Millennials: How Much Risk Should You Be Taking With Your Retirement Savings?
Written by
Yaël Bizouati-Kennedy
Edited by
Molly Sullivan
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One of the defining traits of millennials is that it’s a generation experiencing many firsts in life — the purchase of a home, a new job, a wedding or a child. These, in turn, generate additional burdens, such as day care costs and mortgages.
In parallel, they are also facing a slew of financial challenges, including inflation, soaring interest rates and the resumption of student loan payments, which are burdening many of them. So, it’s no surprise that 31% feel they are falling behind on their retirement savings, according to Goldman Sachs’ Retirement Survey & Insights Report.
Against this backdrop, it can be challenging for millennials — many of whom are also in their prime earning years — to gage how much risk they should be taking with their retirement savings.
Be Aggressive but Be Aware of Fees
Millennials still have a long runway to retirement so they should be aggressive and take appropriate risks with their investing, according to Bobbi Rebell, CFP and personal finance expert at CardRates.com.
That said, they should be aware of fees and make sure they aren’t pushed to buy expensive products that can be marketed to people with growing family responsibilities, Rebell said.
“They don’t need the hand-holding that older generations tend to have valued and therefore should be able to invest with lower costs,” she said, noting that they are more aware of investing in general and tend to be more engaged in their financial lives, thanks to growing up with technology.
Don’t Roll the Dice on ‘YOLO Options’
Millennials have adopted the FIRE (financial independence, retire early) mentality more than any other generation and paved the way for the “side-hustle” approach that Gen Z may be elevating to an art form, according to Stephen Kates, CFP, principal financial analyst at RetireGuide.com.
While they entered the workforce close to the Great Financial Crisis of 2008, they also have benefited from the tremendous growth of the stock market since then, he added.
“For those who have been diligently investing, the period from 2009 to present has been one of the most lucrative 15-year periods in market history,” Kates said.
At the same time, as their positions as investors and retirement savers have changed, they need to be committed to regular contributions to a diversified and tax-efficient portfolio.
“There isn’t as much logic to rolling the dice on YOLO options like their younger counterparts Gen Z when you have a mortgage, two car payments and a child in day care,” Kates said.
Thomas Savidge, economist with the American Institute for Economic Research, echoed the sentiment, saying that they should consider growing their retirement savings through contributions and investment growth while retirement is still a long way off.
Lean Into Higher-Risk Investments but Be Wary of Fads
Some experts also argued that what sets this generation apart when it comes to retirement planning is a fundamentally different relationship with the concept of time.
Unlike previous generations who might have planned linearly for retirement — working for several decades and then stopping — millennials are approaching their financial futures with a more fluid perspective, according to Stephen Greet, CEO and co-founder of BeamJobs.
This strong sense of adaptability has pushed many into alternative career paths, side hustles and entrepreneurial ventures as part of their long-term financial strategy.
“This shift has naturally influenced how they save for retirement, leaning toward more flexible, self-directed investment accounts like Roth IRAs or 401(k)s with options to self-manage,” Greet said.
In turn, Greet said that when it comes to risk, millennials should harness their inherent adaptability but remain cautious about the allure of “get-rich-quick” schemes or overly trendy investments.
Given their longer time horizon, it makes sense for millennials to lean into higher-risk investments that have the potential for higher returns, like stocks or real estate, especially if they have the financial stability to weather short-term volatility, he said.
“However, a word of caution: The temptation to jump on the latest investment trend — whether it’s a hot new cryptocurrency, meme stocks, or speculative tech — should be met with a critical eye,” he said. “It’s easy to get caught up in the excitement, especially when social media amplifies success stories. But, without a solid understanding of the market and a clear strategy, these high-risk moves can derail long-term financial goals.”
According to him, the key for millennials is to take risks that are calculated and informed, not impulsive.
“They should educate themselves, seek advice when needed, and remember that their investment decisions today can pave the way for a flexible, fulfilling financial future,” Greet said.
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