Make Sure You Get a Raise
If the growth of your income keeps pace with inflation, rising prices in the stores won’t hurt you.
Large companies give their employees annual percentage raises tied to changes in the cost of living. Union members have inflation raises written into their contracts with the employer. But at most companies raises are not automatic; they depend on the company’s financial results and the employee’s individual performance. When inflation is high, however, you have grounds to ask for an inflation raise.
The Social Security Administration increases benefits by a Cost of Living Adjustment (COLA) effective January 1 of each year – by 2.8% in 2026, and by 3.6% starting in January 2027. Poland’s ZUS (Social Insurance Institution) adjusts its payments on March 1 – in 2026, by 5.3%.
Investors have a problem, since inflation threatens to shrink their wealth – in 2022 at a rate of 8–9% a year. To prevent this, you should invest in asset classes that hold their value relatively well during inflation.
I bonds
If you want to protect your savings from inflation, invest in inflation-protected bonds – I bonds. At the peak of inflation, in 2022, they paid 9.62%, and bonds bought from May to October 2026 earn 4.26% annually. The rate is adjusted twice a year, in May and November, depending on the rate of inflation.
Series I bonds (I bonds), also known as US Savings Bonds Series I, are indexed to inflation and issued and guaranteed by the U.S. Treasury. Their purpose is to protect the owner from inflationary price increases. In 2022, when prices were rising and the stock market was falling, I bonds suddenly became fashionable thanks to their unprecedented interest rate.
I bonds are a form of thirty-year zero-coupon government bonds. By buying them, you lend money to Uncle Sam. I bonds pay variable interest for 30 years, but since they are “zero-coupon,” you will not receive regular checks in the mail; instead, the interest is added back to the value of the bond.
You do not have to hold the bonds for 30 years, but you must hold them for at least a year. If you cash in your bond before five years are up, you will be charged a small penalty equal to three months’ interest. After five years you can redeem the bonds without a penalty.
As the name suggests, the yield on this security changes along with inflation, which protects the purchasing power of your money.
I bonds can be bought by opening an account on the Treasury Department’s website, treasurydirect.gov. Unfortunately, the limit is $10,000 per person per year. You can learn more on that website.
Gold
Gold is traditionally a safe asset for investors when inflation is rising or interest rates are very low, so it is worth keeping a small portion of your wealth in gold or other precious metals. Gold does well when real interest rates – that is, the interest rate minus the inflation rate – turn negative. Investors often see gold as a store of value in economically difficult times, and it has long succeeded in that role, though not always. In the past there have been periods when its price was out of sync with inflation. For example, in 1980–1984 gold lost 8.3% of its value per year, while inflation averaged 7.5% a year.
You can invest in gold by buying the physical metal or “gold” ETFs.
While we are at it, cryptocurrencies are worth a mention. Bitcoin has gained some popularity as a hedge against inflation because it is seen as an asset similar to gold. However, cryptocurrencies are very volatile, which makes them more speculative assets than inflation hedges.
Stocks
Stocks represent ownership stakes in companies. Usually, as inflation rises, companies raise the prices of their goods and services, which increases their revenues, and that in turn can push stock prices up.
Over the long run, stocks generally do a good job of keeping pace with inflation, but they experience more price volatility than other assets, so investors must be prepared for sharp price drops and accept the risk.
When the Federal Reserve raises rates to rein in inflation, it becomes harder for companies to borrow money for further growth. This can affect their output and profits. However, some sectors, such as financial services, can benefit from rising interest rates, since banks gain from the higher interest they charge on loans.
Because the purchasing power of money is falling, consumers want to get rid of it by buying goods that hold their value. In doing so, they drive the sectors of the economy that produce durable goods. Consider gaining exposure to such sectors by investing in specific stocks, mutual funds or sector-specific ETFs. If you don’t feel up to analyzing the economy, buy an ETF that tracks a stock market index, such as the Standard & Poor’s 500.
Real Estate
A home protects us from inflation for two reasons. First, we take out a long-term fixed-rate mortgage for a substantial amount, which loses value over many years. We pay a fixed monthly payment that, as the years go by, becomes proportionally smaller and smaller compared with our income. Of course, adjustable-rate loans become more and more expensive during inflation, which is why it is best to avoid them.
Second, thanks to financial leverage, after putting down, say, a 20% downpayment, we own 100% of a home whose value rises over the long term.
Real estate investments, instead of buying a home, can also help investors fight the effects of inflation. Since 1990, investing in real estate through Real Estate Investment Trusts (REITs) has been an effective hedge against the impact of inflation.
Commodities
Commodities such as oil, metals, corn, soybeans, coffee and many others are another popular hedge against inflation. When money loses purchasing power, commodity prices rise. For example, the outbreak of the war in Ukraine in 2022 caused shortages of grain and fuel and broke supply chains, leading to further increases in commodity prices.
Commodity ETFs or stocks of companies involved in producing or processing raw materials can help investors hedge against inflation, because the value of these commodities tends to rise as inflation picks up.
What This Means for Individual Investors
Inflation affects everyone. Whether you have a few dollars or a million, inflation slowly erodes the purchasing power of your income and savings. It is worth making the effort to protect what you have built from devaluation: invest regularly in selected financial instruments, ideally held in a retirement account, following a Dollar Cost Averaging strategy, which I will tell you about in future articles.
Updated October 2026.
