Few things are more harmful to retirement savings than risk avoidance.

On the surface, this sounds like a silly statement. Avoiding risk is a good thing, right? Unfortunately, purging a portfolio of risk may also mean relegating your portfolio to returns that are inadequate for building and sustaining a retirement nest egg.

I come across a lot of individuals who, when hitting the age of retirement, believe that they must "batten down the hatches" and avoid taking any risk with their investments. All their money goes into a money-market fund, a certificate of deposit, or perhaps a short-term bond fund. Even worse, I can't tell you how many times I've seen individuals in their twenties and thirties-even individuals in my own company-set up 401(k) plans void of stocks in an effort to avoid risk.

Several problems exist with such a conservative approach. First, just because you've retired doesn't mean that your investment horizon is zero. Many people live well into their eighties and beyond-20 to 30 years after they retire. With such a long life span following retirement, it is important to have growth components in your retirement portfolio, if for no other reason than to keep pace with inflation. Thus, I don't think it's being too aggressive for a 70-year-old to have 30 percent of a retirement account in stocks or equity mutual funds. And for a worker in his or her twenties or thirties, a 401(k) plan should contain almost exclusively equity funds.