The upside to inflation

The upside to inflation

Despite what you might have seen or read or even personally experienced in your own investment portfolio, it’s actually been a decent investing year to date for low-cost indexing fans despite spiking inflation. 

So, I wondered, is there an upside to this inflation thing?

There is.

Read on.

The upside to inflation

Inflation continues to be one of those fearmongering, trigger words for many folks but I don’t believe this is something you should really lose too much sleep over…

What is inflation?

At the most basic level, inflation is an increase in the price of goods and services over time. Basically, the ebbs-and-flows of supply and demand in action and those actions can impact you and me. 

What does higher inflation mean for you and me?

An erosion of purchasing power…

So inflation is bad, right? 

Not always. 

Of course, you could argue some inflation is always very good. The economy is growing. 

Better than deflation. Deflation is associated with a shrinking economy and depressed times – less money in supply and therefore less money to spend.

Inflation Losers:

  • Inflation will hurt those who have a big bias to cash savings – should inflation continue.
  • Retirees focused on just fixed incomes might suffer.
  • Borrowers who took on too much variable-rate debt and other large amounts of rolling debt…

Inflation Winners:

  • Inflation may benefit those with modest debts who are on fixed repayment plans over variable.
  • Owners of land or scarce physical assets (like land, materials, other).
  • Firms that can raise prices, rather easily, without too much trouble or public outcry, and more…

While high inflation or spiking inflation near-term is not good for most given the economic uncertainty it presents, the real-life impacts of inflation can vary depending on your age, investment timeline and risk tolerance of course bundled with your debt, assets and other personal finance matters in very different ways.

The Working Class – Asset Accumulators

Beyond higher prices at the grocery store that we continue to see during 2023, I believe higher inflation is an issue for some working class because of the relationship between inflation and unemployment – this has traditionally been an inverse correlation.

Low inflation and full employment are the cornerstones of monetary policy for our central banks. But inflation can cause unemployment since it creates too much uncertainty related to economic growth. Many companies simply struggle to operate effectively during times of uncertainty. They can’t plan. 

Assuming you can keep your job (!), on the flipside, one of the best long-term inflation hedges around remains staying invested in the stock market. 

While cash is always helpful at any time, a bias to owning stocks with some short-term assets like cash can make for a decent inflation-hedged portfolio.


Stocks can help protect you against long-term inflation while cash can offer a refuge against any short-term inflationary spikes.

The stock market is a wonderful hedge against inflation for a few reasons. Not only have stocks grown in price over time, dividends have grown too. 🙂 So, combined, both appreciation and dividends from stocks offer total returns growing above the rate of inflation.

Tax tips historical returns 


Aspiring retirees and retirees – Asset Decumulators

Questions related to inflation for this cohort abound:

  • Do I have enough to retire, to fight inflation?
  • Will I run out of money in retirement?
  • How much can I safely spend in retirement?

I have the very same questions…

Many aspiring early retirees (my current situation) or retirees worry about the value of their investments that might not keep up with inflation. Add on long-term, future healthcare costs and there are larger concerns for any retiree to consider. 

The good news is in my view, it’s not all doom-and-gloom for this cohort either. 

For one, like I mentioned above, stocks offer an inflation hedge. Historically, because companies have been able to pass forward some rising prices back to the consumer, I would simply keep more stocks than bonds and/or cash as you enter retirement and remain in retirement. 

Two, make sure you consider specific inflation-hedgers and fighters in your portfolio. Historically speaking, whether you are investing in real estate directly via your home or rental units – owning real estate can at times be a decent hedge for higher inflation. Why? People have to live somewhere…

There is also the energy sector, commodities, industrials and consumer staples to consider owning more of when it comes to fighting inflation.

Here is a decent chart showing returns YTD to September 2023 for some key U.S. sectors. This is not a direct correlation to sector performance for any inflationary period, rather, something to demonstrate how certain sectors have performed differently as part of your own research. 

The upside to inflation - S&P 500 YTD September 2023


Third, there are some Canadian government beneifts and account features that should be enablers to fighting inflation. Use that information to your advantage. In fact, you already know that both CPP (Canada Pension Plan) and OAS (Old Age Security) have built-in inflation protection. 

Should you defer your Canada Pension Plan to age 65 or 70?

Every year, tax rates change and to trigger tax rate changes or adjustments to government programs, the government uses inflation data to run the math for a number of programs for the following calendar year.

