Inflation Calculator
Calculate how inflation erodes your purchasing power over time
What is an inflation calculator?
An inflation calculator measures how rising prices erode the purchasing power of money over time. By entering a dollar amount, an expected inflation rate, and a time period, you can see what that amount will cost in the future and how much value your savings will lose. It helps with long-term financial planning and retirement projections.
Future Cost
$134,391.64
What $100,000.00 will cost in 10 years
Purchasing Power Loss
$34,391.64
Cumulative Inflation Rate
34.39%
Year-by-Year Breakdown
| Year | Future Value | Cumulative Rate |
|---|---|---|
| 1 | $103,000.00 | 3.00% |
| 2 | $106,090.00 | 6.09% |
| 3 | $109,272.70 | 9.27% |
| 4 | $112,550.88 | 12.55% |
| 5 | $115,927.41 | 15.93% |
How is inflation calculated?
The inflation formula projects the future cost of goods and services by compounding the annual inflation rate over a number of years. This same formula shows how the purchasing power of a fixed dollar amount diminishes over time.
Inflation Formula
Where Future Value is the projected cost, Present Value is today's amount, inflation rate is the annual rate as a decimal, and years is the time period.
Variable Definitions
- Future Value: What the amount will cost after inflation
- Present Value: The current dollar amount today
- Inflation Rate: Annual rate of price increase (as a decimal, e.g., 0.03 for 3%)
- Years: The number of years to project forward
Cumulative inflation is calculated as (1 + rate)^years - 1, representing the total percentage increase over the entire period.
Frequently Asked Questions
Inflation is the rate at which the general level of prices for goods and services rises over time, reducing the purchasing power of money. When inflation is 3%, something that costs $100 today will cost $103 a year from now. Central banks like the Federal Reserve target around 2% annual inflation as a healthy rate for the economy.
Inflation is caused by several factors including increased money supply, rising demand for goods and services (demand-pull inflation), higher production costs like wages and raw materials (cost-push inflation), and supply chain disruptions. Government fiscal policy, monetary policy, and global economic conditions all play a role in driving inflation rates.
The US inflation rate fluctuates and is measured monthly by the Bureau of Labor Statistics using the Consumer Price Index (CPI). For the most current rate, check the BLS website at bls.gov. Historically, US inflation has averaged approximately 3.3% annually since 1914, though it has varied significantly across different periods.
To protect savings from inflation, consider investing in assets that historically outpace inflation: stocks, real estate, Treasury Inflation-Protected Securities (TIPS), I Bonds, and commodities. Keeping all your money in a low-interest savings account means losing purchasing power over time. Diversifying across asset classes provides the best long-term inflation hedge.
The Consumer Price Index (CPI) measures the average change in prices paid by urban consumers for a market basket of goods and services including food, housing, transportation, medical care, and education. Published monthly by the Bureau of Labor Statistics, the CPI is the most widely used measure of inflation in the United States.
The historical average US inflation rate is approximately 3.3% per year since 1914. However, this average masks significant variation: inflation peaked at 23.7% in 1920 and reached 14.6% in 1980, while deflation occurred during the Great Depression. Since 1990, inflation has generally stayed between 1.5% and 4%, with notable spikes in 2021-2022.