Wall Street will spend next week glued to the Fed’s July 28-29 meeting, where the most likely outcome is nothing — rates hold at 3.50%-3.75%, with the odds of no change near 90%. While everyone watches that, a more useful number has been quietly climbing. The 30-year TIPS real yield hit 2.97% this week — nearly 3% above inflation, and the highest since 2002.
Read that slowly. A “real” yield is what’s left after inflation — so you’d earn roughly 3% a year on top of whatever CPI does, backed by the full faith and credit of the U.S. government and, if you hold it to maturity, locked in for the life of the bond. Over the next three decades your principal rises with prices, and you keep that real return on top. Yields north of 2% now span the 5-, 10-, and 30-year maturities — levels savers haven’t been handed in well over a decade.
For families near or in retirement, that reshapes the math. There’s more than one way to use it. Individual TIPS held to maturity — or a TIPS ladder, one bond maturing each year — let you lock in today’s real yield; a laddered approach can support an inflation-adjusted withdrawal rate close to 4.9%, versus barely over 4% earlier this decade. If you’d rather keep it simple and liquid, a low-cost TIPS fund or ETF gives you diversified exposure in a single holding. Either way, it’s real, spendable income that doesn’t erode when prices rise — the exact risk that keeps retirees up at night.
Two things to know before you act. First, the yield only locks in if you hold individual bonds to maturity; a fund or ETF gives you exposure but its yield floats with the market, and either one can swing in price if real yields keep climbing and you sell early. Second, in a taxable account the annual inflation adjustment gets taxed as ordinary income before you ever see the cash — what advisors call “phantom income.” The usual fix is simple: hold TIPS inside an IRA or another tax-deferred account. Both issues are solvable with a little planning.
At Lake Hills, we don’t guess where rates head next — nobody can, not consistently. But when the market hands you a real return this high — a level not seen since 2002, backed by the full faith and credit of the U.S. government — that’s not a forecast, it’s a window. And windows close: if inflation expectations cool or the Fed starts cutting, these yields compress.
If locking in inflation-protected income fits your plan, this is worth an hour before the window narrows. Give us a call.
For informational and educational purposes only. Not investment, tax, or legal advice. Lake Hills Wealth Management is a Registered Investment Advisor registered with the Securities and Exchange Commission. Registration as an investment adviser does not imply a certain level of skill or training. Our current Form ADV, Part 2A is available at adviserinfo.sec.gov. Tax laws referenced reflect the law as of the date of publication and are subject to change. Individual tax and financial circumstances vary; consult your tax advisor before acting on any information contained herein.