Inflation Calculator

Inflation is the steady erosion of what a dollar buys, and it is the reason a salary that felt generous a decade ago now feels ordinary. This calculator answers both directions of the question: what a present amount of money will need to become to keep the same purchasing power, and what a future amount is really worth in today's terms.

The arithmetic is simple compounding in reverse. Prices rise by the inflation rate each year, so the future cost of something is today's price multiplied by (1 + rate)^years. To convert a future figure back into today's dollars, divide by the same factor. A 3% rate roughly doubles prices in 24 years, which is why a 30-year retirement plan must account for it explicitly.

Inflation also changes how you should read a return. A 7% investment return during 3% inflation is only about 4% of real growth, and after tax it may be less still. The formula for that adjustment is approximately the nominal return minus the inflation rate, and more precisely (1 + nominal) ÷ (1 + inflation) − 1. Ignoring it is the most common way long-range plans come out too optimistic.

For planning, use a long-run average rather than any single year. US consumer inflation has averaged roughly 3% over the past century, with extended periods both well above and well below. For a short horizon, the current rate is more informative; for thirty years, the average is. This tool lets you set the rate so you can test a conservative 4% against a moderate 2.5%.

How the math works

Future cost = present amount × (1 + inflation rate)^years.
Present value of a future amount = future amount ÷ (1 + inflation rate)^years.
Purchasing power lost = the percentage of value that inflation removes over the period.
Real return ≈ (1 + nominal return) ÷ (1 + inflation) − 1, which is the growth of purchasing power rather than of the nominal balance.

Frequently asked questions

What is a normal rate of inflation?

The US Federal Reserve targets about 2% a year, and long-run US consumer inflation has averaged roughly 3%. Individual years vary widely, so for planning horizons of a decade or more a 2.5% to 3% assumption is reasonable.

How do I calculate the future cost of something?

Multiply today's price by (1 + inflation rate) raised to the number of years. At 3% inflation, $100 becomes about $181 in 20 years, and roughly $243 in 30 years.

Why is the real return lower than my investment return?

Because inflation reduces what each dollar buys. A 7% nominal return during 3% inflation leaves about 3.9% of real growth. Real return is best computed as (1 + nominal) ÷ (1 + inflation) − 1.

Does inflation affect my mortgage payment?

For a fixed-rate mortgage, no — the payment is fixed in nominal terms, so inflation quietly reduces its real cost over time. That is one reason a fixed-rate loan is attractive during rising prices, while adjustable-rate loans become more expensive.

How do I protect savings from inflation?

Hold assets that have historically outpaced it over long periods, such as a diversified stock portfolio, rather than leaving everything in cash. Cash is appropriate for short-term needs but loses purchasing power over decades.

Is inflation the same everywhere?

No. The headline consumer price index is an average across a basket of goods, and your personal inflation depends on what you buy — housing, energy and food weigh differently for different households. A high-income household may experience a lower rate than the index suggests.

This calculator is an educational estimator. It is not financial, medical, tax, or legal advice, and it does not account for fees, local rules, or your personal circumstances. Confirm decisions with a qualified professional.

Calculate

How the math works

Frequently asked questions

Related calculators