How to Protect Your Money from Inflation

Series I savings bonds, sold by the US Treasury through TreasuryDirect, earn a composite rate made of two parts. The fixed rate is set when you buy and stays with the bond for its life. The inflation rate is reset every May 1 and November 1 from the change in the CPI-U and applies to each bond for six months at a time. The composite cannot fall below zero, so deflation can reduce the rate but never the bond's value.

Bonds issued from May through October 2022 had a 0.00% fixed rate and a 4.81% semiannual inflation rate, for a composite of 9.62% a year during their first six months. Current rates are posted on TreasuryDirect's rates page and change twice a year.

The limits are tight. Each Social Security number can buy $10,000 a year, electronically only; paper I bonds, which had been available through federal tax refunds, stopped being sold on January 1, 2025. A bond cannot be cashed for 12 months, and cashing it before five years costs the last three months of interest. Interest is exempt from state and local income tax, and federal tax can be deferred until the bond is cashed.

Treasury Inflation-Protected Securities are marketable Treasury bonds sold in 5-, 10-, and 30-year terms, in multiples of $100, at auction through TreasuryDirect or a broker. Their principal is adjusted by the CPI-U: with 3% inflation, $1,000 of principal becomes $1,030 after a year. The fixed coupon is paid every six months on the adjusted principal. Principal falls with deflation, but at maturity the holder receives the adjusted principal or the original amount, whichever is greater.

Two features are easy to miss. First, the yearly increase in principal counts as federal taxable income in the year it occurs, even though the money is not received until the bond matures or is sold. This is often called phantom income. Second, TIPS trade at market prices that fall when real yields rise. The 10-year TIPS yield went from about −1.0% at the start of 2022 to about 1.6% at the end, and the market value of existing TIPS and TIPS funds fell even as inflation ran at 8.0%. A TIPS held to maturity still pays its inflation-adjusted principal; one sold early may not. TIPS also yield less than ordinary Treasuries of the same term, so if inflation comes in below the gap between the two, the ordinary Treasury earns more.

These accounts have no link to the CPI. Their yields follow the federal funds rate set by the Federal Reserve: money market fund yields track it closely, and banks adjust savings rates at their own pace and often only partly. The Fed raised its target range from near zero in early 2022 to 5.25%–5.50% in July 2023 and held it there until it began cutting in September 2024. With CPI inflation at 4.1% in 2023 and 2.9% in 2024, accounts paying close to the policy rate earned a positive real return. The national average savings rate, by contrast, stayed below 0.5% throughout.

Whether these accounts keep up with inflation therefore depends on where the Fed sets its rate relative to inflation, which changes over time. Bank savings accounts are FDIC-insured up to $250,000 per depositor, per bank, per ownership category. Money market funds are mutual funds, not deposits, and are not FDIC-insured.

Companies can raise prices when their costs rise, so over long periods their earnings and share prices have tended to rise faster than inflation. From 1990 to 2026, the S&P 500 price index rose 9.2% a year while consumer prices rose 2.6% a year, a real gain of about 6.4% a year before counting dividends, which added more.

Over short periods the relationship breaks down. In 2022 the S&P 500 fell 19.4% while consumer prices rose 8.0%, as rising interest rates lowered what investors would pay for each dollar of earnings. Stocks have offset inflation over decades, not reliably over any given year or two.

Home prices have kept ahead of inflation over the long run, as the table below shows, and rental income tends to rise with market rents. Real estate investment trusts (REITs) offer the same exposure through traded shares; they must distribute at least 90% of their taxable income to shareholders as dividends. REITs whose leases reset often, such as apartments and self-storage, can raise rents faster than those with long fixed leases.

Gold's record depends on the period. Its annual average price fell from $383 an ounce in 1990 to $271 in 2001 while prices rose 36%, and it was nearly flat during the 2021–2022 inflation surge. It has risen strongly in other stretches, which is why its long-run average in the table looks better than its record as a year-to-year hedge.

The tools differ mainly in how long money has to stay put for the protection to work. Savings accounts and money market funds have no price risk and no lockup, but no inflation link. I bonds track the CPI exactly but require 12 months before any withdrawal and five years to avoid the interest penalty. TIPS deliver their inflation adjustment with certainty only to the maturity date. Stocks, real estate, and gold have outpaced inflation over decades but have fallen in real terms over periods of several years. Measuring what your own cash has lost in the Inflation Calculator puts a number on the cost of leaving it where it is.