Tags: 401k | millennials | millionaires | stock

US News' Carlozo: 401(k)s Can Help Make Millennials Millionaires

By    |   Friday, 20 March 2015 07:40 AM

It's never too early to start work on building your wealth. And Lou Carlozo of U.S. News & World Report offers several tips for millennials — adults born in the early 1980s and afterward — on how to become millionaires.
  • "Ignite your 401(k) with a company match," he writes. Among employees eligible for 401(k)s, nearly 40 percent of 20 to 29 year olds and 31 percent of 30 to 39 year olds save at levels below the company match threshold, according to Aon Hewitt. That's turning down free money that can work wonders over the years through the magic of compounding.
  • "Stock your 401(k) with stocks." That's because stocks have historical annual returns of 8 to 12 percent, compared with 3 to 7 percent for bonds. But don't load up on your company's stock, as you're already dependent on the company for your salary. "Hold U.S. stock funds, international stock funds, real estate stock funds," Amy Merrill, a principal with TrueWealth Management, tells Carlozo.
"If you're a young adult who's ever dreamed of becoming a millionaire, it's time to wake up and start down the path," Carlozo writes.
 
Meanwhile, though Warren Buffett's Berkshire Hathaway has more than doubled the return of the S&P 500 index over the past 15 years, that doesn't mean you should put all your retirement eggs in Buffett's Berkshire basket, says Walter Updegrave, editor of RealDealRetirement.com.
 
"I have no problem with you owning Berkshire shares," he writes in an article for CNNMoney.
 
But, "I don't think it's a good idea to invest too much of your retirement savings into Berkshire. As a rule, it's not wise to concentrate more than 10 percent or so of your stock holdings in the shares of any single company."
 
And why not bet the farm on Buffett?
 
"If you're going to make any single investment the cornerstone of your stock holdings, that investment ought to be very broadly diversified," Updegrave explains. While Berkshire does have a wide range of holdings, he adds, "it doesn't have the breadth of a total stock market index fund."
 
Then there's the question of how much longer Buffett, 84, will be around. "I'm not suggesting the whole shebang will fall apart post-Buffett. But it's an open question as to whether its extraordinary success will continue," Updegrave writes.
 
So what should investors do? "Build a portfolio of low-cost broadly diversified stock and bond index funds or ETFs [exchange-traded funds] that jibes with your appetite for risk," he recommends.

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It's never too early to start work on building your wealth. And Lou Carlozo of U.S. News & World Report offers several tips for millennials — adults born in the early 1980s and afterward — on how to become millionaires.
401k, millennials, millionaires, stock
411
2015-40-20
Friday, 20 March 2015 07:40 AM
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