earn $40,000 annually. You contribute 3% of your salary ($1,200) to your 401(k). Let's also assume you'll make the same salary and same contribution each year until you're 65. You'll have contributed $51,600 to your 401(k) over 43 years. Now, let's add a dollar-for-dollar match from your employer for 401(k) contributions up to 3% of your salary. The match doubles your total savings — from $51,600 to $103,200. That's an extra $51,600 before taking investment returns into account.

Allianz Life Insurance Company of North America addressed the challenge for its employees with its Student Loan Retirement program. Started in July 2020, the program is designed to help employees whose student loan payments prevent them from getting the full 7.5% match in the company's 401(k). Employees let the company know that they're paying down student loans and Allianz tops off their match. The program makes it financially easier for employees to pay back their student loans and save for retirement, said Jenny Guldseth, chief human resources officer at Allianz Life.

The good news is that it should be easier for more employers to adopt a similar policy in 2024, thanks to a provision in the bipartisan Secure 2.0 legislation aimed at boosting retirement savings passed into law in late 2022. Employers starting in 2024 will have the option of treating employee federal student loan payments as retirement savings contributions so that they can receive a matching contribution from the employer up to a certain percentage of their salary.

Of course, it's up to employers to make this option available to employees. I hope many will in 2024, especially considering the competition for talent in a tight labor market.

Chris Farrell is senior economics contributor, "Marketplace"; commentator, Minnesota Public Radio.