How to balance debt and invest for retirement
By Christina Couch • Bankrate.com

Who could say no to free money? Generation Y. Fewer than one-third of all eligible workers between the ages of 18 and 25 participate in their company's retirement plan, according to a survey by human resources research firm Hewitt Associates. They're losing free, steadily increasing funds from employer-matched contributions.

It's not hard to see why retirement savings has taken a back seat to other obligations. In the past decade, the average level of debt for a graduating college senior has more than doubled. Student loan debt tops $20,000 for 2008 graduates, who also carry an average credit card balance of more than $3,200, according to The Project on Student Debt, a Washington, D.C.-based nonprofit organization.

Nicholas Aretakis, author of "No More Ramen: The 20-Something's Real World Survival Guide," says this is testament to why it's important for younger employees to develop long-term savings habits early. "It's crazy for any employee, even under financial strife, not to save for the future," he says. "Many feel that they cannot afford to invest when actually the converse is true -- they cannot afford not to invest."

5 tips to savings without going broke now

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Track your progress Frequently it's not lack of funds, but rather lack of perspective that keeps young employees from opting into retirement accounts, says Dan DeKeizer, a vice president and actuary in MetLife's Retirement Strategies Group. "What I see right in front of me always feels more important than something that's a long time away," he says. "Being able to live a desirable lifestyle in retirement doesn't compare to immediate things like paying a student loan, buying a house, getting married." Understanding that putting money away now translates to bigger, better luxuries later is difficult for someone pinching pennies on an entry-level salary. Danialle Foy, a 29-year-old administrative assistant in Chicago, says that she stays motivated in her savings plan by calculating the earnings her retirement account will likely gain in the next 40 years as well as how much money her household is saving by eliminating credit card debt. "On our credit cards alone, we've paid almost $4,000 in actual debt, but we've also saved about $6,000 in interest," Foy says. "When we've paid off all of our cards, that extra money will go straight to retirement. When you do the math, you can see how much money you're saving and you feel like you're making progress." Track your own progress on Bankrate's retirement calculator to see how your money can multiply over the years. Bankrate's debt payoff calculator reveals how much you can save by paying debt off early.

What's your secret to success with retirement? Or, are you struggling? Share your story.

-- Posted: June 23, 2008