How aggressively should our generation save for retirement?

A fair number of us here, are, or will soon be, in our early 20's. Say you've got some money to start putting away for retirement. In saving for retirement, as a general rule should our generation split bonds/stocks 60/40, 50/50, or 40/60?

In theory, as a young person, it's best to be aggressive and split 40/60. Young people don't need quick access to their retirement money, and can afford to wait out downturns in the market. Being aggressive when you won't need the money and have no kids and homes to support is usually a good strategy.

In practice, the stock market is at an all-time high and housing prices are surely overheated, and interest rates are tightening. Should we perhaps be acting more conservative (50/50 or even 60/40) until the market turns down, and then becoming aggressive in the next downturn to buy stocks when they're low?

Or even buying money market funds as a hedge against rising interest rates?

Keep in mind:
a) This is retirement savings. So it has to reflect the right kind of conservatism. And you can't be playing with it like a day trader
b) If you have extra money to "play with," it's better to put it in stocks and keep your bonds in retirement since stock gains get less tax. Better to stuff the bond gains in low-tax retirement savings
c) Obviously the bond/stock split is a simplification. Those categories need to be further diversified among international content and different sectors



DON'T POST A REPLY IF YOU HAVE NO CLUE WHAT YOU'RE TALKING ABOUT.

This is a bad place for a "I dunno I like bonds to be safe lol" posts, unfortunately.

Jam it back in, in the dark.

Bonds are stupid. Plain and simple. ESPECIALLY when you're young (read: below 50).

Mutual Funds are the way to go. Diversify according to size, area, and risk. I keep my investments about 60% Foreign / 40% Domestic, although most people stick to Domestic funds more. A mix between large, mid, and small cap funds is key. Some High-Risk funds help (Such as Emerging Markets), as well as some Low-Risk (I generally use Index Funds for that purpose).

Either way, "Our Generation" obviously refers to people somewhere between 0 and 30. And retirement is far enough away that there is absolutely no reason to have bonds. You're investing for the long term, and in the long term the stock market ALWAYS does better than bonds. Many, many times better.

There's nowhere I can't reach.

Originally Posted by How Unfortunate

DON'T POST A REPLY IF YOU HAVE NO CLUE WHAT YOU'RE TALKING ABOUT.

To be perfectly honest here, just how many people here do you expect to have a clue about stocks and bonds?

I could be totally wrong here, but I think most people in their early 20s have more pressing concerns than stocks, bonds, and retirement; things such as getting through and paying for college, and then finding a career that they can retire from forty years from now.

This thing is sticky, and I don't like it. I don't appreciate it.

Originally Posted by Lord Styphon

To be perfectly honest here, just how many people here do you expect to have a clue about stocks and bonds?

I could be totally wrong here, but I think most people in their early 20s have more pressing concerns than stocks, bonds, and retirement; things such as getting through and paying for college, and then finding a career that they can retire from forty years from now.

To be perfectly honest, some of us work full time jobs, are out of college, and have 401K plans and the like. If we don't NOW, we will as soon as we hit the working world out of college, provided we intend to use our degrees instead of working at McDonalds with no benefits.

I know I personally would like to be more educated about financial investmests, and I don't really see the harm in discussing what a guy should do when he starts making a little money.

The discussion of Roth IRAs, bonds, investments, stocks and so forth are actually something that should be more widely discussed in my opinion. Most people our age are pretty much clueless about their options when they get hired fresh out of college.

Edit: Incidentally, I only have a 401K put aside for myself at the full 4% allowed limit. I have most of said funds invested in around %70 long-term investment and 30% in aggressive growth. I could give a run down if anyone is interested, but I doubt anyone is. (I'd also have to look at records)

I hear a lot about these Roth IRAs, but I'm a little chickenshit to throw myself into the investment world to be honest. If anyone can enlighten me on the benefits on drawbacks of them, I'd love to hear them.

I am a dolphin, do you want me on your body?

