Inflation Calculator

Inflation is the silent thief of purchasing power. Over time, prices rise, and your money buys less. Understanding how inflation affects your money is crucial for financial planning, retirement planning, and making informed investment decisions.

This free inflation calculator helps you see how inflation erodes purchasing power over time. It shows you how much money you'd need in the future to maintain the same purchasing power as today, helping you plan for long-term financial goals.

Use this tool to understand the real value of money over time, plan for retirement income needs, and make investment decisions that outpace inflation.

Follow these steps to calculate inflation-adjusted values:

1. 1

   Enter Amount

   Input the dollar amount you want to adjust for inflation. This could be a salary, savings amount, or purchase price.

2. 2

   Set Time Period

   Enter the start year and end year for the inflation calculation. This shows how purchasing power changes over that period.

3. 3

   Enter Inflation Rate

   Input the annual inflation rate. Use 3% for historical average, or adjust based on current economic conditions. The calculator compounds inflation annually.

4. 4

   Review Results

   See the future value needed to maintain purchasing power, the value change, and percentage change. This shows how much more money you'd need to buy the same goods.

What is Inflation: Inflation is the rate at which the general price level of goods and services increases over time. When inflation is 3%, prices increase by 3% annually, meaning your money buys 3% less each year.

Historical Inflation: U.S. inflation has averaged 2-3% annually over the long term. The Federal Reserve targets 2% inflation. Recent years have seen higher inflation (4-8%), but long-term planning typically uses 3%.

Impact on Savings: If you keep money in a savings account earning 1% while inflation is 3%, you're losing 2% purchasing power annually. This is why investing is important—you need returns that outpace inflation.

Real vs. Nominal Returns: Nominal returns don't account for inflation. Real returns subtract inflation. A 7% investment return with 3% inflation equals 4% real return—your true purchasing power growth.

1. Invest to Outpace Inflation

Don't keep all money in cash or low-yield savings. Invest in stocks, bonds, real estate, and other assets that historically outpace inflation. Stocks have averaged 7-10% returns, well above typical inflation.

2. Consider Inflation in Retirement Planning

When planning retirement, account for inflation. $50,000 annual income today won't have the same purchasing power in 20 years. Plan for higher income needs in retirement due to inflation.

3. Use Real Returns for Planning

When calculating investment returns, subtract inflation to get real returns. This shows true purchasing power growth and helps set realistic expectations.

4. Consider Inflation-Protected Securities

Treasury Inflation-Protected Securities (TIPS) adjust for inflation, protecting purchasing power. Consider these for conservative portions of your portfolio, especially as you near retirement.

5. Review and Adjust Regularly

Inflation rates change over time. Review your financial plan regularly and adjust assumptions based on current economic conditions. Don't assume inflation will always be the same.

6. Focus on Long-Term Growth

Short-term inflation fluctuations are normal. Focus on long-term trends and ensure your investments outpace inflation over decades, not just individual years.