By Dejan Ilijevski, MBA, MS — SCM Investment Services
Last month, a client asked me whether she should move most of her long-term savings into a bank account — or even a safe at home.
Her father lived through the Great Depression. He told her stories about banks shutting their doors, families losing everything, savings that just vanished. After watching the news over the last couple of years, she started wondering if something like that could happen today.
I couldn’t tell her to make a drastic change based on headlines, but I also couldn’t dismiss what she was feeling.
I’ve been telling clients the same thing for years: every situation is different. That’s not meant to be comforting — it’s just the truth. The causes are always new. The dot-com bubble didn’t look like 2008. Neither of those looked like the March 2020 crash (COVID) or the inflation-driven selloff of 2022. Each one had its own triggers, and each time, new villains were identified — while talking heads who, with the clarity of hindsight, explained why the old rules no longer applied.
But there are two kinds of “different.” One is painful and temporary. The other is the kind where financial recovery doesn’t come back in time — and that’s what she was asking about.
The Disaster We Tell Stories About
She wasn’t asking me to predict the future. Her question was simpler: could she lose everything? Not just go through a rough patch — but lose the value of most of her assets.
Maybe you wonder the same thing sometimes, when the news gets especially bad and scary.
There’s a war reshaping the Middle East and shifting global economic and military power. Programs people have counted on for decades are being cut or fought over. Debates we thought were settled — about how we’re governed, about commitments to people who paid in — are open again. Prices at the store aren’t normal. Social Security trustees have said the trust fund runs dry in 2032, and Medicare’s hospital fund is projected to run dry even sooner. None of this is speculation. We just don’t know how we’ll come out the other side.
At the same time, the market keeps going up, driven by a handful of giant corporations and a wave of spending on artificial intelligence. When the headlines are grim and stocks rise anyway, it’s hard not to feel like something’s being papered over — some risk you can’t see yet.
Then there’s the growing sense — not paranoia, but a justified one — that the game is rigged. That the biggest players, or the ones with access to decision makers before everyone else, have an edge. By the time the rest of us hear the news, billions of dollars have already been transacted.
If you follow the markets, you’ve seen this happened more recently. Earlier this year, Reuters and others reported massive, precisely timed oil trades placed minutes before announcements that sent prices plunging. One trade — worth about $500 million — went through roughly fifteen minutes before crude dropped more than 10%.
There’s also the platform running the president’s social media feed, selling faster access to his posts for up to $100,000 a month.
I’m not going to tell you none of this matters. It does. And if it makes you feel like the system isn’t fair, you’re not wrong.
But here’s the real question I am trying to answer: what happens if we hit another catastrophic downturn? Well, if you’re 40, you might have time to ride out a lost decade. At 75 or 80, that same decade could be the main chunk of an entire horizon.
The Loss You See
Stashing cash at home was a Depression-era answer — a response to thousands of bank failures before deposit insurance existed. But it’s worth understanding how people actually lost everything back then.
Some people lost everything because their bank failed. Their savings didn’t go down — they just disappeared. That’s exactly why the FDIC was created in 1933. When you open a bank account, you’re told your savings are insured for up to $200,000. And since then, not a single insured depositor has lost a cent.
Others lost it because they borrowed money to invest. That still happens today — trading on margin and hedging is a powerful strategy when used right. But back then, you could buy stock with just 10% down. A 10% drop wiped you out completely, and if it fell further, you could end up in severe debt.
A third group lost everything because of timing. You’ve probably heard the market took 25 years to recover from 1929 — but that number ignores dividends, which were substantial, and deflation, which actually increased purchasing power. The real recovery took only 7.2 years.
The problem wasn’t how long the recovery took. It was needing cash in 1932. Jobs were gone, bills kept coming, and families without reserves had to sell assets at rock-bottom prices. Those forced sales were losses they could never get back.
The pattern was clear: no deposit insurance, too much borrowing, and no liquidity to ride it out.
The savers who followed didn’t face bank runs. Their lesson was quieter — and easy to miss.
The Loss You Don’t See
Say you set aside $100,000 at the start of 2021. By 2026, your statement still shows roughly that amount — maybe a little more with interest. But that $100,000 now buys only about $78,000 worth of goods and services today. Over 20% of its value quietly disappeared, spent on rent, groceries, gas, insurance — the things you need every day. And nowhere on your statement does that loss show up. No alert, no warning as the real value of your savings changes with time.
Now compare that to $100,000 invested in a portfolio during a rough market year. The drop — say, down to $70,000 — shows up plainly on your statement. You see it, you feel it, it’s right there in front of you. It’s hard to remember in that moment that you haven’t lost anything yet. It’s only on paper. If you don’t need those assets, if you don’t sell, you haven’t realized the loss.
