Make sure you fit retirement into your budget

It's not only possible to put aside money when you're young, but it's more important than ever

Saving for retirement may seem like a low priority for young families, especially when your debt is adding up quickly. New debt like the mortgage and car payments combined with old debt like student loans and unpaid credit card balances can seem overwhelming. Add that to the expense of raising children and you can see why young families sometimes push aside the thought of saving for retirement.

But retirement planning is more important than ever today. Unlike your parents and grandparents, who often had generous company pension plans along with Social Security benefits, young people today will find more of the burden of funding their retirement falls on them.

With some smart planning, though, you can start saving for retirement and still manage your day-to-day expenses. It helps to set financial priorities like paying down debt, starting with the highest-interest debt. The less money you’re spending on high interest charges, the more you’ll have for long-term goals like retirement.

Two of the most popular ways to start stashing away retirement savings are Individual Retirement Accounts, or IRAs, and employer 401(k) plans. Both offer tax benefits. And, thanks to compound interest, a little money invested in either type of plan when you’re young can turn into a lot of money for retirement.

Skeptical? Consider this bit of information from the U.S. Department of Labor’s Employee Benefits Security Administration: If you put $1,000 in an Individual Retirement Account every year between the ages of 20 and 30 (11 years) and the account earns 7 percent annually, you’ll have $168,514 in the account at age 65 – even if you never put another dollar in.

But someone who puts in $1,000 a year into that retirement account starting at age 30 and continues doing so for 35 years earns only $147,913, even at the same interest rate.

You can start small and gradually put more into your retirement accounts as you, and your income, mature. Remember that while you can borrow money to put your children through college, you can’t borrow for retirement.

A good tax adviser or financial planner can help you figure out how much you’ll need for retirement. Establishing good savings habits when your family is still young can help you achieve those retirement goals.