Research from Russell Investments has come out with research that concludes that it is not how much you save, but how much you earn on those savings that really matters. That is to say someone who stows away thousands of dollars into a savings account may end up doing just as well off as someone stowing away hundreds and allocating it into strong performing mutual funds and other equities.
Of course the big variable in this is your appetite for risk. Many people can’t stomach their retirement fluctuating up and down over 40 years. The simple answer to this: toughen up. If your appetite for risk is limited invest into mutual funds and ETFs that are more conservative in nature or even go 20-30% below your recommended equity allocation, but do not throw all of your money into savings. The harsh reality is that many savings accounts barely return the same money you put in year over year – that is to say inflation can run higher than the rate of return on your savings account.
Do your own research, but also do some simulations. Use some basic assumptions to see the difference in how much you will have when investing in certain ways. You may be surprised how much you’re losing (or gaining) by investing your retirement in a certain manner.