Stay Wealthy Retirement Podcast The Hidden Risk of "High-Yield" Cash in Retirement
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Jun 5, 2025 Explore the surprising risks of relying on high-yield cash for retirement. Discover how inflation can erode those enticing returns, making them less safe than they seem. Learn why a balanced investment strategy, incorporating riskier assets, is crucial for maintaining purchasing power. Get insights on critical performance metrics that can guide your portfolio decisions in an uncertain market.
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Nominal Vs. Real Returns Matter
- Nominal returns state your headline gain but ignore inflation and other erosive factors.
- Real returns adjust for inflation and reveal your true change in purchasing power.
Money Market Gains Masked By Inflation
- Vanguard's VUSXX returned about 14% from 1/1/2022 to 4/30/2025, averaging nearly 4% per year.
- Inflation erased that gain and left money market investors with a negative 1.42% real return.
Cash Rarely Outruns Inflation Long-Term
- Over the last 97 years one-month T-bills returned about 3% per year on average.
- Average inflation over the same period was roughly the same, so cash rarely outpaces inflation long-term.