Sure, say I had $1M in the bank in 1996, it would yield ~$70K which would provide a comfortable living situation both then and today. Inflation was around 2-3%, which is generally the target.

>lose value to inflation

Inflation always erodes money of course, so there was never a time when that didn't happen when there was inflation.

If you took $70K to pay taxes and spend every year, your million would slowly dwindle (CD rates were in the 5-6% range)

At 3% inflation, that $70K/yr would lose half its purchasing value in the span of 24 years of your retirement. (It also would cease yielding $50-70K per year over that time as well, but that’s with the benefit of hindsight and you could lock in the rate with a longer term CD at retirement. That still leaves you with half the purchasing power though.)

I don’t think savings accounts have ever been a reasonable way to invest the bulk of your money for future retirement.

You’re double counting that $70k. That’s interest on the $1M. Assuming rates stay at 7%, you’d get that $70k every year. You are correct that $70k wouldn’t go as far today due to inflation. But $70k per year was great money in 1996.

Related, my dad and a buddy invested $10k in a CD that yielded 21% back in 1984 I think. If the rates are high enough CDs can be an excellent investment. They’re basically risk free. My bank is offering 0.6% currently. Real rates are very negative right now.

CD rates barely beat inflation over time. The amount of money that you could remove from the account in a year and leave the principal untouched (in inflation-adjusted terms) is given by the real rate of return. That’s not 7% in the mid-90s (the nominal rate wasn’t even 7%)

In order to leave purchasing power untouched, you need to grow the account by the nominal inflation rate and leave that for next year (especially in the context of having “a comfortable living situation then and today” over a near-30-year period.)

https://www.putnam.com/literature/pdf/II514-59fb3e978431513e...

The question is whether the inflation exceeds interest. With index funds it generally doesn't, but I'm not sure about a savings account. Right now inflation easily beats a high interest savings account, but I'm not sure about 1996.