Your “Safe” Money Is Losing Ground. Here’s What De-Risking Actually Looks Like in 2026

On May 12, the Bureau of Labor Statistics reported that consumer prices rose 3.8% in April from a year earlier, the hottest reading in nearly three years. The next morning, the Producer Price Index landed at 6.0% year-over-year, the largest 12-month jump since December 2022. Core services inflation re-accelerated to a 6.2% annualized pace—the worst monthly spike since March 2024.

A lot of investors looked at those numbers and felt fine. Their cash is in a high-yield savings account paying 4.5%. Their CDs are locked in around 4%. Their fixed annuity is humming along at 5.5%. The Fed is on hold. What’s the problem?

The Reality: In recent years, after-tax, inflation-adjusted returns on common “safe money” instruments have turned negative. The illusion of safety—nominal yield that looks fine on a statement—is masking the slow erosion of purchasing power that is, statistically, the single most likely way for a long-term investor to lose ground.

The instinct to retreat to cash, CDs, money market funds, and fixed annuities in an uncertain market is understandable. It’s also, in 2026, expensive. The actionable news is that “de-risking” no longer means parking in instruments that lose to inflation. The modern toolkit looks different than it did twenty years ago, and many affluent investors don’t realize how much of it is now available to them.

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What’s behind 3.8% CPI?

Let’s start with what April actually told us. Headline inflation jumped to 3.8%, driven heavily by energy. Gasoline alone rose 15.6% at the producer level, the largest monthly surge in years, reflecting the spring oil shock that followed the closure of the Strait of Hormuz during the early months of the Iran war. Even after the April 8 ceasefire, shipping has not recovered, and the Dallas Fed estimates the disruption will add roughly 0.6 percentage points to headline inflation and 0.2 points to core inflation this year.

But the real concern isn’t energy. Energy is volatile by nature, and the market knows it. The concern is what’s happening underneath: Core services inflation—the sticky, structural component that the Fed actually loses sleep over—is running at a 6.2% annualized pace. Shelter, transportation services, and lodging are all reaccelerating. PPI at 6% YoY means pipeline pressure is still feeding through to consumer prices, and the Fed funds rate is no longer keeping pace.

Here’s the line that should focus the mind: As of mid-May, the effective Fed funds rate sits below trailing 12-month inflation. Real policy rates have flipped negative again. That has consequences.

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What the after-tax math actually looks like

Take a hypothetical investor with $5 million in investable assets, in a high-tax state, with a combined marginal rate around 40% on ordinary income. Plug in today’s yields against today’s inflation:

• A national-average one-year CD earns 1.95%. After tax, that’s about 1.17%.
  • Real Return: -2.63%
• A best-in-class one-year CD at an online bank earns 4.10%. After tax, 2.46%.
  • Real Return: -1.34%
• A top high-yield savings account paying 5.00% APY—the bright spot most investors point to—lands at 3.00% after tax.
  • Real Return: -0.80%
• A 10-year Treasury yielding roughly 4.4% (state-tax exempt, but still federally taxed at ~32% for this investor) clears about 3.00% after tax.
  • Real Return: -0.80%
• A five-year MYGA from an A-rated carrier at around 5.5% is the lone bright spot, returning roughly 1.7% pre-tax in real terms thanks to tax deferral. But here’s the catch: That rate is locked. If headline inflation drifts toward 4.5% over the next two years—a scenario the Cleveland Fed nowcasting model does not rule out—the real return on that locked rate compresses toward zero, and there is no exit ramp without surrender charges.

None of this is hyperbole. None of it requires a recession, a credit event, or a market crash. It only requires today’s inflation, today’s yields, and today’s tax code to coexist for another twelve months. The “safe” allocation is the slowest, most reliable way to lose ground in real terms—and it’s happening right now on most affluent investors’ statements, just buried under the comforting glow of a 4-handle nominal yield.

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“De-Risking” isn’t what it used to be

Here is where the conversation has to evolve. For most investors, “de-risking” still means one thing: Move toward cash and bonds. That mental model dates from a different era—an era when public fixed income reliably paid a real yield, when CD rates outran inflation, when the 60/40 portfolio did the work of risk management for you.

That era ended. The Bloomberg US Aggregate Bond Index lost roughly 13% in 2022, the worst year for public bonds in modern history. Public bonds and equities have shown elevated correlation in inflationary tape, which means the diversification you thought you were buying didn’t show up when you needed it. Cash equivalents, as we’ve just walked through, are bleeding in real terms.

The case I would make to any prospective client today is this: De-risking in 2026 is not about retreating to a smaller set of nominal-yield instruments. It’s about building a custom allocation that manages real risk, in real dollars, across vehicles that didn’t exist or weren’t accessible to individuals two decades ago. The instruments are different. The thesis is the same: Protect purchasing power, manage drawdown risk, and don’t pay an opportunity cost the size of the inflation rate to do it.

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The modern de-risking toolkit

Four vehicles are doing the most work in EdgeRock portfolios right now. None of them is appropriate for every investor. All of them belong in the conversation.

Private Credit (Direct Lending)

The Cliffwater Direct Lending Index, the most widely accepted benchmark for U.S. middle-market direct lending, returned 9.3% in 2025. Over the prior 20 years, it has averaged 9.5% with only one negative year (2008). For comparison, in 2022—the year public bonds lost 13%—the CDLI returned +4.2%.