How about "fixed ratios are for idiots"? When you see that the stock market is dangerously high, and I don't mean by that that it declined for the last week, I mean something like the dot com bubble, where companies with the same earnings as a convenience store have a market capitalization in the billions, then it's time to transfer a part of what you own in stocks to bonds. Once the market is depressed and people are all saying "stocks are for idiots, bonds are safe", then it's time to actually buy the stocks, provided you can find good bargains, or buy an index fund. Mutual funds can be nice, but it's nearly as hard to find a good one as it is to find good stocks since a large number of mutual funds are crap. And those good ones are often closed to further investment.

Also, looking back in history, there have been times where bonds actually had better average returns than stocks. It hasn't been the case for some time now, but it doesn't mean it won't happen again. In fact, more likely than not, it will happen again someday.

I'll admit it, I have very little actual experience when it comes to investing, mostly since I'm only 18. However, there's one investment book I trust, partly because it makes sense and isn't a "make a million in a month" book, and partly because it has essentially remained unchanged since 1949, so there must be some truth to it. And if there's one thing I've learned from it, is that no type of investment is ever always appropriate. That, and an investor's worst enemy is himself.

I was speaking idiomatically.

Originally Posted by Lord Styphon

To be perfectly honest here, just how many people here do you expect to have a clue about stocks and bonds?

I could be totally wrong here, but I think most people in their early 20s have more pressing concerns than stocks, bonds, and retirement; things such as getting through and paying for college, and then finding a career that they can retire from forty years from now.

-Some of us will know enough to have different opinions. That's what a message board is for is it not? Sharing and learning from different opinions? Obviously the advice will be a bit difference from a finance forum or a banker, and that's what I want. Just not random shots in the dark from 13 year olds

-After you graduate and have a job, some financial advisers advocate splitting your "savings" money 50/50 between retirement and paying down your debt on things like student loans and car debts. Partly for the morale boost, if anything. (Obviously credit cards and other insane interest debts are an exception and must be killed first). Plus, not all of us go to college. 70c/hr is still worth saving well...

-Finding a career is more person-specific and would be better served in angst. Finances depend a bit on risk tolerance and the money you have to play with, but that's why I made the question super high-level and general. A good strategy's a good strategy.

What kind of toxic man-thing is happening now?

I'm interested to see how the discussion is focused on the financial market namely stocks, bonds and the likes.

What about property, gold and currency? Perhaps you'll run a business or win the lottery? Money comes in many ways although the most important is our salary.

With the influx of money through all means during our lives, a superannuation contribution and personal savings, together with interest and other sources of income is generally the standard for accumulating for retirement.

A bigger proportion of money saved for retirement will not help much because there is inflation in the long run and it will put you into financial hardship for rent/mortgage, let alone general expenditures. Also, if many people do this, it will affect aggregate demand and consumer confidence collapse in a spiral, ratchet effect.

As long as we don't save too little and not more than half your income, you will in a good position in the long run given wise moves throughout life.

I think this relates to "Paradox of Thrift".

How ya doing, buddy?

Gold, and other precious metals are always a safe investment.

Originally Posted by How Unfortunate

70c/hr is still worth saving well...

Especially when the copper from our American pennies is worth more then the penny itself. Never thought I'd see that particular day! A penny saved is really a penny earned now.

What, you don't want my bikini-clad body?

Hmm. My personal idea isn't in bonds, but my financial plan is saving an amount to cover for a few months expenses, then start going 70% to investments (stocks and warrants, etc) and 30% to savings afterwards.

However, I'm still in college, and although I have a rough idea, I do like more knowledge on the subject. Can any experts here enlighten us?

Jam it back in, in the dark.

Long-term planning will fuck up short-term plans if you're too conservative; saving for retirement but not being able to pay through college will put you in a position where you're compromising a foreseeable job that could exceed even the long-term savings.

Even so, where you put your money is important. You can't predict the future, and your savings can deplete to nothingness given the right scenario.. many Americans should be wary of all the doomsday economists that are foreseeing bad things to come.

There's nowhere I can't reach.