A newer advisor on a financial planning message board wanted to know (spelling/grammar/punctuation corrected):

As an aspiring financial planner, I am curious to know: in your professional experience as a financial planner, have you found that investments are an essential part of growing one’s wealth, or can someone achieve financial success without investing and just saving to accomplish personal goals?

And clarified later in the thread:

By “not invest,” I am referring to not holding any investment vehicle with high risk such as stocks but instead putting money into a savings account with interest to accomplish short- and long-term financial goals. In short, I would like to know if the risk of investing is worth taking for those without debt and an established emergency fund.

My response (note that this was in 2022, so the numbers for Social Security, etc. reflect that):

You can always retire (the primary “personal goal” for most people) successfully if you save enough pre-retirement and spend little enough post-retirement.

I posted this here a few months ago:

Ignoring SS, taxes, and a whole bunch of other pretty relevant things just to see what savings rate we come up with, assume a 30-year working/savings period (people don’t get started right away), a 30-year retirement period, 4% real return on the portfolio, and income, expenses, etc. rise solely with inflation (in real life you get real wage increases over your career and are probably trying to match the *ending *lifestyle, not the average over your whole life). Assume we want level consumption over our lifetimes (Friedman’s Permanent Income Hypothesis), then I need to set X in the two formulas to the same percentage. Here are the Excel formulas:

Saving: =FV(0.04,30,**X**)

Spending: =PV(0.04,30,1-**X**)

Remember all figures are real, not nominal, so this vastly simplifies our computations.

If you solve that, it is 23.57% which I round up to 25%.

You can quibble with the assumptions (even I would), but in a very rough way, it’s conceptually sound, I think.

If we assume that the real return is zero (i.e., that the returns on savings merely match inflation) then the formulas become:

Saving: =FV(0,30,**X**)

Spending: =PV(0,30,1-**X**)

If you solve those for X then it becomes (obviously if you think about it) 50%. Of course, you could start earlier, work longer, etc. but it gives us a starting point.

I also ignored Social Security. If you make (and live on!) $12,288/year pre-retirement (the first Social Security bend point), then upon retirement you will get 90% of that as a benefit. So, you are pretty close to matching your lifestyle (such as it is) with *no *savings.

Of course, no one wants to do that – even though the median global *household* income is about that number! ($9,733 in 2013, which, with inflation and productivity improvement, would be about that first bend point today. $12,288/$9,733^(1/9)-1=2.62% annual growth rate since 2013 to make them equivalent. Seems roughly right.)

I looked at T-bills vs. CPI to see if my intuition/recollection was correct about cash and CPI, and it is. Three-month T-bills have had a very small excess return over CPI, they matched until about 1981 and then T-bills have actually done better (until spring of 2009). Of course, there would be some taxes on the T-bill returns though.

Thus, I think zero-ish real is a good assumption for cash rates (i.e., saving rather than investing).

So, getting back to the original question: “[C]an someone achieve financial success without investing and just saving to accomplish personal goals?”

Yes, but it requires a saving rate in the vicinity of 50% (less for lower incomes because Social Security, and more for higher incomes because taxes).