TIPS Look More Attractive. Should Retirees Buy Them Now?
With real yields near some of their highest levels in years and another inflation report due this week, the better question is not where inflation goes next—but what job TIPS should do inside your retirement plan.
If inflation is finally moderating, why would you consider buying an inflation-protected bond now?
It sounds backward, but that is exactly why Treasury Inflation-Protected Securities, or TIPS, deserve another look. The latest confirmed Consumer Price Index showed headline inflation running at 3.5% over the prior year, while core inflation eased to 2.6%. The Federal Reserve has kept its target rate at 3.50% to 3.75%, and the next inflation report arrives Wednesday, August 12.
Markets will quickly debate what the new numbers mean for interest rates. Retirees have a different job: deciding whether today’s bond market offers a reasonable way to protect future purchasing power without taking more risk than their plan requires.
The Opportunity Is the Real Yield
TIPS are U.S. Treasury securities whose principal adjusts with inflation and deflation. At maturity, investors receive the inflation-adjusted principal or the original principal, whichever is greater.
What has changed is the real yield. As of August 7, Treasury’s five-year real yield was 2.13%, the 10-year was 2.40%, and the 30-year was 2.96%. The 10-year real yield was 1.68% in mid-September 2025, so investors are now being offered roughly 70 basis points more inflation-adjusted yield than they were less than a year ago.
US 10-Year Treasury Real Rate History
The chart shows how dramatically real yields have changed since the negative-rate environment of 2020–2022. That reset is a major reason TIPS deserve renewed attention.
The Number to Watch Is Breakeven Inflation
The second important number is breakeven inflation—the difference between the yield on a nominal Treasury and the real yield on a TIPS security of similar maturity. On August 7, the nominal 10-year Treasury yielded 4.65%, while the 10-year TIPS real yield was 2.40%. The difference was 2.25%, which is the approximate 10-year breakeven inflation rate.
4.65% nominal Treasury yield ≈ 2.40% real yield + 2.25% breakeven inflation
If inflation averages above roughly 2.25% over the coming decade, TIPS would generally have the relative advantage over a comparable nominal Treasury. If inflation averages below that level, nominal Treasuries would generally have the advantage.
Today’s 3.5% CPI reading does not prove that TIPS are mispriced. CPI measures inflation that has already occurred, while the breakeven reflects what the market is pricing over the years ahead.
Inflation Protection Does Not Eliminate Bond Risk
The word “protected” can create a false sense of security. TIPS protect against unexpected inflation, but they do not protect investors from changes in real interest rates. Current real yields rise from roughly 2.1% on five-year TIPS to 2.4% at 10 years and nearly 3.0% at 30 years. The extra yield can look tempting, but longer maturities generally come with greater sensitivity to rate changes.
Real TIPS Yields Across Maturities
As a rough illustration, a 10-year TIPS with a duration of roughly eight to nine years could decline about 4% to 5% in price if real yields rose another 50 basis points, all else equal. Inflation protection and price stability are not the same thing.
For a retiree who expects to use the money within several years, taking decades of duration risk merely to capture a higher yield may solve one problem while creating another. TIPS could also underperform comparable nominal Treasuries if inflation ultimately falls below today’s breakeven expectations.
Taxes Can Change the Math
TIPS have an unusual tax feature. Interest and inflation-related gains are generally subject to federal income tax, while Treasury securities are exempt from state and local income taxes. Those inflation adjustments may create taxable income during the year even though the investor has not received the additional principal in cash.
That potential “phantom income” can create cash-flow friction in a taxable account. For affluent retirees, municipal bonds may also deserve comparison. Account location and liquidity can materially change the after-tax result.
A higher yield is useful. A higher after-tax yield that fits the financial plan is better.
Five Tests Before Adding TIPS to a Retirement Portfolio
1. What problem are the TIPS solving?
If the goal is protecting a known future spending need from inflation, the allocation has a clear purpose. Buying simply because TIPS look attractive is a weaker reason.
2. When will the money be needed?
Maturity and duration should align with the retirement timeline, not simply the highest available yield.
