Self-Made Millionaire's Insight: Why Saving Alone Isn't Enough for Retirement
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Chapter 1: Rethinking Retirement Savings
According to Vivian Tu, a self-made millionaire and author of the upcoming book "Rich AF: The Winning Money Mindset That Will Change Your Life," merely saving for retirement may not be a viable strategy for the average American. Instead, she advocates for investing as a more effective means to achieve a comfortable retirement. In a recent interview with CNBC Make It, Tu shared her insights on this topic.
"Don't save to retire," she emphasizes. "Invest to retire."
Section 1.1: The Reality of Retirement Funds
Recent data from Northwestern Mutual's "2023 Planning and Progress Study" reveals that individuals in their twenties generally believe they need around $1.2 million saved to enjoy a comfortable retirement. While this figure can appear intimidating, relying solely on traditional savings accounts typically falls short of meeting this target by retirement age. The lower interest rates associated with these accounts fail to match the growth potential of investment accounts, which often yield higher returns, particularly with compound interest.
Subsection 1.1.1: The Importance of Investment
Section 1.2: The Numbers Behind the Strategy
To illustrate the difference, consider this: If you begin saving at age 21 and invest $100 monthly in a retirement account with a 7% annual return, you could amass approximately $354,600 by the time you turn 65. Conversely, if you were to deposit the same amount into a traditional savings account with an interest rate below 1%, you would end up with only about $66,300 by retirement.