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mollyd77 asks,

r am I thinking of that wrong? I mean, $1,000 put into a year long CD would return, say $1,050. And then I'd take the original $1,000 and reinvest the $50. If that was done every month, would that extra $600 basically equal the inflation? Or am I completely muddled in my thinking?

Right now you can only get about a 2% yield on a 5 year CD, not 5%. And you have to pay taxes on the 2%, leaving you with something less.

The problem is what happens if we have a situation like the late 1970's where the inflation rate is 10% per year, or more. That's why you need a big pot of cash to protect yourself under those conditions.

intercst
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