How it works
The formulas
With an assumed constant annual inflation rate i over t years:
Future cost = amount × (1 + i)t
Purchasing power (today’s dollars) = amount ÷ (1 + i)t
Future cost answers “what will something that costs $X today cost in t years?” Purchasing power answers “what is $X received in t years worth in today’s money?” The percentage of purchasing power lost is 1 − 1/(1 + i)t.
Important: this is a projection, not history
This calculator uses your assumed rate and does not use historical Consumer Price Index (CPI) data. Actual inflation varies from year to year. For historical comparisons, use the official BLS CPI Inflation Calculator from the U.S. Bureau of Labor Statistics.
Worked examples
$100 today at 3% inflation for 10 years
It will cost about $134.39 to buy the same things in 10 years. Conversely, $100 received in 10 years is worth about $74.41 today — a 25.6% loss of purchasing power.
$60,000 of annual living expenses at 3.5% inflation for 20 years
The same lifestyle would cost about $119,387.33 a year in 20 years.
Choosing an inflation rate
The Federal Reserve targets 2% average inflation over time, as measured by the PCE price index. Many long-term planners use 2.5%–3% to be cautious, and some categories — such as health care and college tuition — have historically risen faster than overall prices. Running the calculator at a few different rates shows a realistic range.
Why inflation matters for your plans
- Retirement savings. At 2.5% inflation, $1,000,000 in 30 years is worth about $476,742.69 in today’s dollars. Convert projections from the 401(k) and Roth IRA calculators before deciding whether they are enough.
- Cash and low-yield savings. If your savings rate is below inflation, your money loses purchasing power even as the balance grows.
- Real returns. A useful approximation: real return ≈ nominal return − inflation. A 4.5% CD during 3% inflation earns roughly 1.5% in real terms before taxes.
- Salary. A raise smaller than inflation is a pay cut in real terms.
- Fixed debts. Inflation reduces the real burden of fixed-rate loan payments over time.
Protecting against inflation
Common approaches include investing for growth over long horizons, Treasury Inflation-Protected Securities (TIPS) and I bonds, and regularly increasing savings contributions. This is general information, not advice.
Reading your results
Future cost shows how many dollars you would need in the future to buy what your amount buys today. Today’s value of a future amount shows the reverse: what that same number of dollars, received in the future, would buy in today’s prices. Purchasing power lost is the percentage by which the value of a fixed dollar amount shrinks over the period. The chart shows both lines diverging over time — the gap widens because inflation compounds.
Inflation compounds, just like interest
Because each year’s price increase builds on the previous year’s higher prices, a modest rate adds up. At 3% a year, prices rise about 34% in 10 years, about 81% in 20 years and about 143% in 30 years. That is why long-term goals such as retirement or a child’s education should be planned in inflation-adjusted terms.
Using this with our other calculators
Run your savings projection first — for example in the savings goal or 401(k) calculator — then enter the projected balance here as the amount with the same number of years to see its value in today’s dollars. Alternatively, inflate your target: if you want the equivalent of $50,000 a year of spending in 25 years, enter $50,000 to see the future amount you will actually need.
Frequently asked questions
How do you calculate the effect of inflation?
Multiply by (1 + inflation rate) raised to the number of years to get a future cost, or divide by the same factor to convert a future amount into today’s dollars.
What inflation rate should I use?
The Federal Reserve’s long-run goal is 2%. Many planners use 2.5%–3% for long-term projections. Try several rates to see a range.
Does this calculator use historical CPI data?
No. It projects using the constant rate you enter. For historical price comparisons, use the official BLS CPI Inflation Calculator.
What is purchasing power?
The amount of goods and services a sum of money can buy. When prices rise, each dollar buys less, so purchasing power falls.
How long does it take prices to double?
Roughly 72 divided by the inflation rate (the “rule of 72”). At 3%, prices double in about 24 years.
How does inflation affect my retirement savings?
A future balance buys less than the same number today. Divide your projected balance by (1 + inflation)years to see it in today’s dollars.
Is inflation the same for everyone?
No. Official inflation measures a broad basket of goods. Your personal inflation rate depends on what you buy — for example, renters, retirees and families with children can experience different rates.