The Inflation Tax on Certificates of Deposit

An advantage that I have coming of age in the 2000s is that I have no reference or anchoring point to the “good old days” when savers could get real returns just by holding money in a savings account at their local bank or agreeing to store some funds in a certificate of deposit. I think I once stumbled across an old Kiplinger’s magazine from the early 1990s that talked about how $100,000 in a savings account paying 5% could be reliably counted upon to generate over $400 per month in retirement income.

If you saved a chunk of capital during the 1960s, 1970s, 1980s, or 1990s, socking it away in a certificate of deposit was often a credible alternative to stock-market investing. What you gave up in gains you made up for with the risk-free nature of your returns.

I was looking at the CD offerings of my local … Read the rest of this article!