I’m a Financial Planning Expert: Millennials Need 4 Key Assets in Their Retirement Portfolios
Written by
Heather Taylor
Edited by
Amber Barkley
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What does the typical millennial’s retirement portfolio look like in 2023? In August 2023, GOBankingRates surveyed 1,091 Americans to learn more about the retirement assets they have, or plan to have, in their portfolios. Nearly 50% of overall Americans surveyed said their retirement portfolios include a 401(k) and/or an IRA.
While it’s good for millennials to have a 401(k) or IRA, the important question to ask is what’s inside this savings vehicle. GOBankingRates spoke to Jordan Taylor, financial planner with Core Planning, to find out which assets millennials need in their retirement portfolios.
Is a 401(k) or IRA a Key Asset?
Before we can explore which assets millennials need in their retirement portfolios, let’s go back to 401(k)s and IRAs. Are these accounts even considered to be assets?
The answer is no, according to Taylor, who said a 401(k) or IRA is a jersey that identifies the tax treatment the assets inside receive. It’s important for millennials to understand the specific investments they’re holding inside of these accounts, which can be cash, mutual funds, EFTs, index funds or other investment assets.
Which Four Assets Should Be in Every Millennial’s Retirement Portfolio?
Taylor recommends millennials invest in a substantial mix of these four assets.
- The S&P 500, or their chosen index
- The U.S. Total Stock Market Index
- The Total ex-U.S. Stock Market
- A global bond fund with strong U.S. holdings
Why focus on these four specific assets? Taylor said this keeps things simple, keeps costs low and creates pools of diversification that have their own unique attributes.
“Each millennial is going to need to evaluate their distance from retirement, the risks they can afford to take, the risks they want to take and their understanding of these investment categories,” said Taylor. “From there, they can decide whether a 40/30/30/0 split, 20/30/30/20 split or another breakdown is best for them.”
Why Should Millennials Invest in These Four Assets?
Taylor’s four investment recommendations will not make millennials rich overnight. Millennials should not expect to become rich in a few years from these investments, either. What this generation can anticipate, however, is these are time-tested assets with a strong track record of providing growth.
Taylor compares building wealth to be like following the rules of architecture. While it is possible to break the rules for building a house, doing so increases the odds the home is no longer safe and may collapse. Similarly, there are a surprisingly large number of people who have gotten lucky using crypto or buying rental properties to suddenly become rich. These individuals are an anomaly. Behind every sudden success story on a TikTok feed, Taylor said there’s a few hundred thousand people just like them who lost everything running the same playbook.
The Unusual Asset Every Millennial Should Invest In
We’re not referring to a type of digital currency or another trending alternative asset, either. Rather, Taylor said millennials should invest in themselves.
“If you’re 40 years old and you can develop a new skill which helps you negotiate an extra $10,000 into your salary, you’ve got 25 years until formal retirement age. That’s a $250,000 pre-tax gold mine you just created,” said Taylor.
What Else Should Millennials Know About Investing?
One thing every millennial should be cautious about is any circumstance where they might be persuaded into buying investments from people who are paid to sell them.
Taylor uses the example of a millennial getting a call from a random friend who just started working at a wealth management firm. While you can still hear this friend out, Taylor said to be aware they might have been trained to market themselves as a financial planner or advisor. In reality, they might be trying to sell you something, like insurance, and likely don’t know enough to know they might be hurting you.
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