You're still making this huge retirement savings mistake, aren't you?
Many Brits have good intentions when it comes to saving for retirement. They stash a few pounds away every month or so for the long term, in the hope of retiring early, or enjoying a more comfortable retirement. However, at the same time, savings statistics show that a large number of Brits could actually be making a huge mistake with their retirement savings. Many may receive a nasty surprise when it comes time to retire. Are you making this critical mistake with your money?
Cash is not king
The mistake I'm referring to, is holding money in cash savings over the long term. According to HMRC statistics, at the end of the 2016/17 financial year, UK savers had a total of £585bn stashed across adult ISAs. Yet of this figure, a massive 46% was saved in Cash ISAs. According to recent YouGov stats, 40% of the population don't even know what a Stocks & Shares ISA is or how it works.
These statistics blow my mind. The average interest rate on a Cash ISA is somewhere around 1% per year. In contrast, inflation is running at around 2.4% per year. What that means, is that money held in Cash ISAs over the long term, is actually losing purchasing power. Make no mistake, if your goal is a comfortable retirement, keeping money in a Cash ISA over the long term, could be a terrible mistake.
You've worked hard for your money. So why not make it work hard for you?
Do more with your money
If you want more from your savings, it's probably a good idea to consider opening a Stocks & Shares ISA. This type of ISA has the same main benefit of the cash version, in that it's a tax-free account, yet its big advantage is that it allows you to do a whole lot more with your money, and potentially generate much higher returns.
Through a Stocks & Shares ISA, you have access to a vast range of growth assets, such as mutual funds, investments trusts, ETFs or individual shares. If you're concerned that you don't know a lot of about these kinds of products, don't worry, as you can take it slowly and drip feed your money into these kinds of products from your Stocks & Shares ISA cash account as you learn more about investing.
Many Stocks & Shares ISA investors have done very well for themselves in recent years. For example, those invested in Terry Smith's Fundsmith Equity fund would have enjoyed a return of around 90%, tax-free, on their money in just three years. Those invested in Nick Train's UK equity fund would have boosted their wealth by 45%, tax-free, in three years. Even those simply invested in FTSE 100 tracker funds, would have seen their wealth rise by around 30%, tax-free, in just three years. These kinds of returns literally smash the returns from Cash ISAs.
Of course, when it comes to growth assets, past performance is no guarantee of future performance. However, over the long term, these assets do tend to outperform cash by a wide margin and provide protection from inflation. If you want to get the most out of your retirement savings and enjoy a comfortable retirement, opening a Stocks & Shares ISA is probably a wise move.
Do you want to retire early and give up the rat race to enjoy the rest of your life? Of course you do, and to help you accomplish this goal, the Motley Fool has put together this free report titled "The Foolish Guide To Financial Independence", which is packed full of wealth-creating tips as well as ideas for your money.
The report is entirely free and available for download today, so if you're interested in exiting the rat race and achieving financial independence, click here to download the report. What have you got to lose?
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