A recent paper from the influential Research Affiliates investment management firm (with more than $140 billion in assets managed) takes the provocative stance that young adults saving for retirement should not start out with a large portion of their money invested in stocks.
I respectfully disagree.
One key point of the paper is that young adults have a tendency to cash out their 401(k)s when they are laid off. Given that layoffs are most prevalent during a recession—precisely when stock values are falling—the last thing a young person wants is a portfolio that has sharply declined in value right when they need it.
But that just seems to concede that cashing out a 401(k) is a fact of life, and is somehow OK. It is not OK. I don't think we need to change the portfolio. We need to change the mindset of young workers so that they realize their 401(k) is not something to be raided. And that's a two-step process.