An inflation-protected security (IPS) is a type of bond that guarantees a real rate of return to its investors. The US federal government is the main issuer of inflation-protected securities, including Treasury inflation-protected securities (TIPS).

What is the role of inflation-protected securities in retirement planning, and do they belong in a retiree's portfolio? Mitlin Financial founder and wealth advisor Lawrence Sprung joined Robert 'Bob' Powell on Decoding Retirement to discuss the latest on inflation and the importance of TIPS for investors.

"I really think it's important that everybody have a plan, whether you're retired or a retiree or moving towards retirement," Sprung explained. "Now it's going to be important as we start entering potentially a lower interest rate environment to start putting that game plan (together) ... whether it be CDs and TIPS and things of that nature, they have to start looking and seeing what's going to work best for them from this point forward."

Real rate of return (decoded)

The real rate of return is the actual return on an investment after adjusting for inflation. It shows how much your purchasing power has increased or decreased over time.

Nominal rate of return (decoded)

The nominal rate of return is the simple percentage increase in your investment over a period of time, without considering factors like inflation or taxes. It's the "face value" of your investment's growth.

REITs (decoded)

Real estate investment trusts (REITs) offer individuals the opportunity to invest in large-scale, income-generating real estate. A REIT is a company that owns and often manages a variety of real estate assets, such as office buildings, shopping centers, apartments, hotels, resorts, self-storage facilities, warehouses, and even mortgages or loans.

"And I'll share something that's happened with families that we worked with. They look at some investments out there, you know, and I'm not picking on REITs. They're good investments for the right people," Sprung said. "We've had people say to us, 'Hey, I see this REIT and it's paying eight, nine, ten percent, and why are we not allocating funds there?' Now when you look at that 10 percent yield, it looks great, but then when you look at the total return of the investment, if it's gone negative, that 10 percent may not be what your real return is."

Retirement planning doesn’t mean locking up your money for a rainy day and forgetting about it. Planning your future means reacting to events today. Decoding Retirement gives you the tools to navigate the years ahead, and take action now!