Key Takeaways:

  • Inflation can chip away at the wealth investors have built.
  • Part of financial planning requires figuring out what your purchasing power will be in the future to see how far your retirement savings will carry you.
  • Investors may consider plans to inflation-proof their portfolio to withstand gradual increases in prices for goods and services.

Thirty years ago, a dozen eggs cost shoppers around 75 cents. Now, you would need to add a dollar to that price to get them. This is just one example of a consumer item’s price that has increased during the past several years, showing how inflation affects our buying power.

The effects of inflation are not only seen in the grocery store. Inflation is persistent and can slowly erode at savings over time. Therefore, it threatens the retirement nest egg. For retirees, savings replace employment wages as the main source of income. This means it is crucial for investors looking toward the long term to build retirement funds that can keep pace, or even out-pace, inflation.

Inflation in brief

Inflation is typically measured by changes in the consumer price index (CPI) maintained by the U.S. Bureau of Labor Statistics (BLS).

Average Inflation By Decade

Average Inflation By DecadeInflation in Brief


Although there are several indices maintained, the one most commonly referred to is the Consumer Price Index for All Urban Consumers (CPI-U), which tracks the change in prices of a basket of goods and services that represent what a typical consumer might buy.

These days, some of the rise in U.S. inflation can be attributed to an economy reopening as COVID-19 pandemic restrictions loosened. Supply-chain issues and a boost in demand are major factors. The CPI increased 5.4% in June 2021 from a year earlier.

Purchasing power

We believe asset allocation within a portfolio should fit investors’ individual objectives and risk tolerance. However, we’ve found that some investments withstand inflationary periods, for example commodities, real estate investment trusts (REITs), and stocks.

The issue for investors who consider income as an objective is that commodities do not pay dividends, unless bought in the form of listed stocks, or interest income.

Additionally, low-risk investments like bonds can be affected by inflation. A longer-term bond has a greater risk that higher inflation could lower the value of payments in inflation-adjusted terms.

Dividend-paying stocks, however, could offer an attractive opportunity for building or completing a portfolio designed for purchasing power. Historically, dividends have often been a source of total return in a diversified investment portfolio. We believe stocks could offer an option to address the quest for purchasing power.

What to consider when talking with your Janney Financial Advisor

A knowledgeable Financial Advisor can help pre-retirees and retirees create and monitor a retirement portfolio that can meet their plan objectives. A couple of things investors can ask to start the conversation about retirement income:

  • Is my portfolio properly diversified to produce income?
  • How much investment return will be needed to support my desired withdrawal level in retirement?


Past performance is no guarantee of future performance and future returns are not guaranteed. There are risks associated with investing in stocks such as a loss of original capital or a decrease in the value of your investment. For additional information or questions, please consult with your Financial Advisor. This report is provided for informational purposes only and shall in no event be construed as an offer to sell or a solicitation of an offer to buy any securities. The information described herein is taken from sources which we believe to be reliable, but the accuracy and completeness of such information is not guaranteed by us. The opinions expressed herein may be given only such weight as opinions warrant. This Firm, its officers, directors, employees, or members of their families may have positions in the securities mentioned and may make purchases or sales of such securities from time to time in the open market or otherwise and may sell to or buy from customers such securities on a principal basis.



About the author

Mark Luschini

Chief Investment Strategist, President and Chief Investment Officer, Janney Capital Management

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