What is a typical inflation rate?

The U.S. Federal Reserve targets 2% annual inflation. Historical long-term average is approximately 3%. Recent years have seen higher rates of 5-8%, though these tend to moderate over time.

How does inflation affect savings?

Inflation erodes purchasing power. Money earning less than inflation loses real value. At 3% inflation, $1,000 buys only $744 worth of goods after 10 years if uninvested.

Should I adjust investment returns for inflation?

Yes, real returns (after inflation) matter more than nominal returns. A 7% return with 3% inflation equals approximately 4% real return in purchasing power growth.

How does inflation impact retirement planning?

Retirement expenses will increase over time due to inflation. A $50,000 annual budget at age 65 may require $90,000+ by age 85. Account for inflation when setting savings goals.

What investments protect against inflation?

Stocks, real estate, Treasury Inflation-Protected Securities (TIPS), and commodities historically provide some inflation protection. Cash and fixed bonds typically lose purchasing power during high inflation.

How does inflation affect fixed income investments?

Fixed income investments like bonds lose real value during inflation because interest payments remain constant while purchasing power decreases. TIPS adjust principal for inflation.

Should I use historical or projected inflation rates?

Use historical averages (2-3%) for long-term planning but consider current economic conditions. During high inflation periods, you may want to use higher estimates for near-term goals.

How does inflation affect salary negotiations?

Annual raises should at minimum match inflation to maintain purchasing power. A 2% raise during 5% inflation is actually a 3% pay cut in real terms.

Inflation Calculator

Calculate purchasing power changes over time

Instant results•No signup•Estimates only

Current Amount

Annual Inflation Rate

Time Period

Future Purchasing Power

$744.09

of today's $1,000

Amount Needed to Match Today

$1,343.92

Purchasing Power Lost

-$255.91

Cumulative Inflation

34.39%

Visualization

Purchasing Power Over Time

Purchasing Power

Original

$1,000

After 10yr

$741

Value Lost

-$259

Results are projections based on consistent contributions and rates.

Results are estimates for informational purposes only and do not constitute financial advice. Actual savings may vary based on interest rate changes, contribution consistency, and account terms.

How calculations work Full disclaimer

Inflation Calculator Formula

F V = P V \times (1 + i)^{n}

FV is the future equivalent value. PV is the present value. i is the annual inflation rate as a decimal. n is the number of years. This formula shows how purchasing power erodes over time due to rising prices.

How the Inflation Calculator Works

1Enter a current dollar amount
2Input the assumed annual inflation rate
3Set the time period in years
4View what that amount will feel like in future purchasing power
5See how much more you'd need in the future to maintain equivalent purchasing power

Inflation Calculator Key Terms

Inflation: The rate at which the general level of prices rises, reducing the purchasing power of money over time.
Purchasing Power: The amount of goods or services that a unit of currency can buy. Inflation reduces purchasing power.
Real Return: Investment return minus inflation—the actual increase in purchasing power.
CPI: Consumer Price Index, a measure of the average change in prices paid by consumers for goods and services.

Inflation Calculator Tips

•Long-term savings must outpace inflation to maintain purchasing power
•Historical US inflation averages about 3% annually
•Account for inflation when setting retirement income goals
•Real assets like stocks and real estate historically outpace inflation
•Fixed income on bonds may lose purchasing power during high inflation periods

When to Use This Inflation Calculator

✓Understanding the future cost of major purchases
✓Adjusting retirement income needs for inflation
✓Comparing salary or income growth against inflation
✓Evaluating whether savings rates are beating inflation
✓Long-term financial planning and goal setting

Inflation Calculator Examples

10-Year Projection

Amount:$1,000Inflation:3%Years:10

Result:$744 purchasing power

$1,000 today will only buy $744 worth of goods in 10 years at 3% inflation. You'd need $1,344 to match today's buying power.

High Inflation Period

Amount:$50,000Inflation:6%Years:5

Result:$37,363 purchasing power

At 6% inflation, $50,000 loses over 25% of its purchasing power in just 5 years.

Long-Term Erosion

Amount:$100,000Inflation:3%Years:30

Result:$41,199 purchasing power

Over 30 years at 3% average inflation, $100,000 retains less than half its purchasing power.

Understanding Inflation in Depth

Inflation is often called the "silent tax" because it quietly erodes your purchasing power without any visible transaction. Understanding inflation's impact is crucial for any long-term financial planning.

Historical Inflation Context

The U.S. Federal Reserve targets 2% annual inflation as healthy for the economy. Historically, inflation has averaged about 3% over long periods, though recent years (2021-2023) saw spikes to 6-9%. Even at 3%, purchasing power halves roughly every 24 years.

The Impact on Savings

Money in a 0.5% savings account during 3% inflation loses 2.5% of purchasing power annually. $10,000 today becomes equivalent to about $7,400 in purchasing power after 10 years. This is why investment returns must exceed inflation for real wealth growth.

Inflation and Retirement

A $50,000 annual retirement income might feel comfortable today, but at 3% inflation, you'd need $67,000 in 10 years and $90,000 in 20 years for equivalent purchasing power. Retirement plans must account for decades of inflation.

Strategies to Beat Inflation

Historically, stocks have returned 7-10% annually, substantially outpacing inflation. Real estate, Treasury Inflation-Protected Securities (TIPS), and commodities also provide some inflation protection. The worst inflation hedge is cash—it guarantees purchasing power loss.

Inflation Calculator FAQs

Browse more tools in Savings Calculators

Related Calculators

Compound Interest Calculator

Calculate investment growth with compound interest

Retirement Calculator

Project retirement savings and income needs

Savings Goal Calculator

Calculate how much to save monthly to reach your goal

Marcus Chen

Financial Analysis Specialist

Marcus has over 12 years of experience in quantitative finance and personal financial planning. He specializes in loan analysis, investment modeling, and consumer debt strategies. His methodologies incorporate industry-standard financial mathematics used by major lending institutions.

Content reviewed: January 2026Next review scheduled: 2027

Editorial Standards: All calculations use industry-standard financial formulas. Content is reviewed for mathematical accuracy and updated to reflect current market conditions. This tool provides estimates for informational purposes and does not constitute financial advice.