You might be missing the issue here. A savings account will cost you money in the long term - ie. your purchase power will decrease every year because the interest paid on savings accounts does not even keep up with inflation.

The longer and more money you have in a savings account, the less purchase power you actually have. Think of this like putting $100 into the account but only being able to spend $90 of it. Multiply that by your life's savings... and this becomes a horrible way to save for retirement.

A Money Market account would be better, and nearly as safe as a savings account.

IRA's and 401(k) where you control you money is ideal. If you don't want to be bothered to pay attention to the markets... get yourself a managed IRA (yes, a fund would then be in control of your future). With a managed portfolio, you generally get some say over how your money is invested - so you could direct them to invest in industrializing economies (which would help lift people out of poverty over time). Just because you make money on the stock market doesn't mean someone is getting screwed over...

Bottom line is, a savings account will lose you money over time (and that doesn't even touch on the maximum amount you can have per account to be insured, which is far less than you'll need for retirement).

I think the parent is talking about an ideal situation in which saving accounts do actually pay off a nice interest that beats the inflation and sprinkle some extra profit on top. Not a lot but it is risk free. Isn’t the idea that banks make the money flow by circulating it around a good one? A saver who doesn’t need it now can park it in a bank and when their time to retire comes they get their actualized money plus some profit. And since the interest compounds, with a nice rate it could be both safe and profitable.

I agree that this is not feasible now but that is only becaus of the low interest. That dynamic would change if the interest is dialed up.

The only way a bank could afford to pay enough interest on a savings account to meet inflation would be to... wait for it... invest that money in something that would beat the inflation rate.

We've just re-invented the stock market.

No. That is not the only way... Alternatives include: charging more interest on loans then on savings, charging service fees for each transaction. Also just think about this for a second. If the economy keeps growing (which is what inflation really is) more people will have more money, they would want to keep that money somewhere. They put it in a savings account. The bank now has more money to pay more interests.

We don’t need the stock market.