Inflation Calculator
How It Works
Inflation is the gradual increase in prices over time — and its mirror image is the gradual decrease in what your money can buy. A dollar today will not buy the same amount of goods in ten years. Understanding how much purchasing power you're losing to inflation is essential for setting savings goals, planning for retirement, and evaluating investment returns.
The Consumer Price Index (CPI) is the primary measure of inflation in the United States, published monthly by the Bureau of Labor Statistics. It tracks the price of a representative basket of goods and services across housing, food, transportation, medical care, and other categories. When CPI rises 3% in a year, that $100 worth of groceries now costs $103 to buy the same items.
Historical U.S. inflation has averaged roughly 3% per year over the long run, though it varies considerably by decade. The 1970s saw inflation peak above 13%. From 2010 to 2020, inflation averaged under 2%. In 2022, it spiked to 8%+ before moderating. For long-term planning, most financial planners use 2–3% as a baseline assumption.
This calculator shows you two distinct figures. The future value tells you what a given amount of today's money will be nominally equivalent to in the future — useful for understanding price increases on specific goods. The purchasing power loss shows how much real value your uninvested cash loses sitting under the mattress — critical for understanding why keeping large sums in zero-yield accounts is costly.
Inflation is also the key reason why investment returns must be evaluated in real (inflation-adjusted) terms. If your savings account earns 2% annually but inflation runs at 3%, your real return is actually -1% — you're losing purchasing power despite nominal gains. The target is always to earn above inflation, not just to earn something.
Use this tool to stress-test your long-term financial plans. What will your retirement savings need to cover? What will a $500,000 portfolio buy in 30 years at 3% inflation? The answer — roughly $206,000 in today's purchasing power — shows why growth above inflation is not optional for retirement security.
Formula Breakdown
Inflation future value formula:
FV = PV × (1 + r)^n
Where:
- FV = Future value (what the amount nominally becomes)
- PV = Present value (starting amount)
- r = Annual inflation rate as a decimal (e.g., 3% = 0.03)
- n = Number of years
Example: $100 at 3% inflation for 10 years:
FV = 100 × (1.03)^10 = 100 × 1.3439 = $134.39
Purchasing Power Loss formula:
Loss = PV - (PV ÷ (1 + r)^n)
= 100 - (100 ÷ 1.3439) = 100 - 74.41 = $25.59Related Calculators
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