You don’t hear much about Millennials – those between 19 and 35 – being enthusiastic investors. 

That’s because so far, they’re not. Studies show that fewer of today’s young adults invest than did previous generations at their age. 

Eric W. Anderson, a financial adviser for RBC Wealth Management-U.S. in Minneapolis, said his Millennial clients typically have 25 to 30 percent of their savings in cash.

Young adults may have good reason to hold back. This is a generation scarred by the 2007 recession: They have had a tough time entering the workforce and many face high amounts of student debt. 

“They grew up having dinner with stressed-out parents talking about how they were burned,” said Heather Krause, a financial adviser for RBC Wealth Management-U.S. in Seattle. “Seeing their parents get so close to the retirement goal line and lose the ability to retire in the way they wanted to made [Millennials] shy about investing.”

But young people do have one distinct advantage: Time.
“Millennials don’t trust the stock markets and they don’t believe Social Security will be there for them,” said Paul DeLauro, senior vice president and manager of wealth planning for City National Bank. “But even putting a modest annual amount into tax-deferred accounts, such as an IRA, or accounts where earnings grow tax-free, such as a Roth IRA, can create significant nest-eggs over time.”
DeLauro said that since their investment time horizon is so long, now is the time Millennials should embrace investing in the markets, particularly as they can dollar-cost-average their investments and as they start earning higher salaries and building wealth. The key for them is to focus on the long term, rather than on daily stock market ups and downs.

“There’s been more volatility over the last few years than a normal market,” Anderson said. “Typically, people will wait until things feel better and then jump in, but Millennials really haven’t done that and they haven’t benefited from that jump in markets.”

He suggested that those new to investing should start by setting goals, such as buying a house. Next, establish a rainy day fund to ensure they have enough money to cover three to six months of living expenses in case they lose a job or have an accident. 
From there, aim to save money in a retirement account, such as an employer-sponsored 401(k) or IRA, and then look at other options. Saving 10 percent of your income is a good starting point, Anderson said.
Here are some additional suggestions for Millennials:

  • Invest early: Investing smaller amounts of money over a longer period of time is a better strategy than investing a larger sum later, due to compound interest.
  • Invest regularly: Invest a fixed-dollar amount on a regular basis to smooth out returns over time. An easy way to do this is through a company 401(k) because it comes out of your paycheck. 
  • Save through retirement accounts: Make the maximum pre-tax contribution, which lowers your adjusted gross income and, potentially, your taxes. Money in a 401(k) is taxed upon withdrawal.
  • Take the 40l(k) match: If your employer offers matching funds to your 401(k) contributions, take the maximum benefit. “It’s free money,” Krause said.
  • Consider a Roth IRA: It’s a counterbalance to a 401(k) because withdrawals in retirement are tax free. Taxes on contributions are paid up front, so it’s better to invest in a Roth IRA when you’re younger – and probably in a lower tax bracket – than later in life. Also, Roth IRAs have income limits that may exclude you later.

“What I tell people is to save from day one because you’ll never miss it,” Krause said. “People can get their hands wrapped around college education, but they need to understand the importance of a retirement plan. It’s getting that concept of the future self down.”



Withdrawals from a 401(k) or IRA prior to age 59½ may be subject to a 10% federal tax penalty on earnings. Withdrawals from a Roth IRA are tax- and penalty-free after age 59½ and if the account has been open 5 years

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