Navigating Inflation and Retirement Investing

Why inflation matters for retirement planning

Inflation is back in focus. On September 16, 2026, the Federal Reserve raised the federal funds rate by 0.25 percentage point to a target range of 3.75%–4.00%, citing elevated inflation and its goal of returning inflation to 2%. While changes in interest rates can influence borrowing, spending, and broader economic conditions, the Fed's latest action also highlights a consideration for retirement investors: inflation can affect the purchasing power of long-term savings.

Even modest inflation can add up over time as the cost of housing, groceries, healthcare, and other everyday expenses rises. For retirement investors, that makes it important to consider not only how much an account grows, but also what those savings may be able to purchase in the future.

Looking beyond nominal returns

For retirement investors, the impact of inflation extends beyond rising prices. A portfolio may grow in nominal terms while delivering considerably less growth after inflation is taken into account. The distinction between nominal and real returns becomes increasingly important over longer investment horizons, when even moderate inflation can compound significantly. Evaluating long-term retirement outcomes, therefore, requires looking beyond account value alone and considering the purchasing power those assets may provide in the future.

The value of tax-advantaged growth

One of the key benefits of using a tax-advantaged retirement account is the ability to keep more of your investment earnings working toward your long-term goals. For example, investments held in a Traditional IRA generally grow on a tax-deferred basis until distributions are taken. Similarly, qualified distributions from a Roth IRA may be withdrawn tax-free when IRS requirements are met.

Taxable vs. tax-advantaged scenario

Stephanie earns $1,000 in a taxable investment account. Depending on her tax situation and the nature of the investment income, a portion of those earnings may be subject to taxes in the year they are earned.

If Stephanie earns that same $1,000 within a Traditional IRA, taxes are generally deferred until distributions are taken. If those earnings occur within a Roth IRA and qualified distribution requirements are met, those earnings may ultimately be withdrawn tax-free.

Because taxes do not immediately reduce eligible investment earnings within tax-advantaged retirement accounts, more dollars can remain invested and compound over time, either tax-deferred or tax-free, depending on the account type and applicable requirements.

Account growth vs. purchasing power

Many investors focus on preserving principal and generating modest returns. While capital preservation can play an important role in a retirement strategy, simply matching inflation may not be enough to meaningfully improve long-term purchasing power.

Nominal growth vs. purchasing power scenario

Jason transfers $100,000 into a retirement account and makes no additional contributions. If the account earns an average annual return roughly equal to the long-term inflation rate, the account balance will grow over time. However, the purchasing power of those savings may remain relatively unchanged because inflation has increased the cost of goods and services during the same period.

In other words, account growth alone does not necessarily translate into greater spending power during retirement. For long-term retirement planning, investors may consider both nominal investment returns and real returns, which reflect returns after accounting for inflation. Considering real returns can also lead investors to look more broadly at how different asset classes contribute to portfolio diversification.

Using self-directed retirement accounts in an inflationary environment

A self-directed retirement account gives investors the flexibility to diversify beyond traditional publicly traded investments. Depending on account type and eligibility, investors may be able to allocate retirement funds to alternative assets such as real estate, private equity, private debt, precious metals, and other investments permitted within an IRA.

For investors evaluating the effects of inflation, access to alternative assets can provide exposure to investments with different return drivers and market characteristics than publicly traded stocks and bonds. Some alternative investments may have lower or different correlations with public markets, which can provide another dimension of portfolio diversification. Correlations can change over time, however, and alternative assets are not insulated from broader economic or market conditions.

Certain alternative assets may also respond differently to inflation. Real estate, for example, may provide exposure to property values and rental income, while private debt may generate returns based on contractual interest and repayment terms. Precious metals and other alternatives may behave differently still. None of these characteristics ensures protection from inflation or positive investment performance.

Alternative investments also present distinct risks and responsibilities, including illiquidity, valuation challenges, limited access to information, market risk, and other investment-specific considerations. Self-directed investors are responsible for conducting due diligence and understanding each investment before committing retirement funds.

Diversification does not guarantee against loss, and self-directed investing does not guarantee higher returns. However, access to a broader investment universe gives investors greater flexibility to construct a retirement portfolio based on their individual objectives, risk tolerance, time horizon, and views on changing market and economic conditions.

How STRATA can help

Whether you're just beginning your self-directed investing journey or evaluating new opportunities within an existing account, education is one of the most valuable tools available. STRATA Trust Company provides educational resources and account administration support to help investors navigate self-directed investing with confidence.

Visit the STRATA Resource Center to explore financial calculators,  FAQs, guides, and Insights on self-directed retirement accounts and alternative investments. If you have questions about account options or the self-directed investing process, our team is here to help.