Inflation calculator

What this inflation calculator tells you

Two things, symmetric sides of the same problem. First, what today's dollars will be worth in the future — a $50,000 pile of cash, untouched in a checking account for 20 years at 3% inflation, has the buying power of roughly $27,700 in today's terms. Second, what it will take in future dollars to match today's purchasing power — the same $50,000 target, 20 years out, requires about $90,300 in nominal future dollars to buy the same basket of stuff.

These are two sides of the same equation. Inflation erodes the real value of any money that isn't earning a return higher than the inflation rate. That's the technical meaning of "a dollar today is worth more than a dollar tomorrow" — not impatience, but physics.

The historical reference points

• Long-run US average (since 1913):about 3.2% annually. That's the number most long-term plans default to.
• Great Inflation (1973–1982): peaked at 14.8% in 1980.
• Great Moderation (1985–2020): averaged around 2.5%.
• Post-pandemic spike (2021–2023): peaked at 9.1% in June 2022 — the highest in 40 years.
• 2024–2026: largely back to the 2–3% range, with some lingering pressure.

For planning purposes, 2.5–3% is a reasonable default. Higher if you're pessimistic about monetary policy; lower is hard to justify historically.

Why inflation quietly wrecks savings accounts

A high-yield savings account paying 4% APY looks great on the surface. Subtract 3% inflation, though, and your real return is 1%. That's fine for an emergency fund — the real purpose is liquidity, not growth. But for retirement money sitting in savings for decades, it's catastrophic: $10,000 held in cash for 30 years at 3% inflation is worth roughly $4,100 in real terms, even if the balance never dropped a penny.

Money that's not invested is money that's losing buying power every month. That's the fundamental case for investing long-term money in assets that outpace inflation — index funds, real estate, productive businesses, certain commodities — rather than leaving it in nominal-return instruments.

What inflates vs. what doesn't

Inflation is an average across a basket of goods. Individual categories inflate at wildly different rates:

• Healthcare and education: roughly 5–6% annually over the past 30 years. Faster than the average.
• Housing: long-term roughly matches general inflation, but local markets deviate enormously.
• Electronics and computing: negative inflation. A TV or laptop you bought today is functionally better and cheaper than the same money got you in 2015.
• Food: long-term slightly faster than general inflation, with big swings year to year.

When planning for retirement, watch healthcare specifically — it's a large share of retirement spending and inflates faster than the headline number.

Inflation and the other calculators on this site

Every long-term calculator on this site is affected by inflation:

• Compound interest calculator — the default 7–8% return is typically nominal. Subtract inflation to get the real return.
• Retirement calculator— the "in today's dollars" output explicitly accounts for this. The nominal balance at age 65 looks massive; adjusting back to today's buying power is sobering.
• FIRE calculator — the target balance needs to grow with inflation, otherwise a 25× annual expenses number is only accurate for year 1.

Ways to beat inflation

For most individual investors, three practical routes:

1. Broad stock market index funds. Historical real return ~7%. Nothing else beats it on a risk-adjusted basis over 20+ year horizons.
2. Treasury Inflation-Protected Securities (TIPS). Principal adjusts with CPI. Lower real return (~1–2%) but guaranteed inflation hedge. Useful for a portion of a fixed-income allocation.
3. I Bonds. US Treasury savings bonds that track inflation directly. Capped at $10,000/year per person. Good parking spot for 1–5 year goals where you want zero real risk.

Real estate is often cited but it's a lumpier bet than index funds and the carrying costs are real. Gold is a fine inflation hedge over 30+ year periods but a terrible one over shorter windows.

FAQ

Is inflation always bad?

No — some mild inflation (2–3%) is considered healthy by most economists. It encourages spending and investing rather than hoarding, and it makes fixed debt easier to pay off over time. Deflation (falling prices) is historically much more damaging; it causes people to delay purchases, which compounds into recession.

Does this calculator use CPI?

No — CPI is a historical index, not a forward-looking forecast. This calculator asks you to supply an assumed future rate and projects forward. Use 2.5–3% as a default unless you have a specific reason to deviate.

What about wages?

Wages historically track inflation roughly over long periods, but lag in the short term. In the 2021–2023 spike, real wages fell because wages didn't keep up with prices; 2024–2025 saw real wages recover. For planning, assume your nominal income grows at roughly inflation + 1–2% over a career, though individual trajectories vary wildly.