Two structural features make private credit particularly well-suited to the current environment:

First, loans are floating-rate, tied to SOFR. When inflation pushes rates higher, coupons reset higher. That is a structural inflation hedge that public investment-grade bonds simply do not offer.

Second, the loans are senior secured, sitting at the top of the borrower’s capital stack with first-lien claims on collateral. In a workout, you get paid first.

Morgan Stanley’s 2026 outlook projects first-lien direct lending yields settling in the 8.0–8.5% range this year. That is roughly double what an investment-grade public bond delivers, with seniority in the capital structure and a coupon that adjusts to inflation rather than getting punished by it.

Private Equity

The Cambridge Associates US Private Equity Index returned 3.9% in the first half of 2025, with growth equity outpacing buyouts. The honest read on the asset class right now is Bain’s “K-shaped recovery” framing: A subset of elite managers is separating from the pack, while everyone else muddles through expensive 2021-vintage portfolios. Manager selection has never mattered more.

This is, frankly, where a custom-managed allocation earns its keep. Private equity exposure through a single-fund commitment or a generic feeder doesn’t work the way it used to. The work is in vehicle selection, manager diligence, vintage diversification, and sizing—exactly the kind of work that does not show up in a brokerage account.

Collar Strategies for Concentrated Positions

For investors with meaningful single-stock exposure—founders, public-company executives, post-IPO employees, anyone whose net worth is anchored in one ticker—the collar is the most underused tool in the toolkit.

The mechanics are simple: You buy a protective put at a strike below the current price, you sell a covered call at a strike above. When the strikes are chosen so the premiums approximately offset, the structure costs nothing upfront. What you’ve done is set a floor and a ceiling on the position for the duration of the options, without triggering a taxable sale.

The trade-off is real—you cap your upside. The reason this trade is popular among UHNW investors with $3M+ in a single name is that the math holds up: You eliminate catastrophic drawdown risk on a concentrated position, defer a substantial capital gains event, and keep the dividend stream and voting rights intact. For an investor whose biggest risk is a 40% drawdown in one ticker, the collar is what de-risking actually looks like.

Principal-Protected Structured Notes

Structured note issuance in the U.S. hit $149 billion in 2024, up 46% year-over-year, and the trajectory has continued through 2026. The reason is mechanical: Higher base rates mean the zero-coupon bond embedded in a principal-protected note is cheaper, which leaves more capital to buy upside participation in equity or commodity indices. Today’s rate environment produces meaningfully better participation rates and caps than were available during the 2009–2021 low-rate era.

The right structure pairs principal protection (subject to issuer credit) with defined upside exposure to a benchmark of choice. Used selectively, structured notes can substitute for a portion of a portfolio’s traditional fixed-income allocation while preserving upside optionality the public bond market does not offer.

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The honest objections

It would be intellectually dishonest to introduce these tools without addressing the real concerns.

On private credit: Yes, the asset class faces its first real liquidity test. The Financial Stability Board’s May 6 report on private credit vulnerabilities, echoing the IMF’s April 2026 Global Financial Stability Report, flagged rising borrower leverage (5.1x EBITDA) and declining interest coverage (1.6x, down from 3.1x in 2021). Blackstone’s BCRED received $3.7 billion in redemption requests against a 5% quarterly cap earlier this year, and Cliffwater’s flagship fund saw 7%+ redemption requests in March. These are real signals. The response isn’t to paint a 20-year asset class with the BDC redemption brush; it’s to be deliberate about manager selection, vehicle structure, and sizing. A senior-secured first-lien loan from a top-quartile manager is a categorically different exposure than a semi-liquid retail BDC at peak inflows.

On collars: Capping upside is a real cost. The right framing isn’t do I want to give up upside? It’s “Am I willing to give up some upside to eliminate the scenario where 70% of my net worth gets cut in half?” For a concentrated holder, that math is usually obvious in hindsight.

On illiquidity: This is a portfolio-construction problem, not an asset-class problem. The right question isn’t “are alternatives illiquid?” It’s “how much liquidity do I actually need, and am I overpaying for liquidity I’ll never use?” Most affluent investors I meet are carrying two to three times the liquidity buffer they actually need, at a real cost of 100–200 basis points per year.

On TIPS: Treasury Inflation-Protected Securities are a perfectly reasonable inflation hedge in isolation. The 10-year TIPS real yield is currently around 1.95%, which beats inflation pre-tax. The catch is the annual inflation accrual is taxed as ordinary income even though it isn’t received in cash—the “phantom income” problem. For a taxable HNW investor, the after-tax real return on TIPS sits close to zero. They belong in a discussion of inflation hedging. They don’t end one.

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What This Adds Up To

The argument I’d leave you with is not “alternatives are good and CDs are bad.” The argument is that a tactically managed, custom portfolio—one that uses private credit where public bonds used to live, collars where concentrated exposure used to sit naked, and structured notes where defensive positioning used to mean cash—does materially different work than a static 60/40 allocation. That work is more important right now than it has been in a decade, because the cost of getting it wrong is no longer abstract. It’s showing up on statements every month, denominated in lost purchasing power.

If you’re holding more than a few months of expenses in money market funds, CDs, or fixed annuities, you are not de-risking. You are paying a real-return tax for the comfort of a nominal yield. There are better tools to do the actual job. Whether they belong in your portfolio depends on liquidity needs, accreditation, time horizon, and dozens of other factors that don’t fit in a blog post.

That conversation, though, is one worth having. Especially this year.