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  • Writer's pictureHugh F. Wynn

Inflation Mitigation: Rising Prices Take a Toll on all Generations

Boomers and Gen Xers are very polarized when it comes to the subject of inflation. To me - a member of the Silent Generation or pre-Boomer - I understand the reason for their differing views. But regardless of your age and life stage, all generations need to consider inflation a mitigating factor in their long-term investing strategy. Since I’m not a credentialed financial advisor, the answers (observations) I give are strictly my opinion.

Stagflation Trauma

Baby Boomers fret about the current high inflation levels for obvious reasons. Many of them graduated from high school or college in the 1960s - just ahead of the 1970s stagflation era, which was characterized by a stagnant economy, high unemployment, and high inflation.

During the 70s stagflation, the then young adult Boomers heard their grandparents constantly grumble about living not just on nominal dollar “fixed” incomes, but on “disappearing” incomes. And for good reason. Their purchasing power was being slowly eroded away due to 2%+ inflation in the 1960s, and then by raging inflation in the 1970s (7%+ on average) and 1980s (nearly 6% on average). Inflation peaked in 1980 at over 13%.

Low-flation Lull

Until recently…say 2021…Gen Xers were suggesting that we old folks worried too much about inflation. Many thought, "That's what our elders experienced in the 1970s and 1980s and is not likely to occur again soon." Considering what's happened in recent decades you might agree with Gen Xers - that there really isn't a reason to worry. The 2000 decade, like the 1960s, was a time of relatively low inflation (around 2.5% on average). And for the period 2010-2020, it was less than 2%.

Then comes 2021 with 4.7% average inflation, and the first seven months of 2022 with 8.34% on average. Now Gen Xers - and the Fed - have suddenly quit talking about low or transitional inflation.

History of Inflation

Why worry? Let's look at the average annual inflation numbers going back to World War I:

The high inflation of the 1970s and 1980s was immediately preceded by very low inflation in the 1950s and 1960s. No one saw its devastating impact coming. Does that remind you of recent trends? The two decades comprising 2000-2020 were also periods of low inflation immediately preceding 2021 and 2022. And based on my recollection, few predicted the high inflation rates of 2022 coming…until very late in the game.

Does this mean that history will repeat itself? I don’t know. But whether or not inflation is here on a long-term basis, how do we mitigate its ravages in the short- and long-term? This is something we must always think about because high inflation is not an uncommon event. Check the chart. Four of the previous 11 decades experienced average annualized inflation significantly higher than the long-term average of 3%. It has been my greatest concern, particularly in my later years. I have long considered it a financial threat looming just around the corner; thus my emphasis on equities versus bonds.

Catastrophic Considerations

I certainly have no idea if the inflation rates we've experienced in 2022 - like we experienced in the 1970s and 1980s - will hang around for long. Based on charts going back to WW I, long term bouts of inflation are unpredictable. But should Baby Boomers, some of whom are already deep into retirement, bet a comfortable retirement on it? I don’t think so.

High inflation of the enduring type can be catastrophic. And as Boomers plan for retirement or manage their spending in retirement, they MUST take potential catastrophic outcomes into account in their planning. Gen Xers should too. In fact, all generations should weave that into their long-term retirement planning strategy.

Inflation Mitigation

I recognize that inflation like we’ve witnessed these last few months is something of a snapshot, but I also realize that prolonged inflation can be a dollar-gobbling monster to those heading for or who have already retired…many largely on those “fixed” incomes. So what can be done about it?

Let’s give some credit to Washington politicians who, in reaction to steeply rising inflation in the 1970s, modified the Social Security program in 1972 such that the rate of inflation itself would trigger increases in benefits. Legislators called that trigger the Cost of Living Adjustment (COLA), which took effect in 1975. Since then, COLAs have provided most of us with a little dab of inflation protection, but only when the CPI-W increases by more than 0.1% between the third quarter of the previous year and the third quarter of the current year.

Here are some other inflation-mitigation methods you might consider, but remember that each of them requires careful research regarding their pros and cons:

  • Consider buying Treasury Inflation Protected Securities (TIPS) bonds, which transfer inflation risk to Uncle Sam. Read more about TIPS in my long-lost blog.

  • I would max out I-Bond purchases before buying TIPs. These are great for smaller investors but can only be purchased up to a limited annual maximum and only online at

  • CPI-adjusted annuities - but do your research. Annuities can be a minefield.

  • Depending on location, home equity is another way to mitigate inflation. Millions of Americans are enjoying the fruits of home ownership as we speak, thanks in part to a recent surge in valuations across the country.

  • In my own particular case, I like equities as a hedge. Yes, during high inflation times such as as we are experiencing (hopefully short-term), stock ownership can cause heartburn and offers questionable inflation protection if you don’t have the financial strength and patience to “wait it out.” But there’s a reason why many investors prefer stocks over bonds. On average, taking the long view, equities simply outperform bonds.

In Sum

Over a lifetime of investing, you can't avoid periods of high inflation. And these periods are just as likely to occur at inopportune times in your life as not. So, plan ahead. You WILL confront the ravages of high inflation somewhere down the line - or even right now.

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