How Should Millennials Invest for Retirement?

There’s a lot of retirement advice out there that is just plain dated. Much of it is focused on those who are already in their 40s and 50s and have sizable nest eggs already. And even more of it is written from the perspective of those who came of age during the stock market heyday of the ‘80s and ‘90s, in which stock markets were seeing 15% average annualized gains and you would have had to actually work to try to lose money.

The economic and investment climate today has changed radically since then, but investment advice hasn’t. That makes some sense in a way, as basic principles of saving and investment still hold true over a long period of time. But that’s little consolation for millennials in their 20s and 30s who now find themselves with money to invest but seemingly with no real options and no real clue about what to do.

Following advice that may have worked 30 years ago is a recipe for suboptimal gains or even outright losses. The investing environment and investor behavior have shifted significantly over the past decades, making it necessary for millennials to think about investment and retirement in a completely different light.

Start Saving

The first key to investing for retirement is to start saving. Millennials who are fretting about retirement need to first get on sound financial footing and begin socking money away every month.

Not a day goes by that there isn’t some sort of article about how millennials are the most indebted generation in history, how they aren’t making as much money as their parents did at their age, or how they spend money on frivolous things.

To a certain extent that’s understandable, as decades of low interest rates spurred massive amounts of debt creation, lowered returns on many investments, and incentivized consumption over saving. That doesn’t mean that it’s impossible to save and invest and grow your wealth, just that doing so will be even more of an uphill battle than it was for previous generations.

Take stock of your income versus your expenses, make a budget, keep to it, and watch your savings grow. Most importantly, don’t get discouraged by bad economic data, the threat of recession, etc. It’s still possible to grow your investments even during a bad economy.

Keep Your Powder Dry

It’s also important not to invest just because. Yes, if you have a workplace 401(k) program that offers matching contributions you should take advantage of it and invest in the best choices the program offers. But investing just for the sake of investing can result in outcomes that you may not have intended.

Whether you decide to keep your money in short-term bonds, money market accounts, or simply in a bank account, there’s nothing wrong with keeping your money out of major investments until you see good opportunities. Many experienced billionaires and hedge fund investors are doing just that right now, putting money into cash or gold in order to keep their money safe until stocks return to more reasonable valuations.

Make Smart Investments

It’s easy to say that you need to make smart investments, but it’s a lot more difficult to pull that off. One principle, however, that bears following is never to follow crowds. If everyone is touting a certain stock or a certain asset class as a sure bet, it’s worth being skeptical, particularly if it’s your retirement savings at risk.

The fear of missing out (FOMO) motivates millions of investors to put their money into high-flying stocks, particularly those in disruptive industries or at the cutting edge of technology. But investors who pile in at the end of a bull run risk losing big when stock prices fall again. Don’t let the fear of missing out on gains cause you to put your money into assets that aren’t safe.

Focus on Wealth Preservation

When planning for retirement, you need to think about the long run. And many of the most successful long-term investors are those who focus on wealth preservation in the long run rather than maximizing their gains in the short run.

That’s especially important with stock markets, which can experience significant downturns that can wreak havoc on investor assets. As many investors found out the hard way during the dotcom bubble meltdown and the financial crisis, a single stock market crash can wipe out a decade’s worth of investment gains.

Investors who are focused on the long run make sure to keep their investments out of harm’s way when stock market crashes are on the horizon. Many of them choose to invest in gold, trusting gold’s superior performance during times of economic turbulence.

Those investors looking to protect tax-advantaged retirement assets can even move them into a gold IRA, allowing them to invest in gold while being able to transfer funds from existing retirement accounts tax-free. That makes it easy for them to protect their retirement savings and still benefit from gold’s growth potential.

None of these investment principles are exclusive to millennials, they can be used by anyone at any stage of life. But for millennials who are fretting about whether or not they will even be able to retire, following these principles should give them greater peace of mind that they too will be able to attain the dream of a comfortable retirement.