Basic Investment Concepts

The Effects of Inflation

Inflation happens when there is an increase in the nation's overall price level. It's a measure of how much prices are going up. Since things cost more, each dollar you have is worth less. In order to 'keep up' with inflation, your investments must earn at least the inflation rate.

In order to get ahead, you need to earn more than the inflation rate. See the section Managing Your 401(k) Plan Investments for some ideas on investing your 401(k) plan assets to keep ahead of inflation.

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