Inflation's 3% Hurdle: Why 'Safe' Cash Can Erode Retirement

Full analysis

Over the past 100 years, U.S. inflation has averaged 3% annually, which means the cost of living doubles roughly every 24 years. A healthy 60-year-old retiring today on a $100,000-a-year lifestyle could face costs of around $240,000 a year by age 90. Treasury bills — which behave like today's CDs, money market funds, and high-yield savings accounts — returned only 3.3% annually over the same century, leaving real purchasing-power growth (return after subtracting inflation) at about 0.3%. The asset that feels safest has historically done almost nothing to grow what your money can buy.

Financial planner Taylor Schulte argues this reframes the risk conversation for retirees: holding more cash than near-term spending requires may feel conservative but is actually a slow drain on purchasing power over a 30-year retirement. Cash has its place for short-term needs and emergencies, but money that won't be touched for a decade or more is likely losing ground in real terms when kept in savings accounts or CDs.