Financial planners have traditionally advised young retirement savers to invest heavily in equities and then gradually transition to less volatile investments as they age. But financial market turmoil appears to have scared many young investors out of the stock market. Twenty-somethings are now the most conservative investors of any age group.
Many young people (41 percent) between ages 18 and 33 say their personal savings is mostly in bank savings accounts and CDs, according to a recent Harris Poll of 2,151 adults. In contrast, only 22 percent of baby boomers and 30 percent of Generation Xers are invested mostly in these FDIC insured products. Young people are even more conservative than individuals age 65 and older. Just under a third (31 percent) of retirees are mostly invested in savings accounts and CDs.
Few 20-somethings own a significant amount of stocks, bonds, or a diversified mix of the two. Only a small proportion of workers in their 20s are primarily invested in stocks or mutual funds (7 percent), mostly in bonds or money market funds (4 percent), or even have a mix of stock and bond funds (7 percent), all the smallest proportions of any age group, Harris found. In contrast, 14 percent of baby boomers are invested primarily in stocks or mutual funds and nearly a quarter (23 percent) have an equal mix of stock and bond funds.
The trend is even more pronounced among affluent investors. Over half (59 percent) of relatively wealthy retirement savers between ages 18 and 34 describe themselves as conservative investors who prefer low risk investments, according to a Bank of America Merrill Lynch survey of 1,000 people with $250,000 or more invested for retirement. More young people consider themselves conservative investors than any other age group including baby boomers age 51 to 64 (39 percent) and even retirees age 65 and older (51 percent).