Inflation risk on the G fund


Q. I am aware that the G fund is not at risk to default, but is subject to the risk of inflation. Could you explain what type of loss would be experienced if we returned to the inflation rates of the 70’s? How would an inflation rate of 15 percent affect my funds in the G fund?

A. Inflation should not produce a nominal loss in the value of the G fund. The G fund guarantees preservation of principal and pays a rate of return – interest – equal to the weighted average return for outstanding treasury debt. The risk you run in being invested in the G fund is primarily the risk that the returns paid will not keep pace with inflation, and that your money will lose its purchasing power over time. An inflation rate of 15 percent will not necessarily adversely affect your G fund investment. Any effect will depend upon the rate of return on U.S. treasury debt compared with the rate of inflation.


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Mike Miles is a Certified Financial Planner licensee and principal adviser for Variplan LLC, an independent fiduciary in Vienna, Virginia. Email your financial questions to and view his blog at

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