Millennials are saving but their fear of stocks could hurt them

Younger generation happy about their savings habits but aversion to stocks could hurt their retirement savings plan
APR 13, 2015

Millennials might be saving more than older folks but they are also the age group that will have the biggest retirement savings burden in history because of their aversion to risk.

BankRate.com's financial security survey found that although more millennials are secure about their jobs and pleased with their savings habits than they were in April 2014, a majority of them (63%) feel less satisfied about their net worth.

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“Millennials got the memo on the importance of savings, but they are going to need a nest egg for retirement that won't come from safe haven investments,” said Greg McBride, chief financial analyst at BankRate.com “They need compounding.”

(Mary Beth Franklin: Nearly half of retirees wish they had retired earlier) The survey did not ask how much people were saving.

Seventy eight percent of the millennials surveyed by BankRate.com said they are not inclined to invest in stocks, preferring investments such as bonds. But “safe haven” investments like bonds will not build significant retirement nest eggs over the long haul, according to Mr. McBride.

Financial advisers tending to millennials might keep that fact in mind.

Mr. McBride said that given millennials' unease with stocks, target date funds could be a “great” option for them. Target date funds typically overweight equity investments and underweight fixed income investments when investors are younger, then gradually shift away from stocks toward bonds as the investor nears retirement.

BankRate.com polled 3,469 people from age 18 to over 65 for its report.

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