Speaking of stocks, as I write this, this year the S&P 500 is down 19.3% from the end of last year. Including inflation this year, its purchasing power is down by 26.4%.
And bonds, who knows. Just looking at one of my bond funds that has been untouched all year (FXNAX), it is down 12.5%. And yes, that includes reinvested interest payments. With inflation, its purchasing power is down 18.0%.
In the 6 years I've had my charitable gift annuity, it has paid out the same flat dollar amount each year (as per contract), but the purchasing power of the latest payment has eroded with inflation by nearly 25% over those 6 years. So for every $4 that the initial payment was worth is now down to $3 for the latest payment. And unlike stocks, purchasing power never recovers, barring a depression that would obviously be terrible financially in other ways. So lost purchasing power is lost forever.
The same is pretty much true for bonds and other fixed income interest. Newer bonds and CDs are paying out higher than before, but the vast majority of existing holdings pay out the same as before and fall in value, and fall even more in purchasing power.
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