Brett Arends’s ROI: Good news for retirees and retirement savers — inflation may be working in your favor

by | Aug 13, 2022 | Stock Market

Retirees and those seeking secure income got two items of very good news this week, though you may only have heard about one. July’s inflation came in below fears (although a debate now rages on what the “real” inflation rate is—more on that below). Meanwhile, your ability to earn a guaranteed rate of return on risk-free investments, regardless of what happens to inflation, actually went up.

So-called TIPS bonds, Treasury bonds protected against inflation, fell slightly in price this week. And as a result the interest rates available for new buyers went up. (Bonds work like seesaws: When the price falls, the “yield” interest rate rises.) A 5-year TIPS bond is now guaranteed to beat inflation by 0.3% a year between now and 2027, no matter what inflation turns out to be, and a 30-year TIPS bond is guaranteed to beat inflation by nearly a full percentage point per year. That’s equivalent to a 35% rise in purchasing power between now and 2052. What is going to happen to inflation over that time? I have no idea. Nor does anyone else. Some extremely smart and experienced financial wizards—including fund managers David Einhorn at Greenlight Capital and Jonathan Ruffer in London—think that inflation is going to rise, and keep rising. Einhorn recently suggested that the rec …

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