It isn't your money that counts. It's what that money will buy that matters. To preserve your savings, your money must earn an income that offsets ravages of inflation. If your interest income is subject to taxation, interest level must equalize inflation after taxation.

It's 1952. You're a 12-year-old conservative investor planning to retire in 2005. You decide that after you retire, you will want to mail 1,000 postcards over remainder of your life. You put $10 in a bank savings account, which represents cost of 1,000 post cards in 1952. The bank pays you 3% annual interest and after you pay State and Federal Tax on interest, you are earning 1.8% on your postcard retirement investment. In 1992, your postcard fund has grown to $20. In January 2005, your postcard fund will have $27.50 in it for your retirement postcards. Meanwhile price of 1,000 postcards has risen to $230. The cost of a postcard will rise again before you die.

If you had a middle class income and retired on a fixed income that equaled your salary in 1993, you are finding it nearly impossible to maintain your lifestyle today. The reason is cost of everything has nearly doubled since 1993. Today, your fixed income buys about half of what it did in 1993. This pattern of certain poverty for elderly has existed since Depression.

What's current inflation rate? If you ask US Government, they will tell you that it has hovered around 3%/year for past decade or more. Their statistical data is called Consumer Price Index (CPI). Unfortunately, Government uses statistics that intentionally report a percentage that is far below real inflation rate for average family. Most economists and business people double CPI to get a figure closer to economic reality. Economic Conservatives tend to triple CPI to suggest annual US inflation rate to be around 9%. I'm with majority who believe that inflation rate for years has hovered around 6%/year.