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60% of Americans Invest Too Conservatively for Retirement, Study Shows

By Maurie Backman – Updated Nov 22, 2016 at 1:35PM

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Are you making the same mistake?

Given the mounting costs seniors face once they stop working, from housing to transportation to healthcare, it's more crucial than ever to start saving for retirement early on. But saving early is only half of the equation. An equally important component is choosing the right investments to allow your money to grow, yet new data suggests many of us are faltering in this regard. According to a recently released Wells Fargo study, about 60% of Americans are saving too conservatively for retirement by focusing on avoiding loss instead of maximizing growth. While nobody likes losing money, if you err too much on the side of caution, you risk coming up short when retirement rolls around.


Who's afraid of a little risk?

It's one thing to be risk-averse as an older investor near retirement. In fact, if you're in your 60s, it's actually a smart idea to start moving away from riskier investments like stocks and put a large chunk (though not all) of your portfolio into more conservative options, like bonds. But if retirement is decades away, and you have time to ride out the stock market's inevitable fluctuations, staying away from stocks is a bad move, as it can stunt your portfolio's growth.

Now what's interesting about the Wells Fargo study is that this conservative approach to investing isn't limited to a particular age group, but rather, is prevalent across the board. Roughly 60% of those in their 30s, 40s, and 50s all share the same attitude about minimizing risk rather than capitalizing on growth opportunities.

Oddly enough, a slightly smaller percentage of 60-something investors have the same attitude. Only 52% of those in their 60s agree that it's better to focus on avoiding losses than take steps to maximize growth. But no matter your age, it's important to understand the lost opportunities that come with conservative investing.

Making the most of your investment dollars

While the annual contribution limits are currently $18,000 for a 401(k) and $5,500 for an IRA ($24,000 and $6,500, respectively, if you're 50 or older), most of us can't max out our retirement plan contributions because we need that money to cover our living expenses. But you can choose the right investments to maximize the limited amount of money you're able to save.

So where should you put your money? While your portfolio should always contain some sort of mix, a more aggressive, stock-focused portfolio typically offers the greatest opportunity for growth. And as long as retirement isn't right around the corner, there's no reason to shy away from stocks despite the risks involved.

The following table highlights the difference between a conservative investment strategy and one that's far more aggressive:

Investment Style

Average Annual Investment Return

Total Accumulated Over 30 Years (Assumes $300 Monthly Investment)




Moderately conservative



Moderately aggressive







As you can see, investing $300 a month over the course of 30 years will leave you with an ending balance of roughly $146,000 if you play it safe. While that's a decent chunk of change, that amount almost triples under an aggressive, stock-focused investment strategy. Even if you were to play it somewhat safe and fall somewhere in the middle, you'd still wind up with anywhere from $202,000 to $284,000 in total -- far more than what you'd have in our most conservative scenario.

Remember, saving for retirement isn't just a matter of having more cash on hand to travel and go out to dinner; it's a matter of being able to cover your basic living expenses. Most retirees need 70% to 80% of their pre-retirement income just to stay afloat financially once they stop working, and Social Security is only designed to replace 40%. That means you'll need to save enough to account for 30% to 40% of your pre-retirement income on your own, and if you're too cautious, you may not reach that goal. And while there are risks involved in stock investing, at the end of the day, you're taking even more of a risk by playing it safe.

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