Here are some examples thanks to inflation that might help you out:

  • The TFSA contribution limit will increase a bit from $7,000 (up from $6,500 in 2023). The TFSA lifetime limit for those eligible since 2009 will soon be $95,000 per adult. Incredible.
  • The OAS clawback threshold will increase to $90,997 (up from $86,912 in 2023). That means anyone collecting OAS, per adult/retiree, can earn up to $90,997 in taxable income in 2024 without fear of having to repay their benefits. Awesome.
  • The federal tax brackets and personal tax credit amounts have increased for 2024 by an indexation factor of 1.047 (a 4.7% increase).

You can look at this great table from for more details. 

CRA keeps a running list of inflation-adjusted personal taxation and benefits amounts here:

The upside to inflation summary

There is lots to be annoyed about, when it comes to recent inflation spikes. I’m with you.

Yet I firmly believe in your asset accumulation years, where you can, the TFSA in particular remains a government gift to invest in as much as you can. In retirement, the TFSA is a gift that keeps on giving – you can maintain and contribute to this account by funneling any money not needed for expenses to the TFSA for more tax-free growth and/or TFSA estate-building power. 

Related Reading:

How and when to withdraw from RRSP and TFSA

A gentle reminder while contributions to a TFSA are not tax deductible, withdrawals of contributions and growth from the account are tax-free. Contributions to a TFSA can be made in cash or in-kind. 

I have no idea how long inflation might last nor what impacts that may cause our broader economy. 

I will continue to say and go on record to write that some level of modest inflation is good for both asset accumulators and asset decumulators assuming you continue to focus on things within your financial control:

  1. Your sustained savings rate. 
  2. Using most of your savings to invest for long-term growth. 
  3. Using some of your savings to protect you from market and/or economic shocks. 
  4. Taking advantage of financial accounts like the TFSA for wealth-building or wealth-preservation, tax-free of course, including from government income-tested benefits. 

Related Reading:

How much cash should you keep? How much do I intend to keep?

Overlooked retirement income and planning considerations.

Should you have 100% of your portfolio in stocks?


My name is Mark Seed - the founder, editor and owner of My Own Advisor. As my own DIY financial advisor, I'm looking to start semi-retirement soon, sooner than most. Find out how, what I did, and what you can learn to tailor your own financial independence path. Join the newsletter read by thousands each day, always FREE.

14 Responses to "The upside to inflation"

  1. Hi there Mark,

    I agree that a continued presence in the markets even with high inflation is important. When inflation is high and the economy is uncertain investors liquidate their investments. This gives some great purchasing opportunities.

    Staying away from debt is also important, and I have nothing else to say about the negatives on the debt subject.

    Then keep a good cash reserve for all the unexpected purchases to keep you in the markets.

    I also agree with previous comments that the opportunity on GIC’s are great due to inflation. Keep a rolling GIC ladder as part of your cash account is always smart. Make cash work a little bit for you compared to making next to nothing.

    Positive attitudes have an easier time prevailing in difficult times. Keep your chin up folks.

    1. Great points, Daniel – a positive attitude in trying times can go a long ways.

      My personal formula going forward is the following, for the coming year:
      1. No mortgage debt (done in 6 months).
      2. Minimal debt / leverage going forward into semi-retirement, nothing we can’t pay off quickly if we wanted to.
      3. My cash wedge/cash bucket for up to 1-years’ worth of spending.
      4. Part-time work while staying invested.

      We’ll see how it goes!?

  2. Hi Mark,

    I already have my inflation slayer. Just the other day, TSE: CGO announced a 16.8% dividend increase on a 6% yield. The market hates the company, but I just ignore the market and focus on building our income in the non-registered faster than inflation each year.

    Good to hear you’ll be mortgage free in 6 months. I’m debt averse so I only indulge when absolutely necessary, and that was years ago.

    Enjoy the coming weekend.

    1. Ha. Good stuff on debt.

      Yes, with the mortgage dead in 6 months (and while we might take on debt from time to time, in the future, while working for investing, other) at least we own our home which should be worth a decent portion of our net worth.

      Like you I bet (?), I’ve been fortunate to get a few dividend raises recently: FTS (small bump), WCN 11% and CNQ 11% just yesterday. That’s OK to fight inflation.

      I appreciate your comments.

