Treasury Inflation-Protected Securities: What are TIPS?

Treasury Inflation-Protected Securities, or TIPS, can help you keep up with inflation. They can be purchased through an online broker or the government.

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Best Investments: Where to Invest in 2026 Estate Planning Checklist: A 7-Step Guide to Getting Your Affairs in Order 5 Best Wealth Management Services Today's inflation concerns are proving to be pretty stubborn. After surging to multi-decade highs in the years after the pandemic, we saw some relief, but tariff uncertainty and geopolitical tensions in 2026 are reviving inflation threats. And with that comes the potential for inflation to erode your savings and investments over time. Investing in Treasury Inflation-Protected Securities, or TIPS, can help combat inflationary pressures on your investment portfolio. TIPS are U.S. Treasury bonds that protect against inflation.

What are TIPS?

TIPS mirror the movements of the consumer price index. This means that the principal you invest in TIPS will rise and fall with inflation and deflation over time. The CPI, a commonly used measure of inflation monitored by the U.S. Bureau of Labor Statistics, keeps tabs on average price changes for a basket of goods and services . » Learn about the different types of Treasurys » Learn about the different types of Treasurys

Earn 3.75% APY by investing in U.S. Treasury Bills*

3.75

*Rate when held to maturity. Rate shown is subject to price fluctuations.

Do TIPS belong in your portfolio?

A common rationale for investing is to preserve or grow the value of your money with the aim of protecting it from inflation. With this in mind, here’s what to consider before adding TIPS to your portfolio.

Benefits of TIPS

The ability to keep up with inflation is a key benefit for those with a more conservative outlook, such as retirement investors, who want to simply maintain their purchasing power (as opposed to growing it as much as possible). The structure of TIPS means that investors can keep their principal investment safe under all circumstances. Even if there is deflation, investors will receive their original principal instead of a reduced amount. » Interested in income investing? Check out the top dividend stocks by yield. » Interested in income investing? Since TIPS are issued by the U.S. Treasury and backed by the full faith and credit of the U.S. government, they are considered low-risk investments. Additionally, there is a secondary market available for TIPS so investors can sell their securities, if needed.

Drawbacks of TIPS

With most investments, the higher the risk, the higher the return. Since TIPS are low-risk securities that guarantee your principal, they garner lower interest rates and returns compared with other bonds, including other government bonds. So while TIPS can help investors maintain their purchasing power, investors may need to look for higher-yielding asset classes if they want to beat inflation. If inflation doesn’t rise as high as expected, TIPS will likely lag behind other investments. maintain » An alternative to TIPS: I bonds » An alternative to TIPS: Also, note that inflation adjustments and interest earned are considered taxable income for federal tax, although they avoid state and local income taxes. To help minimize the tax impact, investors can purchase TIPS in tax-advantaged accounts rather than in taxable brokerage accounts.

How do TIPS work?

When investing in TIPS, you’ll receive semiannual, fixed rate interest payments (called coupon payments). Since your invested principal moves with CPI over time and is multiplied by the fixed interest rate, your interest payments also adjust with inflation. To figure out what your inflation-adjusted principal and interest payments will be, the Treasury supplies TIPS Inflation Index Ratios. To use them, follow these steps: Find your TIPS (using its CUSIP number, a 9-character unique identification code provided along with the terms of your bond) to identify the corresponding index ratio for a specific index date. Multiply the index ratio by your original principal amount to determine your inflation-adjusted principal. Multiply your inflation-adjusted principal amount by one-half of the security’s coupon rate (the annual interest payment) to calculate each semiannual interest payment. Upon maturity, you’ll collect either your original principal or the adjusted principal amount, whichever is bigger. Brokerage firms

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on Vanguard's website

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on Fidelity's website

How to buy TIPS

If you’d like to allocate some of your portfolio to TIPS, you can buy an assortment through a fund or purchase individual securities directly.

TIPS funds

Investors can conveniently access a diversified collection of TIPS through one vehicle by using exchange-traded funds or mutual funds. Funds buy and sell securities of varying terms and reinvest proceeds into new TIPS as each one comes due. However, compared with holding individual bonds with a definitive maturity date, holding TIPS funds can be more volatile. Depending on when you sell your shares in the fund, you may receive more or less than you invested. Generally, inflation-protected ETFs can be more of a pure play in TIPS as many invest solely in TIPS whereas inflation-protected mutual funds may also include other investments known to have inflation-fighting characteristics. » How to invest in mutual funds » How to invest in mutual funds

TreasuryDirect

You can purchase individual TIPS through your brokerage account or by using the U.S. Treasury Department’s website, TreasuryDirect, which allows investors to directly purchase and hold individual securities. Individual TIPS are available to be purchased in multiples of $100 and with varied terms — 5, 10 or 30 years. The Treasury sets the price and interest rate using an auction process. You can choose to hold your TIPS until maturity or sell them prior to their maturity date. » Learn more: How to buy bonds » Learn more: Explore more on Article sources NerdWallet writers are subject matter authorities who use primary, trustworthy sources to inform their work, including peer-reviewed studies, government websites, academic research and interviews with industry experts. All content is fact-checked for accuracy, timeliness and relevance. You can learn more about NerdWallet's high standards for journalism by reading our editorial guidelines. U.S. Bureau of Labor Statistics. Consumer Price Index. Accessed Sep 28, 2022. Treasury Direct. TIPS/CPI Data. Accessed Jul 28, 2022. About the authors Lam-Balfour Tiffany Lam-Balfour is a former investing writer and spokesperson at NerdWallet. Previously, she was a senior financial advisor and sales manager at Merrill Lynch. Her work has been featured in MSN, MarketWatch, Entrepreneur, Nasdaq and Yahoo Finance. Tiffany earned a finance and management degree from The Wharton School of the University of Pennsylvania. Durana Alieza Durana is a former investing writer at NerdWallet. She has over a decade of journalism experience covering housing, labor, gender and public policy issues for the Eviction Lab, The Fuller Project for International Reporting, New America and Slate. Her work has appeared in USA Today, The Washington Post, The Atlantic and Harvard Business Review. She is based in St. George, Utah. Best Financial Advisors By Tina Orem, Alana Benson Find a Financial Advisor Near You | NerdWallet By Diego Gil (C) How to Choose a Financial Advisor in 5 Steps By Taryn Phaneuf