Inflation is not the emergency it was in 2022 when it peaked above 9%. The Consumer Price Index rose 2.6% year-over-year through April 2026, closer to the Federal Reserve’s long-term target, and a significant improvement from the highs of recent years.¹ But “better than it was” is not the same as “no longer a concern,” and for investors, particularly those in or near retirement, even moderate and persistent inflation is a quiet threat to financial security that deserves a place in portfolio planning. 

The math is straightforward and sobering. A 2.5% annual inflation rate reduces the real value of a fixed income by 22% over ten years and nearly 40% over twenty years.¹ For a retiree drawing from a portfolio that is not keeping pace with rising costs, that is not a theoretical risk. It is the lived experience of buying less with the same withdrawal, year after year.  

Why Inflation Hits Retirees Differently 

During the working years, inflation is often partially offset by wage growth. Salaries rise, bonuses increase, and income has at least some capacity to respond to a higher-cost environment. In retirement, that buffer largely disappears. Withdrawals from a fixed portfolio, pension income, and Social Security become the primary income sources, and while Social Security does include an annual cost-of-living adjustment, it is not always sufficient to cover the full inflation experience of a retiree’s actual spending, particularly in categories like healthcare, which tends to inflate faster than the overall Consumer Price Index.² 

For investors still in the accumulation phase, inflation affects the real return of the portfolio — the return that actually matters. A 7% portfolio return sounds strong until inflation is running at 4%, leaving a real return of roughly 3% before taxes and fees. The gap between nominal and real returns, compounded over many years, is where purchasing power quietly erodes.³ 

What a Traditional Portfolio May Be Missing 

A standard stock-and-bond portfolio offers some natural inflation protection, for example, equities over long periods have historically outpaced inflation, but it is not always enough, and bonds in particular can struggle in inflationary environments. When inflation rises, interest rates tend to follow, and the prices of existing bonds fall. A portfolio that is heavily weighted toward fixed income may find itself underperforming inflation in the very environment where retirees are most dependent on it. 

The question worth asking is not whether your portfolio has produced returns, but whether it has produced returns above inflation, and whether it is positioned to continue doing so. 

Tools for Inflation Protection 

Several asset classes have historically provided meaningful inflation protection, each with different risk profiles and roles in a broader portfolio: 

• Treasury Inflation-Protected Securities (TIPS) are U.S. government bonds specifically designed to preserve purchasing power. Their principal value adjusts with the Consumer Price Index: when inflation rises, the principal increases, and interest payments (calculated on the adjusted principal) rise with it. Current TIPS yields offer a real return of approximately 1.9% above inflation, among the most attractive levels in the past decade. For a retiree who allocates $200,000 to TIPS, that translates to roughly $3,800 in guaranteed real purchasing power annually, regardless of where inflation goes. Research from Vanguard found that a portfolio with 20-25% allocated to TIPS historically maintained 94% of its real purchasing power over 30-year periods, compared to 81% for portfolios relying solely on nominal bonds.¹ 
• Real assets — including real estate, commodities, and infrastructure — have historically shown the ability to rise with inflation because the underlying assets tend to increase in value as the prices of goods and services increase. Real Estate Investment Trusts provide access to income-producing real assets without requiring direct property ownership, and many distribute income that adjusts as rents and property values rise.⁴ 
• Dividend growth equities, stocks of companies with a consistent track record of raising their dividends, offer a different kind of inflation hedge. A company that regularly increases its dividend may help shareholders maintain purchasing power better than a stock with no income or a bond with a fixed coupon. The key word is growth: a static dividend does not protect against inflation, but a rising one has historically done so.⁵ 
• I-Bonds, issued by the U.S. Treasury, earn interest that combines a fixed rate with an inflation adjustment tied to the CPI. They are purchased directly from the Treasury and carry a $10,000 annual purchase limit per person. They are not a portfolio cornerstone, but for investors looking for a simple, government-backed inflation hedge, they remain a useful option. 

The Accumulation Phase vs. The Distribution Phase 

How much inflation protection a portfolio needs, and what form it should take, depends significantly on where an investor is in their financial life. Younger investors with long time horizons and growing income have more capacity to rely on equities and real assets as their primary inflation hedge, accepting more volatility in exchange for long-term growth. Investors in the distribution phase, drawing down a portfolio to fund expenses, typically benefit from a more deliberate allocation to inflation-linked securities that provide predictable real income even in challenging environments. 

For most investors, the right answer is not a wholesale shift toward inflation-protection assets, but a considered review of whether the current portfolio has sufficient exposure  and whether that exposure is sized appropriately for the investor’s timeline and income needs. 

Looking Ahead 

Stay tuned! December’s Financial Focus will take this conversation a step further, exploring specific investment tools, including structured products and alternative strategies, that can provide defined outcomes and inflation-aware positioning for investors seeking more tailored solutions.  

Bottom Line: Inflation does not have to be dramatic to be damaging. Even at moderate levels, it compounds into a meaningful reduction in purchasing power over the long arc of retirement. Reviewing whether your portfolio is positioned to keep pace — through TIPS, real assets, dividend growth equities, or a combination — is a conversation worth having with your Wedbush advisor before year-end. 

Sources: 

1. https://due.com/protect-retirement-savings-inflation-2026/ 
2. https://www.nfp.com/insights/inflation-and-your-retirement-plan/ 
3. https://realinvestmentadvice.com/resources/blog/understanding-inflation-impact-on-investments/ 
4. https://www.forbes.com/sites/investor-hub/article/how-to-invest-during-inflation/ 
5. https://www.cnbc.com/2026/03/26/these-inflation-protected-plays-can-help-investors-manage-the-impact-of-higher-prices.html 

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