      Enjoy the weekend back,

  3. Hi Mark: Inflation can be good because unlike the stores when inflation rises the price of stocks drops and creates a buying opportunity for those who would not have bought before because they thought the stocks where too high. Also I found some of the article confusing as you say that the losers are the ones who have a large cash reserve. I would argue that it is better to have a large cash reserve than a small cash reserve. A large portfolio and large cash wedge helps soften the effects of inflation. I agree with your thoughts on taxes but then all taxes are mismanaged. I find nowadays I am paying for my grandfather who never paid taxes as income taxes came in as a war measure and he never applied for them so the government didn’t even know he existed. Mom would say how much taxes did you have to pay this year dad and he would say that I’m not giving them fellas nothing and he never did. Lloyd’s post was right on the money. If you have no debt, a large stock portfolio and large cash wedge your CPI is different than others and these numbers are basically based on Toronto and Vancouver and there is a large population that doesn’t live there. Like MPAC that starts with the price of housing in Toronto and then projects it out for the rest of Ontario. One say’s aren’t you glad your house is worth so much and I say not when my taxes are based on it. Actually the price of a house is artificial as a house built in 1850 should not be worth $300,000.00. Like a car a house depreciates in value if not maintained and the only thing that raises it’s value is time and the fact that governments need money so they raise the mill rate.

    1. Thanks for your thoughts. I will explain.

      Too much cash, earning less than inflation is running, is a loser to inflation. I’m not saying having lots of cash is a bad problem near-term, however, I’ve always believed too much cash vs. other assets like equities is probably not going to return as much over many investing years. History says so. The future could always be different…

      So, “a large portfolio and large cash wedge helps soften the effects of inflation.” – I firmly believe that and have seen that with folks I support who have amassed more than me since:

      1. Stocks do rise in price, and offer dividends, over time, and
      2. Cash can be used in the near-term without selling stocks.

      This is why I agree with Lloyd too, a great equation for any inflation is:

      No debt + a large stock portfolio + a large cash wedge = just fine. That equation is what I’ve learned from others and aspire to.
      I/we will be mortgage free in about 6 months now.


  4. (RBull) deane hennigar · Edit

    Good post Mark. Good comments above from Lloyd and Carl. I agree and those largely apply (or will soon) here too.

    The things that are rising most aren’t our largest consumption items. Although our Provincial tax brackets haven’t been indexed for years and our Municipal taxes are rising significantly. Other than those irritations we have a very positive outlook for the future, regardless of inflation.

    1. Yes, I see our Ottawa taxes rising quite a bit. I also see a lot of mismanaged money in our city which is frustrating.

      I will remain positive (or at least cautiously optimistic??) about any future! 🙂

  5. Lloyd (63, retired at 55) · Edit

    One issue I’ve had debates about is the use of the inflation figure as if it were a single accurate figure applicable to all. It isn’t. People are usually referring to the *national* CPI figure quoted ad nauseum in many news reports and financial articles. The national CPI is used for some fairly specific purposes as mentioned by Mark. But that national CPI may or may not be reflective of one’s regional (provincial) CPI. And even one’s regional CPI may or may not be reflective of one’s personal CPI. As but one example, borrowing costs are a current large factor in the CPI. If one has no borrowing costs, that item is not even in one’s personal basket of goods. There are likely dozens if not hundreds of differences between the basket of goods making up the CPI versus the basket of goods one personally buys. It behooves us to consider these differences when looking at, or speaking about, our *personal* finances. YMMV

    1. Love the comment(s) Lloyd.

      Everyone has a different CPI but I continue to believe, as I have learned from others who have “been there, done that” (like you) whereby less/no debt, mindful spending and disaster-proofing your life to a degree with a good mix of stocks and bonds and cash remains a great recipe for any inflationary period. Government benefits like CPP, OAS, by design will take care of the rest…


  6. I view inflation as an opportunity….as long as I don’t carry debt.
    1 year GIC rates are 5.75%
    TSFA contribution room upped to $7000
    Tax brackets limits increasing
    OAS clawback amount increasing
    CPP increasing so will be bigger when I start collecting at 70
    OAS amount increasing as well
    Indexed pensions increasing

    Yes some things will cost more but I am focusing on the benefits above.

    1. I’m with you Carl. That’s the premise of the post. There are many benefits to be gained from higher inflation vs. what folks were actually dealing with a year ago. 🙂

      Great stuff and to your point, minimal debt, is key! We should be mortgage free in 6 months.


Post Comment