{"id":473680,"date":"2022-07-13T22:34:00","date_gmt":"2022-07-13T19:34:00","guid":{"rendered":"https:\/\/en.buradabiliyorum.com\/brett-arendss-roi-what-can-retirees-do-about-inflation\/"},"modified":"2022-07-13T22:34:00","modified_gmt":"2022-07-13T19:34:00","slug":"brett-arendss-roi-what-can-retirees-do-about-inflation","status":"publish","type":"post","link":"https:\/\/buradabiliyorum.com\/en\/brett-arendss-roi-what-can-retirees-do-about-inflation\/","title":{"rendered":"#Brett Arends&#039;s ROI: What can retirees do about inflation?"},"content":{"rendered":"<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_85 counter-hierarchy ez-toc-counter ez-toc-custom ez-toc-container-direction\">\n<p class=\"ez-toc-title\" style=\"cursor:inherit\">Table of Contents<\/p>\n<label for=\"ez-toc-cssicon-toggle-item-6a3be3ed45021\" class=\"ez-toc-cssicon-toggle-label\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #dd3333;color:#dd3333\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #dd3333;color:#dd3333\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/label><input type=\"checkbox\"  id=\"ez-toc-cssicon-toggle-item-6a3be3ed45021\" checked aria-label=\"Toggle\" \/><nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1 ez-toc-heading-level-1'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/buradabiliyorum.com\/en\/brett-arendss-roi-what-can-retirees-do-about-inflation\/#%E2%80%9CBrett_Arendss_ROI_What_can_retirees_do_about_inflation%E2%80%9D\" >&#8220;Brett Arends&#039;s ROI: What can retirees do about inflation?&#8221;<\/a><ul class='ez-toc-list-level-4' ><li class='ez-toc-heading-level-4'><ul class='ez-toc-list-level-4' ><li class='ez-toc-heading-level-4'><ul class='ez-toc-list-level-4' ><li class='ez-toc-heading-level-4'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/buradabiliyorum.com\/en\/brett-arendss-roi-what-can-retirees-do-about-inflation\/#Brett_Arends\" >Brett Arends<\/a><\/li><\/ul><\/li><\/ul><\/li><\/ul><\/li><\/ul><\/nav><\/div>\n<h1><span class=\"ez-toc-section\" id=\"%E2%80%9CBrett_Arendss_ROI_What_can_retirees_do_about_inflation%E2%80%9D\"><\/span>&#8220;Brett Arends&#039;s ROI: What can retirees do about inflation?&#8221;<span class=\"ez-toc-section-end\"><\/span><\/h1>\n<h2 class=\"article__subhead\" itemprop=\"alternativeHeadline\">\n<\/h2>\n<p><\/p>\n<div class=\"column column--full article__content\">\n<div class=\"article__side\">\n<div class=\"container--sticky not-active\">\n<div id=\"cx-next\" data-nosnippet>\n              <\/div>\n<\/p><\/div>\n<\/p><\/div>\n<div id=\"js-article__body\" class=\"article__body article-wrap at16-col16 barrons-article-wrap\" itemprop=\"articleBody\" data-sbid=\"WP-MKTW-0001023482\" role=\"document\">\n<div class=\"barrons-article-ad-wrapper\">\n<div data-track=\"barrons-article-ad-wrap\" class=\"barrons-article-ad sticky_item\">\n<div class=\"barrons-main-article-ad-target sticky_target body_ad\" aria-hidden=\"true\"><\/div>\n<\/p><\/div>\n<\/p><\/div>\n<div data-layout=\"\n                inline\" data-layout-mobile=\"\" class=\"\n          media-object\n          type-InsetArticleReader\n              \n              inline\n  article__inset\n          article__inset--type-InsetArticleReader\n              article__inset--inline\n  \"><\/p>\n<div class=\"media-object-article-reader\">\n<div class=\"audioplayer\" data-sbid=\"WP-MKTW-0001023482\" role=\"region\" aria-label=\"Listen to Article\" tabindex=\"-1\" id=\"articlereader\" data-show-title=\"false\" data-theme=\"wsj-article-reader\" data-show-header=\"false\" data-show-subscribe=\"false\" data-ads-enabled=\"true\" data-save-publication=\"false\">\n        <\/div>\n<\/p><\/div>\n<\/p><\/div>\n<p>       \u201cMadness.\u201d<\/p>\n<p> That\u2019s how a friend of mine, a veteran money manager with an excellent track record,\u00a0described\u00a0the inflation situation and the bond market at the moment.<\/p>\n<p>Oh, and that comment was made before the\u00a0latest dismal inflation report, which is even worse than the headlines suggest.<\/p>\n<div class=\"paywall\">\n       <strong>Read:<\/strong> \u2018This is a daunting time to retire\u2019: In the age of inflation, there are steps you can take to deal with higher prices<\/p>\n<p>Yes, the \u201cannual\u201d rate is 9.1%, the worst in decades. But that\u2019s almost irrelevant at this point, because it only tells you how much prices have risen since a year ago\u2014not how much they are rising now.