Inflation Calculator
See how inflation erodes purchasing power over time. Convert today's dollars to a future equivalent and understand real vs nominal returns.
For the real-return calculation below
What inflation does to money
Inflation is the general rise in prices over time. A dollar today buys less stuff a decade from now, even if the number of dollars in your wallet hasn't changed. At 3% inflation, $100,000 today needs to grow to $134,392 in 10 years just to maintain the same purchasing power. Beating inflation — growing real wealth — is the core challenge of long-term investing.
Real vs nominal: why it matters
An investment that returns 7% in a 3% inflation environment isn't a 7% return; it's closer to 4% in real purchasing power. Over 30 years, this distinction is huge. A nominal return of 7% on $100,000 becomes ~$761,000; adjusting for 3% inflation, that future balance buys roughly what $313,000 buys today — still a win, but much less dramatic than the big number suggests.
Inflation's hidden tax
Unlike income tax, nobody sends you an inflation bill. But every year, your cash, bonds, and fixed-income investments lose some purchasing power. High-inflation periods like 2022 (9.1%) vaporized nearly a tenth of cash holdings in real terms — invisible unless you're tracking real returns.
Who wins and loses during inflation
Winners: Homeowners with fixed-rate mortgages (paying back inflated dollars), borrowers generally, holders of stocks (companies can often raise prices), commodity owners. Losers: Savers in low-interest accounts, retirees on fixed pensions, bondholders, lenders, people on fixed salaries (until raises catch up).
How to protect purchasing power
Historically, stocks have outpaced inflation by 5-7% per year on average. Real estate also tracks inflation well. TIPS (Treasury Inflation-Protected Securities) are bonds whose principal adjusts with CPI. I Bonds combine a fixed rate with an inflation component. Pure cash reserves beyond a few months of expenses lose to inflation almost every year.
Frequently asked questions
What's a typical long-term inflation rate?▾
In the US, the Fed targets 2% annual inflation. The historical average (1913-present) is closer to 3.3%, with significant variation — the 1970s averaged 7-8%, the 2010s averaged under 2%, and 2022 hit 9%. For planning, 2.5-3% is a reasonable baseline.
How is inflation measured?▾
Most commonly via the Consumer Price Index (CPI), which tracks the price of a basket of goods — groceries, rent, energy, healthcare, etc. The BLS publishes CPI monthly. Personal inflation can differ significantly: if your biggest expense is housing in an expensive city, your effective inflation rate may far exceed the headline number.
What's the difference between nominal and real return?▾
Nominal return is the raw percentage gain. Real return subtracts inflation and shows actual growth in purchasing power. 7% nominal with 3% inflation = roughly 4% real (using the Fisher equation: (1.07/1.03) − 1 = 3.88%). Real return is what matters for maintaining or growing wealth in practical terms.
Does cash lose value even in savings accounts?▾
Yes, if the account's rate is below inflation. A 1% savings account in a year with 3% inflation loses 2% of purchasing power. This is one reason why high-yield savings accounts (currently 4-5% APY) are important — they keep pace with typical inflation but still lose to high-inflation periods.
How should I adjust retirement planning for inflation?▾
Always plan in today's dollars for desired spending, then apply inflation at the end. $60,000/year in 2026 dollars will feel like ~$108,000/year in 30 years at 2% inflation, ~$162,000 at 4%. Use real returns (nominal − inflation) on your investment projections for apples-to-apples comparisons.
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