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“Retirement Planning for 20-Somethings: Don’t Fall
Into the ‘Playing It Safe’ Trap”
Something that this article has made clear to me is that target-dated funds should continue to rise in popularity. This is because they offer the “easiest” way to be on a better track to a more diversified portfolio. Not everyone has the knowledge or willpower to allocate their own portfolio. This is an accessible way that offers a potentially higher return than the 16% of workers in their 20s (in 2006) that had no money in stocks could realize. Your risk tolerance should be higher when you are young because you have more time to wait out the lows of the economy as well as more time to earn money. Investing completely in low-yield etfs and “stable-value” funds can result in much more conservative gains that will at best beat inflation.
There is a lot of discussion on the millennial generation and the general trends observed. They arrive into the workforce with significantly more debt than any generation prior and tend to more or less nitpick the job they ultimately undertake. Additionally, as the article states, there is much speculation that social security may not be around when the millennial generate arrives at retirement age so the need the for retirement savings is even more important. So while the challenges for retirement planning appear to be greater for this generation than past, there are several positive changes that one could argue make it easier to plan. First, the amount of time available is the most important asset we currently have. The article discusses the various funds available that, for the most part, do the investment work throughout the funds life for you. While this generation is entering the workforce with more debt, they’re also entering during a time when trading and investing has never been cheaper. Prior generations didn’t have access to the wealth of resources we have available and searching for particular funds that address one’s needs is now easier than ever. Buying stocks and the development of ETF’s have made investing for just about anybody literally at the tips of ones fingertips. Despite the challenges faced, ‘play it safe’ is really the most detrimental them you could do to your retirement.