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4 Mistakes Millennials are Making with their Retirement Accounts

The term “Millennial” has been more descriptive of a culture rather than a well-defined group. The Pew Research Center has made a best guess as to exactly how old that generation is, pointing to anyone born between 1981 and 1996.1 If that is the case, in 2019 the oldest Millennials are 38 years old. Millennials came of age during the dot-com boom where technology appeared to be driving the economy to new heights. The likelihood that Millennials grew up hearing how important it is to invest to get wealthy is high. They also lived through the financial crisis, and likely had difficulty finding work after incurring huge amounts of student debt. These experiences may have colored their view of the economy and how best to negotiate it.

Some observers have noticed that Millennials could be making better decisions when it comes to investment strategies. Make sure you’re avoiding the investment mistakes some Millennials are making.

1. Cash Heavy

The biggest mistake Millennials could be making today is not having a retirement account at all. A study from Bankrate, a financial services company, finds that many Millennials are heavily invested in cash. Meaning, Millennials have placed large sums of money into savings accounts and CDs, not so much in investments.2 This strategy is understandable given how the markets rocked the economy in 2007. However, having a more diverse portfolio - earning more interest than a savings account - may be best.

2. Fear of the Markets

The fear of stock market volatility is a rational fear for a Millennial. However, erring on the side of stability may be counterproductive by preventing Millennials from creating a robust retirement fund. While a short-term hiccup can cause havoc with an investment portfolio, stocks can produce a good return over the long-term if the investor has a goal in mind and a plan to reach that goal.

3. Blind Investing

Research indicates that Millennials are less likely to review investment portfolios or their 401(k) after they’ve initiated them. They don’t look to review and readjust portfolios for market changes. While they are relatively young, Millennials have the time to do more with their money. These are the years they can afford to take more risks, which should mean more market investments instead of cash. A diverse portfolio can help mitigate risk so that one wrong move won’t ruin plans. The relative youth of Millennials also gives them time to make a plan and invest towards a goal, whether it’s college or retirement.

4. Getting the Full Benefit

If you’re not part of the freelance economy as many Millennials are, you likely have an employer who will contribute to your 401(k), matching your contribution up to a preset maximum. Some employers will match your entire contribution or just a percentage of it. However, some Millennials aren’t taking full advantage of the employer’s matching contribution. If the employer matches your contribution to your retirement account at 100% and you aren’t contributing as much as possible, you could be missing out on thousands of dollars over time.

5. Strategize with a Financial Advisor

The Millennial generation may be young but it has seen great turmoil in the economy and in the world. They have seen more changes than their boomer predecessors have, and continue to experience some uncertainty. Having a sound financial plan for retirement may help ease some concerns. Whether you’re starting out in the job market or have a strong career going full steam, it helps to discuss investment strategies and retirement plans with a financial advisor.

1 http://www.pewresearch.org/fact-tank/2018/03/01/defining-generations-where-millennials-end-and-post-millennials-begin/

2 https://www.bankrate.com/investing/financial-security-july-2018/

This content is developed from sources believed to be providing accurate information, and provided by Twenty Over Ten. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security.