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Saving for retirement: It helps to start young

Courtesy of Edward Jones.1 / 2
Examples provided by Edward Jones. (Graph by DL Newspapers staff)2 / 2

Think of it as another bill.

Young 20-somethings nowadays lead busy lives. Some are recent college graduates just starting to build their careers. They have enough on their minds when it comes to finances, there is no more room left for retirement planning.

But even though the 20s and 30s can be the time to buy a first home, plan a wedding and start a family, financial advisors say "pay yourself first."

Juggling student debt and the rest of life's expenses can be mentally exhausting and with today's gloomy economy, fewer young people are choosing to invest early on.

"With the younger generation, fewer individuals are finding jobs or good quality paying jobs, and unfortunately they're looking at paying the bills today instead of saving for retirement," said Jodi Ahles, investment representative at the Detroit Lakes State Bank & Trust.

Gregory Salsbury, author of the new book "Retirementology: Rethinking the American Dream in a New Economy" writes that many people treat retirement as a "zone" they don't have to worry about for 20 or 30 years.

"Quite the contrary, retirement should be viewed as a process -- one that begins as soon as you engage in earning, saving, spending, borrowing or investing," Salsbury writes.

The sooner you start, the smaller the amounts you have to put in now that will still pay off in the long run.

"Statistics show that if you start when you're 20 or even 30 and make smaller contributions, you can have almost twice as much money then if you start at age 40," Ahles said.

Kelly and Sherry Bisek, originally from the Mahnomen area, are among the lucky ones who were able to kick off their retirement planning around the age of 25.

They both take advantage of pension plans provided by their employers, but prior to that, they had limited expenses when Sherry's job offered her free housing.

The couple, now living in Wahpeton, N.D., still had to watch their expenses and put some money aside. But soon enough, they were able to buy their first home and start a family.

In addition to both employer-sponsored plans, the Biseks chose to open a Roth IRA in case they have to roll pension funds from one job to another.

"At this point, we're both vested in our jobs," Kelly Bisek said. "The Roth IRA will always be with us no matter where we're working or where we're living."

But like many other young couples, they've got their hands full with a 2-year-old son, mortgage on a home they bought last year and everyday expenses.

"We're starting a family, we have other priorities right now." Kelly Bisek said. "We wanted to have (the Roth IRA) open and started because we can increase the amount each month or decrease it depending on our income level."

Prioritizing and budgeting properly, as well as weighing the numerous available options, are key when it comes to planning early for retirement.

Ryan Thompson, financial advisor with Edward Jones, said in a world of investment roller coasters, diversified retirement planning based on each individual's comfort level is important.

Mutual funds, individual stocks, government and corporate bonds in addition to 401(k) plans with pre-taxable contributions, are some of the options to choose from.

Ahles said Roth IRAs are a greater benefit for the younger generation because taxes are paid up front, then years later the account is completely tax-free.

"If they start when they're 20 and they leave it in there until they're 60, they've got 40 years of tax-free earnings," she said. "And who doesn't like tax-free money?"

Nonetheless, a mistake that some people make is choosing all risky funds or all flat funds. Even if they're willing to see big swings, Thompson said it's not such a good idea.

"There is always risk involved with investments," he said, adding that with the help of a professional, balancing out portfolios has the potential for big gains.

Regardless, treating retirement saving as one more bill -- as small as $10 or $20 a month -- is the way to go.

"The nice thing is that you have the potential where that's gonna pay you back in the long run," Thompson said. "Other bills don't have that return."

What financial advisors are seeing lately are those who have emergency cash sitting in savings accounts and not being utilized.

Justyn and Jenna Schoenberger are big savers, but not so big on retirement planning. It's not intentional, though.

"We just haven't made that transition," 26-year-old Justyn said.

The young couple used up some stock market investments to buy their first home in Detroit Lakes four years ago. Jenna, a teacher for the Mahnomen Head Start program , has paid off all student loans. Justyn, who's pursuing a degree in accounting, said his student loans are "very minimal."

With two young children, the Schoenbergers say years have gone by so fast that they haven't thought about retirement planning yet.

"We both live very, very busy lives," Justyn Schoenberger said.

When it comes to student loans and other debt, Ahles said if it helps ease your mind, pay those bills off first before putting money away.

Then after car payments, a student loan or a hefty credit card bill is down to nothing, put that same amount of money into retirement saving.

"If you've never had it in your pocket, you're not gonna miss it," Ahles said.