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Image source: Getty Images<\/p>\n
The costs of not investing in a Stocks and Shares ISA can be truly astronomical. Millions of people prefer the security of a guaranteed return with savings accounts. It\u2019s a strategy that can sabotage a shot at a comfortable retirement.<\/p>\n
According to Moneyfacts, the average annual return of a Cash ISA<\/a> since 2010 is 1.79%. Compared to the 6.79% that the investing ISA<\/a> has delivered, the gap in potential wealth over time is staggering.<\/p>\n The tragedy to me is that the modern investor has many options to generate wealth without taking excessive risk. Want to see how I\u2019m building a serious nest egg for retirement?<\/p>\n Double trouble<\/p>\n My plan doesn\u2019t involve sticking all of my money into the stock market. Like many Britons, I love the Cash ISA, with its enormous tax benefits and reliable return.<\/p>\n But the majority of my extra cash each month is put in shares, trusts and funds. That 5% difference each year between cash savings and the Stocks and Shares ISA can add up to hundreds of thousands of pounds over a lifetime.<\/p>\n It\u2019s not just the risk that I\u2019m losing out on better returns elsewhere that drives me either. Inflation means my money may be losing value in real terms if locked in a low-yielding product.<\/p>\n This has been the case since 2010 when inflation has averaged 2.92%, above the 1.79% Cash ISA return. In other words, cash has been a losing asset class.<\/p>\n A \u00a3500k+ nest egg<\/p>\n Let\u2019s check how these returns could shape someone\u2019s savings stash for retirement. With \u00a3500 a month put into a Cash ISA, I\u2019d make \u00a3238,050 after 30 years, if the average annual return since 2010 stays the same. Would that likely be enough money for me to live comfortably in retirement? I have my doubts.<\/p>\n Conversely, if I put that \u00a3500 a month into a Stocks and Shares ISA instead, I\u2019d have \u00a3585,303 for retirement. That\u2019s a staggering difference of almost \u00a3350,000.<\/p>\n I\u2019m not suggesting that investors put all their money in the stock market. That\u2019s far too risky, even for someone who loves share investing like myself. An 80-20 split between the investing and savings account is one popular strategy I\u2019m a fan of. With this method, I could have an impressive \u00a3515,852 to retire on if all goes well.<\/p>\n Investing wisely<\/p>\n