Inflation Calculator
Calculate how inflation erodes purchasing power over time. See what today's money will be worth in the future, or find the present-day value of a future amount.
Today's Value
$100,000
Purchasing Power in 20 Years
$55,368
Purchasing Power Lost
$44,632
44.6% erosion
Purchasing Power Over Time
| Year | Real Value | Power Lost | % Lost |
|---|---|---|---|
| 1 | $97,087 | $2,913 | 2.9% |
| 2 | $94,260 | $5,740 | 5.7% |
| 3 | $91,514 | $8,486 | 8.5% |
| 4 | $88,849 | $11,151 | 11.2% |
| 5 | $86,261 | $13,739 | 13.7% |
| 6 | $83,748 | $16,252 | 16.3% |
| 7 | $81,309 | $18,691 | 18.7% |
| 8 | $78,941 | $21,059 | 21.1% |
| 9 | $76,642 | $23,358 | 23.4% |
| 10 | $74,409 | $25,591 | 25.6% |
| 11 | $72,242 | $27,758 | 27.8% |
| 12 | $70,138 | $29,862 | 29.9% |
| 13 | $68,095 | $31,905 | 31.9% |
| 14 | $66,112 | $33,888 | 33.9% |
| 15 | $64,186 | $35,814 | 35.8% |
| 16 | $62,317 | $37,683 | 37.7% |
| 17 | $60,502 | $39,498 | 39.5% |
| 18 | $58,739 | $41,261 | 41.3% |
| 19 | $57,029 | $42,971 | 43.0% |
| 20 | $55,368 | $44,632 | 44.6% |
Understanding Inflation and Purchasing Power
Inflation is the gradual increase in prices over time, which means each dollar buys less in the future than it does today. While 2-3% annual inflation might seem small, it compounds just like interest — except it works against you. At 3% inflation, prices double roughly every 24 years.
This is why simply saving money in a checking account is not enough. If your savings earn 0.5% but inflation runs at 3%, you are losing 2.5% of your purchasing power every year. Over 20 years, that means your cash can only buy about 60% of what it could when you first saved it.
Why Inflation Matters for Financial Planning
When planning for retirement or long-term goals, you must account for inflation. A retirement that costs $50,000/year today will cost approximately $90,000/year in 20 years at 3% inflation. Failing to plan for this means your savings may run out faster than expected.
This calculator helps you understand both directions: what your current money will be worth in the future (purchasing power erosion), and what you would need to save in the future to match today's purchasing power.
Frequently Asked Questions
What is a good inflation rate to use for calculations?
The US Federal Reserve targets 2% annual inflation. Historical US inflation has averaged about 3% over the last century. For conservative planning, use 3%. For recent years (2022-2024) inflation ran higher at 4-8%, but long-term projections typically use 2.5-3.5%.
How does inflation affect my savings?
Inflation reduces the purchasing power of cash over time. If your savings earn less interest than the inflation rate, you are effectively losing money. For example, $100,000 in a 1% savings account loses real value every year if inflation is 3% — after 10 years, your money buys only about $82,000 worth of goods.
How can I protect my money from inflation?
Invest in assets that historically outpace inflation: stocks (7-10% average return), real estate, TIPS (Treasury Inflation-Protected Securities), and I-Bonds. Keeping large amounts in low-interest savings accounts is one of the biggest wealth-eroding mistakes people make.
What is the difference between nominal and real returns?
Nominal returns are the raw percentage gain on an investment before accounting for inflation. Real returns subtract the inflation rate. If your investment earned 8% and inflation was 3%, your real return was approximately 5%. Real returns show your actual increase in purchasing power.