Why TIPS Are Your Best Bet Against 2026 Inflation

Inflation has been a hot topic in 2026. The Consumer Price Index (CPI) rose 3.1% over the past year, according to the Bureau of Labor Statistics. While that’s lower than the peak of 9.1% in 2022, it’s still above the Federal Reserve’s 2% target. If you’re worried about your savings losing value, Treasury Inflation-Protected Securities (TIPS) can help.

TIPS are bonds issued by the U.S. government. Their principal adjusts with inflation. When inflation goes up, the principal goes up. When inflation goes down, the principal goes down, but you always get at least the original amount at maturity. This makes TIPS a safe way to protect your purchasing power.

In 2026, the yield on 10-year TIPS is about 1.8%. That’s the real yield after inflation. Compare that to regular 10-year Treasury bonds yielding 4.2%. The difference—2.4 percentage points—is the market’s expectation for average annual inflation over the next decade. If inflation averages higher than 2.4%, TIPS will outperform regular Treasuries.

For example, suppose you invest $10,000 in a 10-year TIPS with a 1.8% real yield. If inflation averages 3% per year, your principal will grow to about $13,439 after 10 years. You’ll also earn interest on that higher principal. In contrast, a regular 10-year Treasury paying 4.2% would give you a fixed $10,000 principal plus $4,200 in interest over 10 years—totaling $14,200. But that $14,200 would have less purchasing power if inflation is high. With TIPS, your $13,439 is adjusted for inflation, so it’s worth $13,439 in today’s dollars.

TIPS also have a tax advantage. The inflation adjustment is taxable as interest income each year, but you don’t receive the cash until maturity. This can create a tax bill without the cash to pay it. To avoid this, hold TIPS in a tax-advantaged account like an IRA or 401(k).

You can buy TIPS directly from the Treasury through TreasuryDirect.gov. The minimum purchase is $100. You can also buy TIPS through exchange-traded funds (ETFs) like iShares TIPS Bond ETF (TIP) or Schwab U.S. TIPS ETF (SCHP). These funds let you diversify across many TIPS with a single purchase.

In 2026, the Fed has signaled it may cut interest rates later this year. If rates fall, bond prices rise. TIPS prices could benefit, but they’re more sensitive to inflation expectations than to rate changes. If you think inflation will stay above 2.4%, TIPS are a smart addition to your portfolio. If inflation drops, regular bonds might be better. But for most people, a mix of both is a good strategy.

Bottom line: TIPS aren’t exciting, but they’re a proven way to protect your money from inflation. In 2026, with inflation still above target, they deserve a spot in your bond allocation. Start with a small amount, say 10% of your bond portfolio, and adjust based on your inflation outlook.