The reality is that keeping money “safe” in cash doesn’t protect you. It just hides the erosion. FDIC insurance protects the number of dollars in your account — but not what those dollars can buy. Cash at home earns nothing, has no protection, and isn’t insured by anyone.
Now, the past five years have been a mild version of degrading purchasing power.
Between 1966 and 1982, prices in the U.S. nearly tripled. A dollar saved at the start of that period could buy only a third of what it could by the end. Many of you remember living through it — or watched your parents go through it.
What made it worse: savers were legally blocked from keeping up. Regulation Q, a federal rule, capped bank savings rates at around 5¼% — even as inflation hit 11%, then 13%. People weren’t just losing ground. They were barred from earning enough to catch up.
President Carter eventually called the cap “unfair to the small saver,” and Congress repealed it. But by then, the damage was done.
No banks collapsed. No one was robbed. There were no breaking news alerts. But millions of people who did everything right watched their savings lose value, year after year.
Isn’t Losing a Little Better Than Losing It All?
If Social Security or a pension already covers your expenses, and this account is more of a safety net than something you’re actively relying on, keeping it in cash might make sense.
But for most retirees, the money needs to do more. Say you’re 68 with $200,000 in the bank. It’s insured, stable, and feels safe. But it may need to last 25 years or more. Interest alone on those savings may not be enough.
The problem with an all-cash strategy is that the risk you’re trying to avoid — loss — is the one it guarantees. At recent inflation rates, your money’s buying power could be cut in half over about 20 years. Your statement will still say $200,000, but it’ll only buy what $100,000 buys today.
A diversified portfolio can lose roughly half its value in a major decline — that’s real. But historically, markets have recovered, even if not on a fixed timeline and never with a guarantee. Cash doesn’t risk a nominal loss, but the erosion of purchasing power is almost certain.
Then there’s the timing problem: when do you get back in? Moving to cash isn’t one decision — it’s two. Most people wait until the market feels safe again, but by then, prices have usually already climbed back. The stock market is forward looking, so it usually recovers much faster than the overall economy.
What Cash Is Actually For
Cash has a job: covering near-term expenses, acting as an emergency cushion, and preparing for known upcoming costs. Its role isn’t to grow — it’s to make sure you’re never forced to sell at the worst possible moment, like in 1932. Cash buys time. That’s what those families didn’t have.
How much should you hold? Probably less than you think.
Some advisors say two to three years of expenses in cash. The research doesn’t back that up. A study covering 21 countries and 115 years found that rebalancing a diversified portfolio beat holding large cash reserves. Rebalancing does what cash is supposed to do — it sells what’s gone up and buys what’s gone down. A big cash buffer just drags on your returns.
What the research does support: a modest cash cushion lets you avoid making reactive decisions with the rest of your portfolio. The right amount of cash is the smallest amount that gives you the confidence to stay invested — not the largest amount fear or anxiety tells you to hold. The right number depends on your situation.
“Do Nothing” vs. “There’s Nothing to Do”
I’m not going to tell you to change your strategy based on headlines. But understand the difference between “do nothing” and “there’s nothing to do.” One is indifference. The other is a deliberate choice — backed by logic and evidence.
We’re wired to think action is always the answer. That if you’re not doing something, you’re not solving anything. But holding isn’t inaction. It’s a conclusion.
And there are four concrete steps you can take right now that don’t require predicting anything:
- Match your cash reserves to your actual expenses, not your anxiety. This is usually less than you’d expect — and it lets the rest of your portfolio do its job.
- Diversify your cash. Use multiple banks, stay within FDIC limits, and consider Treasury bills.
- Minimize debt and stay in your home. It’s not flashy advice, but it matters — this was the single biggest factor in who made it through 1929 and who didn’t.
- Write down your plan for a 30% market drop — today, while things are calm. The greatest risk to most retirements isn’t a global crisis. It’s abandoning a sound strategy during a tough moment.
None of this depends on seeing the future or even playing in a fair system. Your edge is patience — a long-term perspective while others chase the next millisecond. Not panicking is its own kind of power, no matter what’s happening in the world.
You Can’t Prepare for Every Scenario
Trying to anticipate the next crisis is like planning for the last one — it never looks the same. Crises catch us off guard precisely because they don’t repeat.
But building resilience doesn’t require predictions.
Invest in real businesses across diverse markets. Hold enough cash to avoid selling in a downturn. Manage debt responsibly. Have a plan before you need one.
This works in an average rough year. It works in an exceptionally hard year. And even in the rare, worst-case scenarios, it’s still the most practical approach — imperfect, but realistic.
