What are TIPs?

TIPS are Treasury Inflation Protected Securities, and they can be a terrific idea for retirement investors.

TIPS pay a fixed coupon rate of interest that's lower than that of regular Treasury bonds. But the principal, or face value, of TIPS is adjusted to keep pace with changes in the consumer price index. The result is that as inflation rises, so do the interest payments and the face value of your TIPS. That gives you a sure hedge against inflation - a great thing if you're worried about outliving your money in retirement.