What is Risk Tolerance?

Risk tolerance is the degree of variability in investment returns that an investor is willing to withstand in their financial planning. It is an important component in investing. Knowing your risk tolerance helps create a game plan and in many ways it will drive how you invest.

Risk tolerance is based on a few determining factors, so everyones tolerance level will vary based on the following:

• Personal Goals

• Timeline to Reach Your Goals

• Stage of Life (Your Age)

• Portfolio Size

• Comfort Level

Investing without considering risk tolerance is like driving blind folded on the wrong side of the street. Imagine investing in stocks without thinking about how you’ll react if their value starts to go south. If you don’t understand your risk tolerance, chances are you’re going to go into shock and potentially make a move that could potentially put you in an even worse position.

Don’t put yourself in that position. Take a few minutes out of your day to complete a free Risk Tolerance Assessment to see where you stand. You’ll be glad you did.

The Challenge Millennials Are Facing

Millennials are known for being tech-savvy. But they’re also known as a generation that faces a perfect storm when it comes to financial burdens.

Here are some of them:

• Crushing student debt. College tuition has more than doubled since the 1980s, and student loan debt is at an all-time high.

• Rising home prices. Higher home prices—and larger down payments—means that most millennials are waiting longer to buy homes (if they buy at all).

• Soaring rents. Because they can’t afford to buy a home, millennials are spending their money on soaring rents instead of building equity.

• Underemployment. Because of changing employment trends, there’s a general mismatch of skills in the workplace. Many millennials rely on side gigs to get by.

• Caring for aging parents. More millennials are caring for their aging parents, and they’re spending more of their own money to do so.

• Inflation. $1 million used to be a nice target for a retirement nest egg. But thanks to inflation, that amount in 40 years will have the same spending power as about $270,000.

Roth IRA's- The Ideal Solution for Young Investors

These financial challenges can make it tricky for millennials to save for retirement. But even small contributions can grow to a sizable nest egg by the time retirement rolls around because of time (a millennial's superpower) and the power of compounding.

What’s more, many millennials will earn more money—and get bumped into a higher tax bracket—as they age. Here’s why that matters.

Once you put money into a Roth, you’re done paying taxes on it, as long as you follow the withdrawal rules. This means that many younger people will pay their taxes at a lower rate (early on) and enjoy tax-free withdrawals during retirement—when they’re more likely to be in a higher tax bracket.

Why Roth IRA’s Make Sense for MIllennials

The sooner you start building your nest egg, the better chance you’ll have enough saved for a comfortable retirement. A great way to start saving early is with a Roth IRA.

Here’s Why:

• Roth IRAs are ideal retirement savings accounts if you're in a lower tax bracket now than you expect to be in during retirement.

• Millennials are well-poised to take full advantage of a Roth IRA’s tax benefits and decades of tax-free growth.

• You'll pay taxes now on contributions, but withdrawals are tax-free in retirement.

The Roth IRA offers tax deferral on any earnings in the account. Withdrawals from the account may be tax free, as long as they are considered qualified. Limitations and restrictions may apply. Withdrawals prior to age 59 1⁄2 or prior to the account being opened for 5 years, whichever is later, may result in a 10% IRS penalty tax. Future tax laws can change at any time and may impact the benefits of Roth IRAs. Their tax treatment may change.