I’m 25 & Ready To Invest For Retirement. Where Do I Start?

September 26, 2019

Molly WardMolly Ward
Certified Financial Planner & Financial Professional
AXA Advisors
Houston, Texas
What’s important: Celebrating milestones in long-term savings

The idea of accumulating money for retirement is outdated, Ward suggests, so to get younger people to think about long-term savings habits, she celebrates milestones. That makes savings more tangible and easier to visualize. It’s easier to coach and motivate younger investors if they reach milestones like $100,000 in their investment account.

“We want to celebrate those milestones and achievements rather than focus on one big lump sum at the end of the retirement rainbow,” she said. “I think this is absolutely the most important way that we’ve tried to get younger people to think about saving for the long term.”

She remarked she also tries to dispel the myth that there’s a “hot” stock of the day that will help clients get rich quickly, or that they can put off saving until they make more money.

Kirk KinderKirk Kinder
Owner & Financial Planner
Picket Fence Financial
Bel Air, Maryland
What’s important: Thinking about total net worth

With so many millennials graduating with significant student debt, their ability to invest may be limited. That’s why Kinder looks at a younger clients’ net worth. By focusing on net worth rather than just investments, it shows positive improvements in their overall financial situation, he notes.

“As they’re paying down the debt, their net worth is going up. So even if they’re not investing a ton, if their net worth is going up, they can look at it as they’re getting wealthier. That success builds on itself,” he said.

Many millennials might only be able to invest enough in a 401(k) to get their employer match, which may be as small as 3% of their income. “If you only focus on the investment portion, it may not look like they’re doing really well,” he said.

John HamJohn Ham
Associate Advisor
New England Investment & Retirement Group
What’s important: Knowing your risk tolerance

Younger generations who start saving early have time on their side and can take on more risk. With that in mind, one of the broadly diversified equity ETFs Ham uses with millennials is the SPDR Portfolio S&P 500 Growth ETF (SPYG) for its growth tilt.

While his firm’s most aggressive investment model is 100% in equities, he doesn’t always suggest it for his younger clients.

In the firm’s moderately aggressive portfolio model, there’s a “healthy” allocation for fixed income. He points out that younger clients may say they have a high risk tolerance but don’t have much experience in down markets. The fourth-quarter 2018 downdraft was a wakeup call for some younger clients. “We used that as an opportunity to talk about why you have a fixed income allocation and reallocating in down markets,” he said.

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