What Risk? More Americans Play It Safe With Their Nest Eggs

What Risk? More Americans Play It Safe With Their Nest Eggs

Having a healthy nest egg isn't just about saving routinely—it's also about saving smartly.

And according to new research, Americans seem to be getting better at the latter.

That's according to a recent Vanguard Group report, which dug into the retirement plans of its 3.6 million participants and found that savers are increasingly steering clear of risky retirement strategies.

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To start, fewer workers today are investing in employer stock.

Why is this considered risky business? Investing heavily in your employer means that if the company sinks, your nest egg could go down with it—at the same time you might also be losing your job. In 2005, 18% of savers had 401(k)s made up of more than 20% employer stock. But by 2014, that number had fallen to just 8%.

Secondly, the study found that Americans are wising up to the pitfalls of putting all their eggs in one basket. In 2006, close to 1 in 4 Americans kept more than 90% of their portfolios in equities—despite the fact that most experts recommend that retirement accounts include a healthy mix of stocks and bonds. The good news is that today, that stat is just about 13%.

And overall, nearly 70% of today's portfolios could be considered to be balanced, Vanguard found—which they define as having 40% to 90% in equities and less than 20% in employer stock. That positive stat has shot up over the years, from just under 40% in 2005.

So what's behind these improvements? Lessons learned from the most recent recession, for one, but also most likely the increased use of target-date funds, which automatically adjust exposure to stocks and bonds as workers age. Today, more than half of all 401(k) contributions go into these funds.

Overwhelmed about your retirement savings altogether? Consider this goals-based approach to your golden years to start.

LearnVest Planning Services is a registered investment adviser and subsidiary of LearnVest, Inc., that provides financial plans for its clients. Information shown is for illustrative purposes only and is not intended as investment, legal or tax planning advice. Please consult a financial adviser, attorney or tax specialist for advice specific to your financial situation. Unless specifically identified as such, the individuals interviewed or quoted in this piece are neither clients, employees nor affiliates of LearnVest Planning Services, and the views expressed are their own. LearnVest Planning Services and any third parties listed, linked to or otherwise appearing in this message are separate and unaffiliated and are not responsible for each other’s products, services or policies.

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