Methodology and Historical Notes
The illustration and the $100,000 example reflect the change in the Consumer Price Index for All Urban Consumers (CPI-U) published by the U.S. Bureau of Labor Statistics. The index stood at 261.582 in January 2021 and 333.952 in June 2026, an increase of roughly 27.7%, meaning $100,000 held as cash over that period would purchase approximately $78,000 of the same basket today. Figures are rounded. The illustration shows the effect of inflation on cash and does not represent any actual account, investment, or client experience.
Between 1966 and 1982 the CPI-U rose from an annual average of 32.4 to 96.5, an increase of approximately 2.98 times. Regulation Q ceilings on passbook savings rates stood at approximately 5.25% during the late 1970s, against annual CPI increases of 11.3% in 1979 and 13.5% in 1980. The ceilings were phased out following the Depository Institutions Deregulation and Monetary Control Act of 1980.
Margin requirements in the late 1920s permitted purchases with as little as roughly ten percent down in many cases; minimum margin requirements were subsequently established under the Securities Exchange Act of 1934 and Federal Reserve Regulation T.
References to the post-1929 recovery period reflect the distinction between price-only index levels, which did not regain their September 1929 peak until 1954, and total-return measures incorporating reinvested dividends and the deflation of the early 1930s, which reached recovery materially earlier. Published estimates vary by index and methodology.
The discussion of cash reserves references Javier Estrada, “The Bucket Approach for Retirement: A Suboptimal Behavioral Trick?” (Journal of Investing, 2019), which examined 21 countries over a 115-year period and found that static allocations with periodic rebalancing outperformed bucket strategies across four measures of performance, and related analysis by Michael Kitces on cash reserve strategies versus total-return rebalancing. Findings are historical and do not predict future results. The appropriate amount of cash for any individual depends on that person’s spending, other sources of income, time horizon, and circumstances.
The statement that money loses roughly half its buying power in about twenty years reflects a constant annual inflation rate near the most recent twelve-month CPI reading, applied using the rule of 72. Actual inflation varies year to year and the outcome would differ materially at a different rate. The $200,000 figure is illustrative and does not represent any actual account.
References to current events reflect publicly reported conditions as of early August 2026 and are subject to change. They are described for context only and are not intended as commentary on any policy, party, or administration.
The description of oil futures activity preceding public announcements reflects reporting by Reuters and subsequent coverage in Forbes and CNBC during 2026, including a reported order of approximately $500 million placed shortly before a March announcement, and reports that the Department of Justice and the Commodity Futures Trading Commission are examining trading around those events. Members of Congress have separately requested regulatory review.
The description of the paid social media data feed reflects reporting by Bloomberg, CNBC, NBC News and NPR between July 17 and August 1, 2026, including the reported pricing of up to $100,000 per month for the fastest tier. Statements regarding potential legal issues reflect positions taken publicly by members of Congress and by a former SEC official as reported in those accounts.
As of publication, no regulator or court has made any finding in connection with these matters. Nothing in this post is intended as an allegation of wrongdoing by any person or entity, and readers should not infer that any conclusion has been reached. You cannot invest directly in an index, and index returns reflect no fees or expenses. Diversification does not eliminate the risk of loss, and there is no guarantee that any portfolio will recover from a decline.
Sources: U.S. Bureau of Labor Statistics, Consumer Price Index for All Urban Consumers, 1966–2026; Federal Reserve History, “Interest Rate Controls (Regulation Q)”; Reuters, Forbes and CNBC reporting on oil futures activity preceding public announcements, 2026; Bloomberg, CNBC, NBC News and NPR reporting on paid social media data feeds sold to trading firms, July–August 2026; Javier Estrada, “The Bucket Approach for Retirement: A Suboptimal Behavioral Trick?”, Journal of Investing (2019); Michael Kitces, kitces.com, on cash reserve strategies versus total-return rebalancing; 2026 Social Security and Medicare Trustees Reports via the Bipartisan Policy Center and the Committee for a Responsible Federal Budget; Federal Deposit Insurance Corporation; CNBC; CNN Business.
Investment advisory services offered through SCM Investment Services, a Registered Investment Adviser. This material is for informational and educational purposes only and is not intended as investment, legal, or tax advice. All investing involves risk, including the possible loss of principal. Past performance is not indicative of future results. Any examples are for illustrative purposes only and do not represent any actual investment. Client experience described is a single illustrative example and is not representative of all clients or of any particular outcome. Different assumptions or dates would produce different results. Please consult a qualified professional before making investment decisions. For SCM Investment Services’ full firm disclosures, please see our disclaimer page. Form ADV Part 2A is available upon request and at scminvesting.com.
