Most people I’ve talked to aren’t excited about investing in the stock market these days. Worries about valuations, economics, politics, etc. are common reasons cited. I get it. All-time highs don’t seem like the greatest entry point. But they’re missing the bigger risk.

One day, if people choose to retire, they will probably need a sum of money saved (outside of social security) to live comfortably. That sum might be large - a 4% rule of thumb says a $500,000 nest egg can provide about $20,000 annually. Building up your nest egg may seem overwhelming, but you can get there. Here are the 3 main ways:

1. Setting aside tons of money at low guaranteed interest rates.

2. Investing less money and hoping compounding over time makes up the difference.

3. Winning the lottery or inheritance.

Let’s run a math-based savings scenario (and rule out the rich uncle or lucky scratcher):

Most people are unable to save $1,700 per month, and would probably opt for saving less and hoping for returns to make up the difference. Unfortunately, a lot of people do neither: most Americans retire with less than $200,000. Market volatility is one thing, but retiring with less than you need is by far the greater long-term financial risk.

If you want to avoid stock market risk, that’s perfectly fine. Just be prepared to invest a lot more money to meet your projections.

You can read more about our approach here.