Skip to main content

The 'save for retirement' formula is obsolete

Blog Image
The save for retirement formula will not bring you financial independence. That is the simple truth.
Saving is an important component, but it will not seal the financial freedom deal.
Consultants will have you believe that saving is the name of the game. In reality it is extremely difficult to save your way to good living.
A typical retirement plan for example will pay you significantly less during retirement than what you earned during your working years.
►So why save?
There are three major reasons:
  1. Grow your emergency fund, for those events that will take you by surprise.
  2. Build discipline, which is critical for wealth creation.
  3. Generate a surplus, which you must use to build passive income.
There is no doubt that having a good savings behaviour is essential to your financial wellbeing. But that's only half of the story. The real issue is what you do with your savings? 
Growth on your savings (also known as investment return) is the name of the game. If the growth is inadequate, your wealth creation strategy becomes inadequate.
► Should you save for retirement?
Absolutely! You just have to make sure that you are using the right formula, i.e. saving or investing at the required return on investment. 

Rule of 6 book