Why You Shouldn’t Save For Retirement

October 20, 2015

National Save for Retirement Week is a time to raise awareness about the importance for saving for retirement and a chance to reflect on where we are in the process. Employers who sponsor retirement plans will often use the week to begin a conversation about the process for starting a retirement account, adjusting outlooks, or increasing funding to a retirement account.

For me, this week is a time to consider what retirement means to me and how I’m going to fund that vision. While things seem to be on track for my retirement, I still had concerns. I came to the realization that anyone who simply saves for retirement isn’t going to make it.

While savings are an important component of a solid personal financial plan, savings, by their very nature, can’t get the job done when it comes to reaching the long term goal of one day permanently leaving our jobs. So what do we do? The key is not to save for but to invest in our retirement.

In the world of personal finance the basic concepts of saving do not match-up with the requirements for retirement planning the way that investing does. See below:

retirement savings/investing

To be fair, most Americans use the words save and invest interchangeably when it comes to retirement. So it would seem I’m quibbling over words.  Here’s the thing though, the reality is that investing serves a very different purpose in our personal finance plans, as you can see in the chart above.

Essentially, investing is the use of time (long term goal setting) in tandem with a higher risk/reward profile to outpace inflation and retain (or even increase) our standard of living decades in advance. By adopting an investment mindset, funding retirement can cost us less up front because of the growth while increasing our chances of hitting our goals than those who are simply saving.

An investment mindset has already applied to many of us throughout our lives. Think about a time when you took the opportunity to take a risk and make sacrifices of time and money to enrich your life and prospects. It might have been to increase your education, obtain a certification, purchase equipment, take a relationship class, or have children. If you’re having trouble getting up the nerve, remember those times when you took an uncomfortable step and put in the work.

Life is full of investment opportunities. Retirement planning is no different. We have to understand the basics, use tools, and remain diligent in working toward our goals. This week, instead of simply saving for retirement, invest in it. Invest in the life of your future self and the life you imagine. When you did take those uncomfortable steps in the past, how did it turn out? Was it worth it? I bet it was and this will be too.


Check out these other posts on investing to help you invest in your future:

Why You Shouldn't Base an Investing Strategy on a One-Year Return

Investment Fraud: How to Protect Yourself

How Long Will It Take for Your Investments to Double in Value

Investing 101: Mutual Funds vs Exchange Traded Funds