As part of the generation referred to as “millennials” I’m used to reading opinion pieces about what other people think of us. Sometimes I agree with their opinions, other times I don’t. Today I read an article that I agree with 100%. It was written by Patrick O’Shaughnessy and featured on MarketWatch. I frequent Patrick’s personal site, Millennial Invest, often and was delighted to see him featured on MarketWatch. He shared his opinion on how millennials need to think about saving for retirement. A lot of millennials don’t think they’re adult enough to consider topics like retirement saving, but they couldn’t be more wrong.
Among other great points Patrick stated:
“Millennials must change their definition of risk. We all tend to define risk as the choppiness of an investment or the potential that it will hurt us badly in the near term. But the whole point of investing in the stock market is for the long term. If you need to spend whatever money you are investing in the next five years, maybe even the next 10 years, then you should have less of it in stocks. But if your goal is to invest for later in life — for retirement, or your kids’ education — then the least risky asset has always been the stock market.”
An overall distrust of Wall Street and the stock market are prevalent in millennials, more so than other generations. Patrick includes some statistics in his post. Previous generations have relied on social security and their home equity as sources of retirement income. Owning a home is not an income producing asset and social security is a huge question mark, especially for millennials. So what are millennials supposed to do? We’ve overwhelmingly risk averse as a generation, but saving for retirement is a necessity.
I completely agree with Patrick’s solution for millennials facing this retirement saving dilemma: save more, invest more. I believe learning to tune out the short term market noise is a crucial concept to understand. The sooner investors comprehend that, the better off they will be. While things like social security may be out of our control, saving money isn’t. Socking away money in a savings account is great, but it isn’t going to get anybody to a comfortable retirement.
The most important asset millennials have compared to other generations is time. Time is the most valuable asset we have as investors. The best time to start investing for retirement is today.
I highly recommend reading Patrick’s post in its entirety. You’ll find a link to it below.