<\/p>\n<p><strong>Read:<\/strong> Inflation will push your <a href=\"https:\/\/buradabiliyorum.com\/en\/category\/social-mediaa\/\" data-internallinksmanager029f6b8e52c=\"1\" title=\"Social Media\" target=\"_blank\" rel=\"noopener\">Social<\/a> Security check even higher in 2023<\/p>\n<p>If you look at the most recent data, prices rose from May to June at 1.3% \u2014 equivalent to an annualized rate of 16.8%.<\/p>\n<p>Yikes.<\/p>\n<p>It\u2019s no surprise stocks were down and predictions of a recession were up.\u00a0But where does that leave retirees, other senior citizens, and anyone else who is on the wrong end of rising prices and wants to protect themselves?<\/p>\n<p><strong>Read:<\/strong> Avoid these food items the next time you go shopping if you want to cut your grocery bill<\/p>\n<div id=\"cx-membership-tile\"><\/div>\n<p>That\u2019s where the \u201cmadness\u201d comes in.<\/p>\n<p>While inflation has skyrocketed in the past year, the cost of inflation insurance has collapsed.<\/p>\n<p>Pretty much everything that professional investors buy if they expect inflation has gone down, especially since January.<\/p>\n<p>Real-estate investment trusts, for example as measured by the Vanguard Real Estate ETF<br \/>\n        VNQ,<br \/>\n        <bg-quote field=\"percentchange\" format=\"0,000.00%\" channel=\"\/zigman2\/quotes\/202931846\/composite\" class=\"negative\">-0.36%<\/bg-quote><span>,<\/span><br \/>\n      \u00a0are\u00a0down 21%.<\/p>\n<p>Gold<br \/>\n        GLD,<br \/>\n        <bg-quote field=\"percentchange\" format=\"0,000.00%\" channel=\"\/zigman2\/quotes\/200593176\/composite\" class=\"positive\">+0.44%<\/bg-quote><br \/>\n       is down 5%.<\/p>\n<p>Natural resource stocks \u2014 such as GNR<br \/>\n        GNR,<br \/>\n        <bg-quote field=\"percentchange\" format=\"0,000.00%\" channel=\"\/zigman2\/quotes\/207739257\/composite\" class=\"positive\">+0.18%<\/bg-quote><br \/>\n       \u2014 are down about 8%. (Though\u00a0commodity futures, for example via the Invesco DB Commodity Index Tracking ETF<br \/>\n        DBC,<br \/>\n        <bg-quote field=\"percentchange\" format=\"0,000.00%\" channel=\"\/zigman2\/quotes\/205569319\/composite\" class=\"positive\">+0.66%<\/bg-quote><span>,<\/span><br \/>\n       are still up.)<\/p>\n<p>The simplest and most obvious security that people buy to protect themselves against sustained inflation is an inflation-protected Treasury bond. It\u2019s issued by the U.S. government and guaranteed to adjust the effective interest rate to keep up with the CPI.<\/p>\n<p>And these TIPS bonds, as they are known\u2026are also down.<\/p>\n<p>The iShares TIPS Bond ETF<br \/>\n        TIP,<br \/>\n        <bg-quote field=\"percentchange\" format=\"0,000.00%\" channel=\"\/zigman2\/quotes\/200600110\/composite\" class=\"positive\">+0.46%<\/bg-quote><br \/>\n       is down 12%. The PIMCO 15+ Year TIPS Index ETF<br \/>\n        LTPZ,<br \/>\n        <bg-quote field=\"percentchange\" format=\"0,000.00%\" channel=\"\/zigman2\/quotes\/208968406\/composite\" class=\"positive\">+1.58%<\/bg-quote><span>,<\/span><br \/>\n       which invests in longer-term TIPS bonds, has plunged 28% since the start of the year. If you\u2019d predicted this huge inflation surge last fall, and loaded up on long TIPS in anticipation, you\u2019d have done worse than someone who just kept their money in the S&amp;P 500<br \/>\n        SPX,<br \/>\n        <bg-quote field=\"percentchange\" format=\"0,000.00%\" channel=\"\/zigman2\/quotes\/210599714\/realtime\" class=\"negative\">-0.40%<\/bg-quote><span>.<\/span>\n      <\/p>\n<p>Which is, as my friend says, \u201cmadness.\u201d<\/p>\n<p>I\u2019ve written about all of these assets before. They have all been tanking all year. As for TIPS: Their plunge is the reason that the bond market\u2019s 5-year inflation forecast remains so low, even now.<\/p>\n<p>Right now the U.S. bond market is still predicting inflation to collapse, and to average just 2.5% over the next\u00a0five\u00a0years. That forecast has fallen by a third since its peak in March, and is now lower than it was in the spring of last year\u2014when there was basically no inflation at alll.