Many millennials are focused on saving for retirement, but the goal needs to go beyond just socking away money, according to one expert.
“We’re definitely seeing millennials being more active savers,” Katherine Roy, J.P. Morgan’s chief retirement strategist, told Yahoo Finance. “I think the ongoing concern, though, is that they’re great savers but the question is: Are they really investing to the degree they need to over the long term and really benefit from the market?”
People further away from retirement age have the luxury of taking financial risks because there’s more time to recoup any losses, but Roy advised that even if you have time on your side, slower and steadier options can still grow your wealth.
But it’s not just about saving — it’s about “systematic investing” of making regular investments, increasing savings contributions, and fighting off the temptation to spend more when there’s a budget surplus.
“We had record savings in 2020,” Roy said. “There’s an opportunity we think going forward as things normalize to really think carefully about what we didn’t miss, so we spend less to save more.”
Younger generations also have stepped outside of traditional retirement investments and leaned into more alternative investments like cryptocurrencies. As investing and trading have become more mainstream and accessible, millennials can be more comfortable diversifying their portfolios with more volatile investment options than a financial advisor would typically suggest.
Cryptocurrencies bring a potential for high returns, but Roy is against making any one investment opportunity your sole strategy. The ultimate key for successful saving is taking the “appropriate level of risk into a diversified strategy” because “being invested is important but being more diversified is equally as important.”
“Making sure that they have a well-diversified strategy we believe is the best path and the smoothest path to get to a long-term successful retirement outcome,” Roy said.