Though a large number of working Americans still aren't taking steps to save for retirement, those of us who are saving know it doesn't come easy. After all, it takes effort and sacrifice to put money aside that we'd rather be using today, so the last thing any of us wants is to lose a chunk of that hard-earned cash, whether due to a bad investment or a general dip in the market.

But many of us are taking that fear to a dangerous extreme by being way too conservative in our long-term investments. According to a Wells Fargo study released late last year, almost 60% of Americans focus more on avoiding loss in their portfolios than maximizing investment growth. And it's not a problem unique to any one particular age group; rather, it's a universal trend among savers in their 30s, 40s, 50s, and 60s.

Reviewing investments


Of course, those nearing retirement (meaning, workers in their late 50s and 60s) are a bit more justified in this habit. In fact, you should start shifting toward safer investments with retirement right around the corner. But those of us who have 20 years or more to invest are doing ourselves a major disservice by going the conservative route. And if we don't change our ways, our nest eggs are going to fall short.

Make the most of your investments

When we talk about investing too conservatively, we generally mean taking a bond-heavy approach, as opposed to loading up on stocks. Though bonds are a far less risky investment, they also offer notably lower returns. Stocks, on the other hand, are more volatile, but they're also a means to an end. Sticking with stocks means opening the door to sizable returns that could spell the difference between adequate cash flow in retirement or years of financial struggle.

The following table shows how limiting yourself to conservative investments might cause your nest egg to suffer:

Investment Style

Average Annual Investment Return

Total Accumulated Over 30 Years (Assumes $200 Monthly Investment)




Moderately conservative



Moderately aggressive







You can't help but notice the whopping $175,000 difference between an aggressive, stock-heavy strategy and a wholly conservative approach. Furthermore, keep in mind that 8% is actually a bit below the stock market's historical average, while 2% is a generous estimate if you're going to stick to cash. In other words, if you opt for either extreme, that gap might be wider in practice.

So just how much of your retirement savings should you put in stocks? Though it's not a perfect formula, a popular rule of thumb is to take your age, subtract it from 110, and use that number to determine the percentage of your portfolio to dedicate to stocks.

For example, if you're 40 years old, you'd subtract that from 110 to arrive at 70, which means 70% of your savings should be stock investments. You might then put 30% to 35% of your remaining savings into bonds, with 5% to 10% in cash. (Generally speaking, you don't want to tie up too much money in cash, especially given today's interest rates. Keeping some of your savings in cash, however, is a smart strategy because it gives you a chance to capitalize on buying opportunities as they arise.)

Since most of us can't max out our retirement plan contributions, the next best thing is to save as much as we can manage to part with each month, and then invest that money in a manner that will help it grow. So rather than fixate on loss avoidance, try learning about stock investments and different ways to get a piece of the action. Though the stock market is indeed a volatile beast, history tells us that savers who invest for the long haul are more likely than not to come out ahead. And the sooner you learn to get comfortable with a reasonable amount of risk, the better your chances of amassing a nest egg that actually serves your needs in retirement.