Inflation has a complicated relation with your 401(k), and it largely depends on the assets you're holding. Inflation causes company revenue to increase, but it also often escalates the input costs to manufacture, distribute, and market products. Your 401(k) is more likely to be impacted if and when the government acts against inflation. By raising interest rates, bond prices fall, companies find it more expensive to raise debt, and real estate leases turn unfavorable when locked into very long-term leases. Alternatively, commodity prices may raise along with inflation, and specific government bonds may be pegged to inflation rates. There are ways to shield your 401(k) against inflation, though there are ways it can also deteriorate.