Inflation Calculator
See how inflation erodes purchasing power over time, or find out what a past dollar amount is worth today. Includes common expense projections.
Inputs
Purchasing Power in Future
$5,537
Purchasing Power Lost
$4,463
Real Value Decline
44.6%
over 20 years
Purchasing Power Over Time
Common Expenses — In 20 Years
Smart Insights
3% is near the US historical average. Purchasing power declines are modest but compound significantly over 20+ years.
Over 20 years, you lose 45% of purchasing power. To maintain real value, your savings must earn at least 3% annually.
Inflation affects all assets differently. Real estate, stocks, and TIPS tend to outpace inflation over long periods; cash savings typically fall behind.
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Understanding Inflation
Inflation is the rate at which the general level of prices for goods and services rises over time, reducing purchasing power. Central banks like the US Federal Reserve target 2% annual inflation as a sign of a healthy economy. Even modest inflation significantly erodes the real value of cash held over decades.
Frequently Asked Questions
What does this calculator show?
In "future" mode, it shows what today's money will be worth in future years after inflation erodes purchasing power. In "past" mode, it converts a historical dollar amount to today's equivalent — useful for understanding how prices have changed.
What inflation rate should I use?
The US long-run average is about 3%. The Federal Reserve targets 2%. Recent years have seen higher rates (6–9%). For conservative planning, use 3%; for stress-testing, try 5–6%.
What is the Rule of 72 for inflation?
Divide 72 by the inflation rate to estimate how many years it takes for prices to double (or purchasing power to halve). At 3% inflation, prices double in about 24 years. At 6%, it takes just 12 years.
How does inflation affect savings?
If your savings account earns 2% but inflation is 3%, your real return is -1% — you are losing purchasing power each year even as your balance grows. This is why investing in assets that outpace inflation is critical for long-term wealth.
What assets protect against inflation?
Historically, equities (stocks), real estate, commodities, and inflation-protected bonds (TIPS) have outpaced inflation over long periods. Cash and fixed-rate bonds tend to lose real value during inflationary periods.