<\/p>\n<p>So the bond market still doesn\u2019t expect inflation. Nor do the markets for gold, resource stocks, real estate trusts and the like. And nor do investors for TIPS bonds.<\/p>\n<p>Make of this what you like. I have absolutely no idea what is actually going to h<a href=\"https:\/\/buradabiliyorum.com\/en\/category\/download-scripts-themes-apps\/\" data-internallinksmanager029f6b8e52c=\"9\" title=\"Download Scripts &amp; Themes &amp; Apps\" target=\"_blank\" rel=\"noopener\">app<\/a>en to inflation, and I don\u2019t pretend to. (I am always amazed at the way otherwise intelligent people will suddenly lapse into fortunetelling.) I\u2019ve been reporting for months on what the bond market is forecasting. Maybe it\u2019s right. Maybe it\u2019s crazy.<\/p>\n<p>The limited good <a href=\"https:\/\/buradabiliyorum.com\/en\/category\/news\/\" data-internallinksmanager029f6b8e52c=\"2\" title=\"News\" target=\"_blank\" rel=\"noopener\">news<\/a> here is that the falling price of inflation protection this year creates an opportunity for all those who either expect inflation to continue, or who \u2014 at least \u2014 cannot afford to leave themselves exposed to it. That includes many, possibly most, retirees.<\/p>\n<p>Bonds work like seesaws: When the price falls, the yield or interest rate rises. Inflation-protected Treasury bonds, or TIPS bonds, have fallen to the point where someone buying them today can guarantee that their purchasing power will beat inflation over the long haul, no matter whether it averages 2.5% a year or 9%\u00a0or\u00a016.8%. All they have to do is buy the bond and hold it until it matures. (Between now and that point the price can fluctuate up and down, as it has this year.)<\/p>\n<p>Especially notable are the TIPS bonds that are not due to be redeemed for another 20 or more years. TIPS bonds that mature between 2041 through 2050 currently offer \u201creal\u201d yields, meaning a rate of interest on top of inflation, of 1% a year or better. The 2045 bonds yield inflation plus about 1.2%. a year, which means your wealth is guaranteed to be worth about a third more in real, purchasing power terms by then so long as you buy the bond and hold it until maturity.<\/p>\n<p>(But with TIPS the floor is also the ceiling. Buy and own this bond until 2045 (for example) and at the end you will be some 30% richer: No less, but no more either. Your return is locked in.)<\/p>\n<p>Pro-tip: Always own TIPS bonds in a tax-sheltered account like an IRA if you can, because otherwise you will get some annoying an unpleasant tax bills every year.<\/p>\n<p>Earlier this year there was a small stampede of people buy\u00a0\u201cI Bonds,\u201d\u00a0a government-issued investment which is protected against inflation and similar to TIPS in many ways. TIPS have two advantages compared with I Bonds: There are no annual limits to how much you can buy, and you can hold them in a tax-sheltered account.<\/p>\n<p>TIPS have one comparative downside. These bonds are freely traded, so the price can drop (or rise). Once upon a time, back in the early 2000s, they were much cheaper. They were new products back then, and Wall Street didn\u2019t value them as highly. But we also didn\u2019t have quantitative easing and zero interest rate policies. So, for various reasons, TIPS bonds were so cheap you could buy them with \u201creal,\u201d inflation-adjusted yields north of 2%.<\/p>\n<p>If such happy times reappear, someone who buys a bond today with a 1% real yield will see the price fall. And may be kicking themselves for a missed opportunity.<\/p>\n<p>On the other hand, if the bond market starts panicking about long-term inflation you can probably expect these bonds to go a lot higher\u2014at which point you may be kicking yourself for not buying them now.<\/p>\n<p>The longer-term the TIPS bond you buy, the higher the guaranteed inflation-adjusted yield\u2026but the more volatile the bond\u2019s price. A basic TIPS fund like TIP or Vanguard Inflation-Protected Securities<br \/>\n        VAIPX,<br \/>\n        <bg-quote field=\"percentchange\" format=\"0,000.00%\" channel=\"\/zigman2\/quotes\/204162186\/realtime\" class=\"negative\">-0.04%<\/bg-quote><br \/>\n      owns bonds of all maturities, and will be much less volatile.