Investing for retirement is crucial to building a nest egg that can provide financial security in your later years. Unfortunately, many people who are investing are making a big mistake with the money they’re saving for the future. In fact, recent research from Fidelity found around a quarter of all employees who are invested in workplace retirement accounts are taking on more risk than they should.

Among the 24.2% of investors in 2021 who are over-exposed to risk, there’s one generation that’s especially likely to be invested in the wrong mix of assets.

Baby boomers are the most likely to be invested too aggressively

Fidelity’s data showed that in 2021, close to one in four employees had more stock than was recommended. Allocating too much money to equities is dangerous because stocks present a higher risk of loss. Now, they also offer higher potential returns than other, safer investments. It’s important for every investor to balance risk versus return and to put an appropriate percentage of their investments into equities given their investing timeline.

Unfortunately, baby boomers are more likely than their younger counterparts to have a portfolio in which stocks are over-represented. And one reason for this may be that older Americans aren’t rebalancing their portfolios often enough.

See, as you age, you should have less exposure to equities because you have less time to wait out market downturns. You may need your money before an inevitable recovery happens. Having to pull out cash during a market crash can lock in losses that you’d likely be able to recover from if you had a long investing timeline. The other issue is that, the closer you get to retirement, the less time you have to build your account back up if you do suffer losses.

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