Inflation Calculator

Calculate how inflation erodes purchasing power over time. Find out how much more you will need in the future to maintain today's standard of living.

Inflation Details

$

Today's dollar value

%
yrs

Enter an amount and inflation rate, then click "Calculate" to see how inflation affects purchasing power.

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Pro Tip

When planning for future expenses (retirement, college, etc.), always inflate today's costs to future dollars. A 3% inflation rate doubles prices approximately every 24 years.

Try the Retirement Calculator →

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Understanding Inflation

Inflation is the rate at which the general level of prices for goods and services rises, causing purchasing power to fall. Central banks attempt to limit inflation to keep the economy running smoothly, typically targeting around 2% annually.

The effects of inflation compound over time, much like interest. At 3% inflation, prices roughly double every 24 years. This means that $100,000 today would need to be about $200,000 in 24 years to have the same buying power.

Inflation affects different people differently. Retirees on fixed incomes are particularly vulnerable because their purchasing power steadily declines. Borrowers, on the other hand, can benefit from inflation because they repay loans with dollars that are worth less than when they borrowed.

To protect against inflation, investors typically turn to assets that historically outpace inflation: stocks, real estate, Treasury Inflation-Protected Securities (TIPS), and commodities. Cash and fixed-rate bonds tend to lose real value during periods of high inflation.

Inflation Impact Formula

Future Cost = Present Amount × (1 + inflation)years

Where:

Future Cost = What you will need in the future to match today's value

Present Amount = Today's dollar amount

inflation = Annual inflation rate (decimal)

years = Number of years into the future

Example

$100,000 with 3% inflation over 20 years:

  • • Future equivalent: $100,000 x (1.03)^20 = $180,611
  • • You will need $180,611 to buy what $100,000 buys today
  • • Purchasing power of $100,000 in 20 years: $55,368
  • • Purchasing power loss: 44.6%

Frequently Asked Questions

What is a typical inflation rate?
In the US, the Federal Reserve targets about 2% annual inflation. Historically, US inflation has averaged around 3% per year. However, rates can spike much higher (as in the 1970s or 2021-2023) or even go negative (deflation) in unusual circumstances.
How does inflation affect my savings?
If your savings earn less than the inflation rate, you are losing purchasing power. For example, money in a 1% savings account during 3% inflation is effectively losing 2% per year in real value. This is why investing is important for long-term wealth.
What investments protect against inflation?
Stocks, real estate, TIPS (Treasury Inflation-Protected Securities), commodities, and I-Bonds are traditional inflation hedges. Stocks have historically returned 7-10% annually, well above typical inflation.
How does inflation affect retirement planning?
Inflation means your retirement expenses will increase over time. If you retire at 65 and live to 90, 3% inflation will roughly double costs. You need your retirement portfolio to grow to keep pace, which is why many retirees maintain equity exposure.