3. Which account should hold them?
The taxation of inflation adjustments makes asset location particularly relevant across taxable, tax-deferred, and Roth accounts.
4. What are the alternatives?
Compare TIPS with nominal Treasuries, municipal bonds, CDs, and cash. Judge each by its tax treatment, liquidity, and role in the plan.
5. What does the rest of the portfolio still need to accomplish?
Inflation protection does not replace long-term growth. A retirement that may last decades still requires assets positioned for future spending and purchasing power.
The Bigger Retirement-Planning Question
At Advanced Wealth Management, we would not begin with, “Do you like TIPS?” We would begin with a different question: “What part of your retirement plan needs protection?”
Within a Boutique Family Office™ approach, an investment decision should connect to the retirement income plan, tax strategy, and long-term goals. TIPS may fit very well into one portion of that structure without becoming the answer for the entire portfolio.
Today’s numbers make that conversation more interesting. The 10-year Treasury market is offering approximately a 2.4% real yield while pricing roughly 2.25% average inflation over the coming decade. Those levels make TIPS worthy of serious analysis, but they do not eliminate duration risk or tell us exactly where inflation is headed.
That is the distinction between buying an investment and building a retirement plan. The goal is not to win a prediction about Wednesday’s CPI report. It is to make sure your retirement plan can keep working across more than one economic outcome.
Put Each Retirement Dollar to Work With a Purpose
TIPS are not a retirement strategy by themselves. Their role depends on when the money will be needed and what spending it is intended to support.
Our complimentary GPS to Retirement Planning guide explains how retirement assets can be organized around different jobs and time horizons. It can help you think through how near-term income needs, future spending, and longer-term growth should work together within a retirement strategy.
For the broader planning framework behind those decisions, explore our complimentary Your GPS to Holistic Retirement Planning course.
Retire once. Stay retired.
Complimentary retirement course + workbook
Let’s build a stronger, smarter plan together.
Schedule your free consultation today.
This material is provided for educational purposes only and is not intended as personalized investment, tax, or legal advice. Investing involves risk, including possible loss of principal.
Important Disclosure:This content is for educational purposes only and should not be considered personalized investment, tax, legal, accounting, or medical advice. Advanced Wealth Management, LLC is a Florida Registered Investment Adviser. Advisory services are offered on a fee basis. Investing involves risk, including the possible loss of principal. Advanced Wealth Management, LLC does not provide medical advice, diagnosis, or treatment.References to diagnostic platforms are provided for educational context only and should not be interpreted as endorsements, medical recommendations, or substitutes for guidance from a qualified healthcare provider. Always consult your physician or qualified healthcare provider before making changes to your healthcare, testing, medication, supplement, nutrition, or exercise routine. Please consult qualified tax, legal, insurance, and medical professionals regarding your personal situation.
At AWM, Our Fiduciary Duty Principles™ Define Our Commitment
This commentary is for informational and educational purposes only and is not investment, tax, legal, or accounting advice. Any investment involves risk, including the possible loss of principal. Private and alternative investments may be illiquid, may involve higher fees, may use leverage, may have limited transparency, and may not be suitable for all investors. Liquidity features (including redemption/repurchase programs) are not guaranteed and may be limited, suspended, or modified. Distributions are not guaranteed and may be sourced from factors other than operating cash flow. Tax treatment is complex and investor-specific; consult your tax advisor. Any offering is made only through applicable offering documents and only to eligible investors where lawful.
How We Can Help You
At AWM, we provide personalized, comprehensive guidance for individuals and families. Our services offer peace of mind and confidence through every stage of your financial journey:
- Investment Management: Our globally diversified, tax-efficient portfolios are designed for resilience across market conditions.
- Proactive Tax Planning: We focus on tax-efficient strategies for both accumulation and distribution phases, helping you manage liabilities.
- Integrated Goals-Based Planning: Align all life goals into a unified financial plan to navigate transitions strategically.
Contact AWM today to schedule a confidential consultation and connect with an advisor who can help you achieve your financial goals. For assistance, reach out to us at Service@awmfl.com.
Thank you for your continued trust and engagement.
Tony Gomes, Author, MBA
CEO and Founder
Advanced Wealth Management