<\/p>\n<p>Standard disclaimer: If I knew what was going to happen, I\u2019d be filing this column from my yacht.<\/p>\n<p>But if you are, for example, a retiree and you need to protect yourself against inflation, TIPS are a good way to do it.<\/p><\/div>\n<\/div><\/div>\n<p><\/p>\n<div class=\"byline article__byline\">\n<p>    <span>By<\/span><\/p>\n<div class=\"author mobile-scrim hasMenu\" data-scrim='{\"type\":\"author\",\"header\":\"Brett Arends\",\"subhead\":\"The Wall Street Journal\",\"list\":[{\"type\":\"link\",\"icon\":\"bio\",\"url\":\"https:\/\/www.marketwatch.com\/topics\/journalists\/brett-arends\",\"text\":\"Biography\"},{\"type\":\"link\",\"icon\":\"twitter\",\"url\":\"https:\/\/twitter.com\/BrettArends\",\"text\":\"@BrettArends\"},{\"type\":\"link\",\"icon\":\"email\",\"url\":\"http:\/\/www.marketwatch.com\/news\/mailto:barends@marketwatch.com\",\"text\":\"barends@marketwatch.com\"}]}' itemscope itemprop=\"author\" itemtype=\"http:\/\/schema.org\/Person\">\n<h4 itemprop=\"name\"><span class=\"ez-toc-section\" id=\"Brett_Arends\"><\/span>Brett Arends<span class=\"ez-toc-section-end\"><\/span><\/h4>\n<p><ufc-follow-author-widget product=\"marketwatch\" author-id=\"209_MW\" author-name=\"Brett Arends\" signin-url=\"https:\/\/accounts.marketwatch.com\/login?target=https%3A%2F%2Fwww.marketwatch.com%2Fstory%2Fwhat-can-retirees-do-about-inflation-11657740863%3Frss%3D1%26siteid%3Drss\" panda-api=\"https:\/\/follow-api.marketwatch.com\"><\/ufc-follow-author-widget><\/p><\/div>\n<\/div>\n<p><script async src=\"https:\/\/platform.twitter.com\/widgets.js\" charset=\"utf-8\"><\/script><\/p>\n<blockquote><p><strong><span style=\"color: #ff6600;\">If you liked the article, do not forget to share it with your friends. Follow us on\u00a0<span style=\"color: #ff0000;\"><a style=\"color: #ff0000;\" href=\"https:\/\/news.google.com\/publications\/CAAqBwgKMLG0nwswvr63Aw\" target=\"_blank\" rel=\"nofollow noopener noreferrer\">Google News<\/a><\/span>\u00a0too, click on the star and choose us from your favorites.<\/span><\/strong><\/p><\/blockquote>\n<blockquote>\n<p style=\"text-align: center;\">For forums sites go to <span style=\"color: #ff9900;\"><a style=\"color: #ff9900;\" href=\"https:\/\/forum.buradabiliyorum.com\/\" target=\"_blank\" rel=\"noopener\">Forum.BuradaBiliyorum.Com<\/a><\/span><\/strong><\/p>\n<\/blockquote>\n<blockquote>\n<p style=\"text-align: center;\"><strong>If you want to read more News articles, you can visit our <span style=\"color: #ff9900;\"><a style=\"color: #ff9900;\" href=\"https:\/\/en.buradabiliyorum.com\/news\/\" target=\"_blank\" rel=\"noopener\">News category.<\/a><\/span><\/strong><\/p>\n<\/blockquote>\n<p><span style=\"color: black;\"><a style=\"color: #ff9900;\" href=\"http:\/\/www.marketwatch.com\/news\/story.asp?guid=%7B20C05575-04D4-B545-7F9D-FA5393644FA3%7D&#038;siteid=rss&#038;rss=1\" target=\"_blank\" rel=\"noopener\">Source<\/a><\/span><\/p>\n","protected":false},"excerpt":{"rendered":"<p>&#8220;Brett Arends&#039;s ROI: What can retirees do about inflation?&#8221; \u201cMadness.\u201d That\u2019s how a friend of mine, a veteran money manager with an excellent track record,\u00a0described\u00a0the inflation situation and the bond market at the moment. Oh, and that comment was made before the\u00a0latest dismal inflation report, which is even worse than the headlines suggest. Read: \u2018This&#8230;<\/p>\n","protected":false},"author":1,"featured_media":473681,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"fifu_image_url":"https:\/\/images.mktw.net\/im-583089\/social","fifu_image_alt":"","footnotes":""},"categories":[70897],"tags":[],"class_list":["post-473680","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-news"],"_links":{"self":[{"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/posts\/473680","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/comments?post=473680"}],"version-history":[{"count":0,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/posts\/473680\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/media\/473681"}],"wp:attachment":[{"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/media?parent=473680"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/categories?post=473680"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/tags?post=473680"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}