Inflation Calculator
Calculate how inflation affects your money's buying power over time.
Safe conversion with no data sent to server
Last updated: March 2026
Settings
$100,000 today will only buy
$74,409
Purchasing power loss: 25.6% ($25,591)
Year-by-Year Breakdown
| Year | Buying Power |
|---|---|
| Year 0 | $100,000 |
| Year 1 | $97,087 |
| Year 2 | $94,260 |
| Year 3 | $91,514 |
| Year 4 | $88,849 |
| Year 5 | $86,261 |
| Year 6 | $83,748 |
| Year 7 | $81,309 |
| Year 8 | $78,941 |
| Year 9 | $76,642 |
| Year 10 | $74,409 |
Disclaimer: This calculator provides estimates for educational purposes only. It does not constitute financial or tax advice. Consult a qualified professional.
Financial Disclaimer
This calculator is for informational and educational purposes only. Results are estimates and do not constitute financial advice. Actual figures depend on your specific circumstances, lender terms, and market conditions. Consult a qualified financial advisor before making financial decisions. See full disclaimer.
What is Inflation?
Inflation is the rate at which the general price level of goods and services rises over time, which correspondingly reduces the purchasing power of currency. When inflation is 3% per year, a basket of goods costing $1,000 today will cost approximately $1,030 next year. Over a 20-year period at 3% inflation, that same basket would cost about $1,806 — an 80% increase in nominal price with no change in the actual goods received.
The compound interest formula A = P(1 + r/n)^(nt) underlies inflation calculations. For annual inflation compounded once per year, the formula simplifies to A = P(1 + r)^t, where P is the initial amount, r is the annual inflation rate as a decimal, and t is the number of years. This exponential relationship means that seemingly small differences in inflation rates produce dramatically different long-term outcomes — 2% inflation over 30 years reduces purchasing power by 45%, while 4% inflation reduces it by 70%.
The US Federal Reserve targets a 2% annual inflation rate as the benchmark for a healthy, growing economy. Inflation below 1% risks deflationary spirals, while sustained inflation above 4–5% erodes savings and destabilizes investment planning. Understanding inflation's long-term impact is essential for retirement planning, salary negotiation, and evaluating whether investment returns are keeping pace with real purchasing power erosion.
How to Use This Calculator
- Select "Forward" to see how inflation erodes the future purchasing power of a current amount, or "Backward" to find the historical equivalent value of a past amount in today's dollars.
- Enter the dollar amount you want to analyze.
- Set the number of years for your calculation horizon.
- Select a preset inflation rate (2%, 3%, or 4.5%) or enter a custom rate. The long-run US average is approximately 3%; the Fed's 2% target is appropriate for near-term planning.
- Optionally enter a wage growth rate to see how real purchasing power changes when wages grow alongside inflation.
- Review the headline result showing purchasing power loss and the year-by-year breakdown table.
Financial Planning Tips
- Use the Rule of 72 to estimate how long inflation takes to halve your purchasing power: divide 72 by the inflation rate. At 3% inflation, purchasing power halves in roughly 24 years.
- Any investment returning less than the inflation rate is losing real value — a savings account earning 0.5% while inflation runs at 3% loses 2.5% in real terms annually.
- Treasury Inflation-Protected Securities (TIPS) and I-bonds are US government bonds specifically designed to protect against inflation by adjusting principal with CPI changes.
- When negotiating salary increases, aim for at minimum the current inflation rate just to maintain your existing standard of living; a raise below inflation is effectively a pay cut in real terms.
- Retirement income planning should model 3% annual inflation over a 20–30 year retirement horizon — a $50,000 annual income need today becomes approximately $90,000 in 20 years at 3% inflation.
- Stocks and real estate have historically provided returns that outpace inflation over long time horizons, making them important inflation hedges in diversified portfolios.
FAQ
What is the historical average US inflation rate?
Since 1913, the US inflation rate has averaged approximately 3.2% annually, though it varies considerably by era. The 1970s saw inflation peak above 13%, the 1990s and 2000s averaged closer to 2.5%, and 2021–2023 saw inflation spike to 7–9% before moderating. For long-term planning, 3% is a commonly used assumption.
How does inflation affect savings accounts?
If your savings account earns 1% annual interest while inflation runs at 3%, your money loses 2% of its real purchasing power each year. The nominal balance grows, but what that money can buy shrinks. This is why financial advisors recommend investing savings beyond a short-term emergency fund in assets expected to beat inflation over time.
What is the Rule of 72?
The Rule of 72 is a simple mental math shortcut: divide 72 by an annual growth rate to estimate the number of years it takes for a value to double (or purchasing power to halve, in the case of inflation). At 3% inflation, 72 ÷ 3 = 24 years to halve purchasing power. At 6% inflation, it halves in just 12 years.
Should I use nominal or real returns when planning investments?
Always evaluate investments using real returns (nominal return minus inflation). If an investment returns 7% nominally and inflation is 3%, the real return is approximately 4%. When comparing investment options or projecting retirement portfolios, real returns give a much more accurate picture of actual wealth accumulation than nominal figures.
Related Personal Finance Tools Tools
Credit Card Payoff Calculator
Calculate how long it takes to pay off credit card debt and how much interest you'll pay
Debt Snowball vs Avalanche Calculator
Compare debt snowball and avalanche methods to find the fastest, cheapest way to become debt-free
Emergency Fund Calculator
Calculate your ideal emergency fund size and create a savings plan to reach your goal
FIRE Calculator
Calculate your FIRE number and find out when you can retire early based on savings rate and investments