US inflation context

Long-term US CPI average: ~3% per year over the past century. The 2021–2023 period saw CPI peak at 9.1% (June 2022), the highest since 1981.

For retirement planning, the standard assumption is 3% long-term inflation.

Impact on savings

At 3% inflation:

  • $1 million today = $553,000 real value in 20 years
  • $1 million needed in 20 years = $1.81 million nominal

High-yield savings accounts (4–5% in 2024 with Fed rates elevated) beat inflation. Regular savings accounts (0.1–0.5%) do not.

TIPS and I-Bonds

Treasury Inflation-Protected Securities (TIPS) and I-Bonds adjust with CPI — they guarantee real returns above inflation. I-Bonds: 0% real rate + CPI adjustment, max $10,000/year per person, tax-deferred. Useful as emergency fund for disciplined savers.