(I am not a licensed Financial Advisor. Please conduct your own due diligence and consult a professional before investing in volatile assets.)

Countless studies and articles emphasize that the mass majority of Americans are not saving enough for retirement. In fact, this study by the Transamerica Center for Retirement Studies suggests that the average American in their 40s has only saved about one fifth of the amount which they would need to retire on $36,000/yr.

Indeed, many Americans are not hitting their retirement goals, but these papers often point readers in the wrong direction to begin accumulating the wealth that is necessary to retire comfortably.

Saving money alone is not enough to acquire the long term wealth necessary to retire comfortably; you must invest your savings into assets that allow your wealth to grow in order to have a fighting chance at retirement.

There are two main reasons why just saving a percentage of income in your typical savings account will never create enough wealth for a comfortable retirement.

First: Retirement is Expensive (Like… Really Expensive)

Most people do not understand the staggering amount of money necessary to retire. Assuming a yearly salary of $68,000 (the median household income), and a goal of spending 70–90% of that income per year throughout retirement, someone would need savings of about $2.65 million to retire at 67 years old.

Attempting to accumulate such a significant amount of money purely by saving a percentage of your income is not even just difficult, it's pretty much impossible. Given the hypothetical above, you would have to save about $56,400 annually beginning at 20 years old to hit the target amount. Considering that the average annual income for those ages 20–24 is just $28,080, good luck with that. This is without even accounting for the next factor which is equally as detrimental.

Second: Inflation Sucks (If You Don't Know What You're Doing)

Inflation. Everyone has heard of it but not everyone truly understands it. Let's start with what everyone gets: rising wages or consumer expenditures cause businesses to raise prices.

This is known as consumer price inflation. This is why as kids, our parents always told us that goods and services, such as movie tickets, were much cheaper during their childhood.

Consumer inflation fundamentally devalues the buying power of our money, which is where the true issue with savings accounts lies. Money sitting in a savings account constantly loses its value over time because not even the highest yield savings accounts can beat inflation on a consistent basis.

The average rate of inflation over the past 20 years is 3.1%. This may not sound too terrible at face value, but consider that at this rate, your money's value would be cut in half in just about 20 years.

Because of these two factors, it is nearly impossible to actually accumulate enough wealth to retire in a savings account.

Instead, we must take advantage of a different type of inflation, asset inflation. When the price for goods and services rises, so does the valuation of assets such as real estate and businesses. As such, in order to accumulate the large sums of wealth necessary for retirement, as well as to protect it from price inflation, we must position our savings so that they are invested in spaces which exploit asset inflation.

My personal favorite way of doing this is in the stock market. The stock market allows individuals to buy equity, or shares, in a company whose "share price" fluctuates based on said company's perceived value.

Individually, this comes down to investing in companies which you believe have the most propensity for growth by the time you will retire. By making great picks, some can make huge returns and amass a significant sum of wealth over their lifetime.

However, retiring on saved money in the stock market is actually pretty easy and does not take a genius stock picker in any sense of the imagination. The secret is S&P 500 index funds or ETFs (exchange traded funds).

The Standard and Poor's 500 aims to track the performance of the stock market in its entirety by measuring the combined value of the 500 largest companies in the United States.

Investing in a fund which mimics the portfolio of the S&P 500 takes minimal effort and has historically outperformed consumer inflation by around 7%. All it takes to invest in these 500 companies is the ticker symbol $VOO or $SPY at the brokerage of your choice.

In my opinion, this is the most surefire and risk-free way to make sure that your savings continue to grow in value and are protected from inflation.

Now let's talk specifics. To reach the same target goal of $2.65 million by 67 years old mentioned in the beginning, someone would have to invest an average of $671 a month, or $8,052/year over the same 47 year period to reach their target.

In comparison, the first example required saving 7x more income over the same exact timeframe, and is a significantly less realistic annual savings goal than approximately $8,000.

Additionally, these investments will continue to grow throughout retirement, giving you the ability to grow wealth that will last generations for your children and loved ones.

Although savings accounts do have their purposes such as for emergency funds or paying off other large purchases, they should be used exclusively for these purposes, not to hold your life savings.

The one main takeaway that I hope this article leaves you with is that it is possible for anyone, regardless of their current income or savings, to build wealth and retire comfortably with the appropriate planning, strategy, actions, and commitment.

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