Still Paying Student Loans at 40? How To Get Your Retirement Savings Back on Track
Student loans don’t just weigh down 20-somethings. Student loan debt can linger for decades and leave a lasting scar on your retirement savings.
A 2026 study by EBRI found that student loan borrowers in their 40s have workplace retirement account balances 45% lower than workers without student debt. Even older workers saw a gap in the 401(k) balances, holding 30% less on average in their accounts.
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The cause, of course, is that they contribute less. Older workers ages 50 to 54 with student loans contributed 14.7% less than their counterparts, for example. Both contribution and participation rates among student loan borrowers lagged behind, putting them in a hole that they have to work much harder to escape since they don’t benefit from the same compounding returns from early investments in their 20s and 30s.
So how can you catch up on retirement if you’re still carrying student loans after 40?
Maximize Your Employer Match
If your employer offers matching retirement contributions, take them up on it. You effectively earn an instant 100% return on your investment.
“That is free money you are leaving on the table if you don’t contribute,” said financial advisor Gerry Keene with LPL Financial.
Many student loan borrowers don’t realize they may qualify for matching contributions from their employer, based on payments to their student loans. Under the SECURE 2.0 Act, the IRS allows employers to contribute to their workers’ retirement accounts, matching their student loan payments. This is optional for employers however, so not all employers offer it.
Check with your employer’s HR department before assuming you can move forward.
Consider Retirement as the First Expense, Not the Last
Retirement isn’t optional. The day may come when you can’t work anymore even if you want to, and you’ll have to live the rest of your life on the nest egg you’ve saved.
“Create a spending plan that includes a bucket earmarked for retirement,” said financial advisor Shavon Roman with Heal Plan Invest. Make it the first “expense” that comes out of your paycheck, not whatever remains left over at the end of the month.
To help you trim spending elsewhere, audit your last 12 months of spending to find unused subscriptions. Also take a second look at all employee benefits offered by your employer, to see if you’re underutilizing any of them. Or, for that matter, paying for an optional benefit service that you don’t need.
Build a Safety Net
Most financial advisors recommend an emergency fund with three to six months of living expenses saved.
Sound like a lot? You don’t have to save it all up at once. Keep building it paycheck after paycheck, a little at a time. Get to $500, then $1,000, then one month’s expenses, then two, and so forth.
Unexpected expenses will hit you, it’s just a matter of when. That could mean your next car repair bill, major home repair or medical bill for you or a family member. Without an emergency fund, these bills can derail your entire life. It’s a lot harder to get to work without a car, after all.
Rethink Your Student Loan Strategy
Don’t assume you have to pay off your student loans before saving for retirement.
“Consider making the required loan payments and concentrating on your retirement and other savings,” Keene said.
Over time, compounding returns will build real wealth and do the heavy lifting for you — but only if you start young.
Also, keep in mind that higher-interest debts should take priority. If you’re paying 22% interest on your credit card debt and 7% on your student loans, knock out your credit card balances as your highest priority.
Close the Gap
If you feel behind on your retirement savings, start by sitting down with a financial planner. Set a target retirement date and nest egg, so you have a firm goal.
Catching up might require you to save and invest more money. You can explore investing through not just your workplace retirement account but also an IRA, HSA or an after-tax brokerage account. After reaching 50, you can also make extra catch-up contributions toward your retirement accounts, boosting your tax-free investments.
Depending on your goals and available time, you might have to work later in life. “If you delay retiring until age 67 or 70, that adds years of saving money and subtracts years of withdrawing it,” Keene said.
You can catch up, even after a rocky start troubled by student loans. Just be prepared to push harder now to make up lost time.
This article was provided by MoneyLion.com for informational purposes only and should not be construed as financial, legal or tax advice.
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