Automatic enrollment and target-date funds within 401(k) plans have fueled that increase, Young said.

"Prior to these innovations, younger workers invested more conservatively in DC plans," Young said. "But with the increasing popularity of auto enrollment and target-date funds, plan sponsors are now able to take advantage of participant inertia by getting participants invested in a diversified, age-appropriate portfolio."

According to Vanguard Chief Investment Officer Gus Sauter,  the stakes are much higher today for all investors, but particularly those younger than 30. Today's investors must accumulate substantially more in retirement savings because of longer life expectancies and potentially less generous pension and Social Security benefits.

"With many younger investors expected to live 30 years or longer in retirement, it is critical to generate sufficient returns on their retirement investments," he said. "While no one can predict the future, stocks have outperformed bonds and cash over the long term, and a strong allocation to equities is necessary for most long-term investors."

The danger of inadequate exposure to equities early in an investor's life is that inflation could erode the value of their portfolios, and because prices tend to double every 25 years, investors' standards of living will decline unless the size of their portfolios also doubles over this same time period, he said.

A key advantage of owning equities, particularly for investors with long time horizons, is that the variability of returns tends to compress over time. It's not unusual for equities to experience outsized gains or losses in one year of 30 percent or more, Mr. Sauter said. But over a 40-year time horizon, equities are much more likely to achieve their historical average returns of 7 to 11 percent, a performance that's significantly higher than that of more conservative asset classes over the same time frame. "The longer your time horizon, the more you may be able to afford the risk associated with stocks," Sauter said.

TDFs also give younger investors some exposure to bonds, which help reduce volatility in a portfolio. "Frequently, when stocks are performing poorly, bonds perform well, and diversifying across the two asset classes may cushion the blow in declining equity markets," he said. "This can help from a return standpoint. A portfolio that's down 10 percent only has to increase in value 11 percent to break even, but a portfolio that's off 20 percent has to increase 25 percent to be whole."

Sauter recommends investors also boost their savings rates to at least 12 percent–15 percent of their annual salary (including any company matches) and consider saving over a longer time horizon to offset some of the risk of outliving their assets in retirement.