Inflation Calculator
Purchasing power over time
How to Use the Inflation Calculator
Understand how inflation affects purchasing power over time. See what today's dollars will be worth in the future, or what past amounts are worth today.
How Inflation Works
Inflation reduces purchasing power—the same dollar buys less over time. We calculate future value using: Future Value = Present Value × (1 + inflation rate)^years
Historical Context
- US average inflation: ~2-3% historically
- High inflation periods (1970s): 10%+
- Recent inflation (2021-2023): 5-9%
- Target inflation (Federal Reserve): 2%
Practical Applications
Use this calculator for retirement planning (ensuring savings keep pace with costs), wage negotiations, long-term contracts, and understanding historical prices in today's terms.
Frequently Asked Questions
Inflation is the rate at which prices increase over time, reducing purchasing power. If inflation is 3%, $100 today buys what $103 would buy next year. This means your savings and income must grow faster than inflation to maintain value.
US historical average is about 3% annually since 1926. The Federal Reserve targets 2% inflation. Recent years (2021-2023) saw higher inflation of 5-9%. Use 2-3% for long-term planning and adjust based on current conditions.
Subtract inflation from your expected investment return. If investments return 8% and inflation is 3%, real return is about 5%. Use real returns to calculate future purchasing power. $1 million in 30 years may only buy $400,000 worth of today goods.
If your salary does not increase with inflation, you effectively get a pay cut. A 3% raise during 3% inflation means no real increase. Negotiate raises that at least match inflation to maintain purchasing power.
TIPS (Treasury Inflation-Protected Securities), I-Bonds, real estate, commodities, and stocks historically outpace inflation. Cash and fixed-rate bonds lose value during high inflation. Diversification helps protect purchasing power.
Calculate using our tool or formula: Lost Value = Principal x ((1 + inflation rate)^years - 1). $10,000 over 10 years at 3% inflation loses about $3,400 in purchasing power if not invested.