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Inflation Calculator

See how inflation affects purchasing power over time.

Inputs

$
3.5%
020
10 years
150

Results

Purchasing Power
$708.92
Of today's $1,000
Purchasing Power Lost
$291.08
29.1% decrease

Disclaimer: This calculator provides estimates for informational purposes only. Results are not financial advice. Consult a qualified financial advisor for decisions about your specific situation. Actual rates, terms, and conditions may vary by lender and individual circumstances.

How Does the Inflation Calculator Work?

The inflation calculator demonstrates how rising prices erode the purchasing power of money over time. Inflation means that the same amount of money buys fewer goods and services each year. Enter an amount, the expected inflation rate, and a time period to see what your money will be worth in future dollars, or conversely, how much more you will need in the future to maintain the same buying power. The calculator uses the compound deflation formula to show the real decline in purchasing power. Understanding inflation is critical for long-term financial planning because it affects everything from savings goals to retirement planning to investment returns. An investment that returns 8% in a year with 3% inflation has only grown your real wealth by about 5%.

How to Use This Calculator

Enter the dollar amount you want to analyze, the expected annual inflation rate (3% is the historical US average), and the number of years. The calculator shows the future purchasing power of your money — what your current dollars will actually buy in the future — and how much more you would need to maintain the same buying power. For historical analysis, you can also see what a past amount is worth in today's dollars. Use the results to set more realistic savings goals that account for the rising cost of living.

Example Calculation

Lisa has $100,000 in a savings account earning 1.5% interest. She wants to understand how inflation at 3% per year affects her savings over 10 years.

  1. 1Current amount = $100,000
  2. 2Annual inflation rate = 3%
  3. 3Time period = 10 years
  4. 4Purchasing power after 10 years = $100,000 / (1.03)^10 = $74,409
  5. 5Savings growth at 1.5% = $100,000 x (1.015)^10 = $116,054
  6. 6Real value of savings = $116,054 / (1.03)^10 = $86,380
  7. 7Purchasing power lost = $100,000 - $86,380 = $13,620
Result: Even though Lisa's savings grows to $116,054, its real purchasing power is only $86,380 in today's dollars. She effectively loses $13,620 in buying power because her 1.5% interest rate does not keep up with 3% inflation.

Understanding Your Results

The future purchasing power figure shows what your current money will actually buy in the future after accounting for inflation. If the calculator shows that $100,000 has a purchasing power of $74,409 in 10 years, it means your $100,000 will only buy what $74,409 buys today. The equivalent amount needed figure shows how much you would need in the future to have the same buying power as your current amount. This is crucial for setting savings goals — if you need $50,000 in today's purchasing power in 20 years, you actually need about $90,306 at 3% inflation.

Key Inflation Concepts

Consumer Price Index (CPI)

The CPI measures the average change in prices paid by consumers for goods and services. It is the primary gauge of inflation in the US.

Core vs. Headline Inflation

Core inflation excludes volatile food and energy prices, giving a clearer picture of underlying inflation trends. Headline inflation includes everything.

Sector-Specific Inflation

Healthcare and education costs often inflate at 5-7% annually, much faster than the general 2-3% rate. Plan accordingly for these expenses.

Central Bank Target

The Federal Reserve targets 2% annual inflation. Actual rates fluctuate, but long-term planning around 2.5-3% is reasonable for the US.

Tips & Best Practices

  • ✓Historical US inflation averages about 3% per year, but varies significantly by period and category.
  • ✓Holding cash long-term guarantees losing purchasing power — invest to stay ahead of inflation.
  • ✓TIPS (Treasury Inflation-Protected Securities) provide a guaranteed real return above inflation.
  • ✓Some expenses like healthcare and education inflate much faster than the general CPI — plan for 5-7% on these.
  • ✓Retirees are especially vulnerable to inflation since they are on fixed incomes. Plan for rising costs in retirement.
  • ✓Inflation benefits borrowers (loans are repaid with cheaper dollars) and hurts savers (cash loses value).

Frequently Asked Questions

What is a good inflation rate to use for planning?▾
For long-term planning, 3% is a reasonable estimate based on the historical US average. For conservative planning, use 3.5-4%. The Federal Reserve targets 2% inflation, but actual rates often exceed this. For specific categories like healthcare or education, use 5-7%. Remember that your personal inflation rate may differ from the national average based on your spending patterns.
How does inflation affect investments?▾
Inflation reduces the real return on every investment. If your investment returns 8% and inflation is 3%, your real return is approximately 5%. This is why it is essential to invest in assets that outpace inflation. Stocks, real estate, and TIPS have historically done this over the long term. Cash, traditional savings accounts, and low-yield bonds often fail to keep pace with inflation, resulting in a real loss of purchasing power.
How does inflation affect retirement planning?▾
Inflation is one of the biggest risks in retirement because you may be living on a fixed income for 20-30+ years. At 3% inflation, prices double roughly every 24 years. A retiree who needs $4,000/month today will need about $7,225/month in 20 years to maintain the same lifestyle. This is why retirement planning must include growth-oriented investments even during retirement.
Why does money lose value over time?▾
Money loses value because of inflation — a general increase in the prices of goods and services. Inflation occurs when the money supply grows faster than the economy's production of goods and services, when production costs increase, or when demand outpaces supply. Central banks aim to maintain a small, stable rate of inflation (around 2%) because mild inflation encourages spending and investment rather than hoarding cash.
What is the Rule of 72 for inflation?▾
The Rule of 72 works for inflation just as it does for growth. Divide 72 by the inflation rate to estimate how many years it takes for prices to double. At 3% inflation, prices double in roughly 24 years (72/3). At 6% inflation, prices double in just 12 years. This rule helps you quickly gauge how urgently you need to protect your purchasing power.
By CalcMaven Editorial TeamLast Updated: February 2026

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Free Inflation Calculator — Purchasing Power Impact | CalcMaven