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Saving Versus Investment For Retirement


October 12th, 2021 14:54

Savings vs investment

Saving versus investment is always a moot point to consider once you start having a consistent income stream or whenever you are looking to channelize your funds wisely for your retirement. 

When you plan to run a marathon, you first practice for days to make your body adapt and endure to the long run. When you actually start running a marathon, you begin at a slow pace and gradually increase your speed. This is the ideal way of progressing and making your way to the finishing line with ease. 

Similar is the scenario with planning for retirement. In the above context, if we take the marathon as retirement, then the initial training period can be correlated to the initial stage of earning, i.e., the early years. Now, this earning, when stabilized and accumulated, can be utilized in investment. 

Due to the inflow of income, both saving and investment can be done simultaneously. Savings can start at a gradual rate and a good portion can be invested. However, as and when we near retirement, the segment dedicated to saving should ideally increase, owing to the discontinuation of a consistent income during retirement. And, like every drop makes an ocean, each penny saved today can create a fortune for you tomorrow.

Retirement for most people begins in their sixties, meaning that they do have an ample amount of time to look forward to, without a fixed income. The decades following retirement require as much financial freedom as the ones preceding it. 

You cannot walk on eggshells for years to come, therefore, saving for the future can lower, if not eliminate, the risk of financial debacle. However, placing enormous emphasis on saving can lower your current disposable income

To save or to invest?

It is very important to pragmatically decide how to save, what amount to save, and where to save in order to stand in good stead. While planning for a better future, do not compromise with your present. As far as possible, try saving, investing, and spending wisely, productively, and proportionately.

Prudent financial management calls for a fixed corpus for retirement, which can either be built by way of saving or investing. When a person is earning a regular and stable income, then the risk-taking capacity increases. However, without a fixed income, market volatility might not be well-handled. 

And investments, although reap many benefits, are equally subject to market risks. If the risk can be absorbed without posing any threat to the finances of an individual, then investment can probably be exercised as an option. Risk can be balanced by investing in safer and less volatile options.

A balanced investment portfolio can be created by investing in debt securities that yield a relatively fixed earning. 

The stock market is essentially unpredictable, and when planning for investing for retirement, Murphy’s Law should be kept in mind which states that anything that can go wrong can go wrong. Channelizing your money into saving for retirement would not decrease the amount in any scenario; however, nothing can be said about investment. Therefore, the decision of saving vs. investing would depend upon your risk-taking capacity and preference. 

Investment can either give great returns or can even take a one-eighty degree turn and drown the principal amount as well. You can consider investing in term or recurring deposits during the initial period in order to reap the fruits post-retirement. 

Retirement only calls for the discontinuation of a consistent income and not of expenses. Hence, expenses being the same, have to be met by you nonetheless. It, therefore, becomes crucial to have an ascertained amount of money safe with you which can be utilized during that period.

You can invest your money such that your investment returns are at least commensurate with inflation. And ultimately, the choice fundamentally depends on the circumstances surrounding you and your financial strategy. 


It is safe to say that planning for retirement primarily depends on your current age. Whichever option you decide to choose, you must do your research and select the one that will suit your needs best. Concluding with the words of Harry Emerson Fosdick, "...don't simply retire from something; have something to retire to."

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Frequently asked questions

1. How do I create a financial plan for retirement?

  • To create a financial plan, objectives should be clearly outlined. You may designate a budget to set out funds for retirement. These funds may either be used for saving or investing, depending upon your priority, preference, and risk appetite. 

2. Is it worth saving for retirement?

  • It is considered to be a prudent decision to consistently save a percentage of your monthly income for retirement purposes. This can substantially improve the quality of life post-retirement when a steady and continuous income is absent. 

3. What is more important, savings or investment?

  • Both saving and investment can enhance the financial well-being of a person. However, it is to be borne in mind that investment brings the opportunity of both risks and returns.

4. How much should I save for my retirement?

  • It is usually considered to be a good practice to save around 10 to 15% of annual income before tax, for retirement purposes. Depending on your income and weighing the feasibility, you may decide what percentage you wish to save. 

5. What are the safest investments for retirement?

  • Although no type of investment can conclusively be said to be the safest, some of the safer investments would be bank savings, treasury securities, and fixed annuities.

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