Inflation Calculator
Inflation is the rate at which prices rise, which is the same thing as the rate at which a dollar loses value. At 3 percent a year, $100 today buys about $74 worth of goods in ten years, and a paycheck that never changes is quietly shrinking.
Amount and timeframe
How much will you need later to buy what this amount buys today?
The Federal Reserve targets 2%. The long-run U.S. average is close to 3%.
What 3.0% inflation does over time
Inflation compounds exactly like interest, only against you. At 3.0% a year, prices roughly double every 24 years. That is the Rule of 72 applied in reverse.
The same amount at different rates
| Inflation rate | Needed in 20 yrs | Change |
|---|---|---|
| 1% | $61,010 | +22.0% |
| 2% | $74,297 | +48.6% |
| 3% (selected) | $90,306 | +80.6% |
| 4% | $109,556 | +119.1% |
| 5% | $132,665 | +165.3% |
| 7% | $193,484 | +287.0% |
Uses a constant inflation rate, which no real economy delivers. Actual price changes vary year to year and differ sharply by category. Housing, healthcare and education have generally risen faster than the overall index, while electronics and clothing have often fallen.
The two directions
Forward: what today's amount would need to be in the future to buy the same thing. Backward: what a past amount is worth in today's dollars. Both use the same compound relationship, just inverted.
The official measure
The Bureau of Labor Statistics publishes the Consumer Price Index, which tracks a basket of goods and services. CPI is the standard yardstick, but your personal inflation rate can differ sharply. Renters, homeowners, parents and retirees each spend in different proportions.
What it means for your money
Cash loses purchasing power every year. A savings account yielding 4 percent during 3 percent inflation preserves value. Keeping $50,000 in a checking account earning nothing costs about $1,500 in real terms each year.
For long-term planning, the practical move is to run projections in today's dollars by subtracting inflation from your expected return, rather than projecting nominal amounts you have to mentally deflate later.
Frequently asked questions
What is a normal inflation rate?
The Federal Reserve targets 2 percent over the long run. The historical U.S. average since 1926 is close to 3 percent. Anything above 5 percent for an extended period starts to distort spending and investment decisions.
How do I protect my savings from inflation?
Series I savings bonds and TIPS are explicitly inflation-linked. Over long periods, diversified stock portfolios have historically outpaced inflation by a wide margin, though with more volatility than bonds or cash.
Why does inflation matter for my paycheck?
A raise below the inflation rate is a pay cut in real terms. A 2 percent raise during 4 percent inflation leaves you able to buy less than before.
Is deflation possible?
Yes, and it is generally worse than moderate inflation. Falling prices encourage households to delay spending, which reduces demand, which pushes prices down further. It is the spiral Japan fought for two decades.
This calculator is an educational tool and does not constitute financial, tax or legal advice. Results are estimates based on the inputs and assumptions described above. Verify important figures with a qualified professional or the relevant government agency before acting on them.