Inflation Calculator

Q: How does inflation affect my retirement savings?

Inflation is a major retirement risk. $1M at 3% inflation loses ~45% purchasing power in 20 years. Fixed pensions and bonds lose value. Hold inflation-beating assets (stocks, real estate, TIPS) and include inflation in your retirement plan.

Q: What investments historically beat inflation?

Different investments have different risks and no asset is guaranteed to beat inflation. Treasury Inflation-Protected Securities (TIPS) adjust principal with CPI, while stocks and other market assets can rise or fall. Compare risk, fees, taxes, and your time horizon rather than assuming a fixed real return.

Q: What's the difference between nominal and real returns?

Nominal return is the stated return before inflation. A more precise inflation-adjusted return is (1+nominal)/(1+inflation)-1. Investor.gov defines real return as return after accounting for taxes and inflation, so taxes and fees should also be considered when evaluating what you actually keep.

See how inflation quietly erodes your money — what your cash will really buy in the future, and how much you'd need to keep up.

With 3% annual inflation, $100,000 today will be worth about $180,611 in 20 years in nominal terms, but it will only buy what $55,368 buys today — roughly $44,600 of purchasing power quietly lost. Inflation erodes cash because prices rise each year and your money's buying power falls. This calculator shows both the future nominal amount and the real purchasing power, so you can plan savings and retirement goals in today's dollars.

Your money

Calculations run in your browser. Inputs are not stored.

Current amount

Annual inflation rate

Time horizon

20 years

Future value in 20 years

$180,611

At 3% annual inflation over 20 years

Real purchasing power left$55,368

Buying power lost$44,632

What today's $100,000 will actually buy

Purchasing powerFuture nominal value

Show yearly breakdown

Year	Nominal value	Purchasing power	Lost

How this calculation works

The formula

With a constant annual inflation rate i over N years:

Future value = A · (1+i)^N · Purchasing power = A ÷ (1+i)^N

A = current amount · i = annual inflation rate · N = number of years. The future value is what you'd need so your money buys the same things; the purchasing power is what today's money will actually be worth.

Assumptions

A single constant annual inflation rate is applied for the whole period — real inflation varies every year.
Inflation compounds annually, so its effect accelerates over longer horizons.
The calculation is before investment returns: it isolates the effect of inflation alone on a static amount.
Price changes differ by category (housing, food, energy, education), so a single rate is an approximation.
Results are hypothetical and for education only — not financial advice.

View the formula →

Educational purposes only. Not financial advice. See the full methodology and disclaimer.

Worked examples

See how inflation erodes purchasing power over time. All examples use a constant inflation rate for illustration.

Example 1: $100,000 at 3% inflation for 20 years

Today's value

$100,000

Purchasing power in 20 years

$55,368

Purchasing power lost

44.6%

At a 3% annual inflation rate, $100,000 today will only buy what $55,368 buys today in 20 years. That's a 44.6% loss of purchasing power. To maintain the same standard of living, you'd need your income or investments to grow to at least $180,611 (the inflation-adjusted equivalent). This is why keeping cash under the mattress is not a long-term strategy — even "modest" 3% inflation halves your purchasing power in about 24 years.

Example 2: The impact of higher inflation — 5% vs 3%

Same $100,000 · same 20-year horizon · different inflation rates

3% inflation

$55,368

44.6% lost

5% inflation

$37,689

62.3% lost

A 2-percentage-point difference in inflation doesn't sound like much, but over 20 years it's dramatic. At 3%, you lose 44.6% of purchasing power; at 5%, you lose 62.3%. That's an extra $17,679 of lost purchasing power. Periods of high inflation (like the 1970s, when U.S. inflation peaked near 14%) can devastate fixed-income retirees. This is why financial planners recommend investing in assets that historically keep pace with or beat inflation — like stocks, real estate, or TIPS — rather than holding all your wealth in cash or bonds.

Example 3: Time is inflation's best friend

$50,000 at 3% inflation · different time horizons

10 years

$37,205

25.6% lost

20 years

$27,684

44.6% lost

30 years

$20,599

58.8% lost

Inflation compounds just like investment returns — but in reverse. After 10 years, $50,000 loses about a quarter of its value. After 20 years, nearly half. After 30 years, nearly 60%. If you're 35 and planning to retire at 65, that's a 30-year window where your savings need to outrun inflation. A 3% inflation rate means prices roughly double every 24 years. This is why your retirement plan should always include an inflation assumption — planning in "today's dollars" without adjusting for inflation will leave you significantly short of what you actually need. Try our Retirement calculator with inflation adjustment to see the real picture.

All examples use a constant inflation rate for simplicity. Real inflation varies year to year and differs by spending category (healthcare and education typically rise faster than the overall CPI). See full disclaimer.

Inflation, explained

How do you calculate purchasing power?

The future value you'd need to keep the same buying power is amount × (1 + inflation)^years. The real purchasing power of today's money is amount ÷ (1 + inflation)^years — that's what the money will actually buy in the future.

What's a realistic inflation rate to use?

Inflation varies over time. The Federal Reserve states a 2% longer-run inflation goal for the PCE price index, while this calculator uses 2%, 3%, and 5% only as scenarios. Test multiple rates rather than treating any preset as a forecast.

Why does purchasing power fall even though prices rise?

The same dollar buys less every year as prices go up. Because inflation compounds, the erosion accelerates over time — after 10 years at 3%, $100 only buys about $74.4 of today's goods; after 20 years, about $55.4.

Is this financial advice?

No. Results are hypothetical estimates based on a constant inflation rate. Real inflation varies from year to year and depends on what you buy. The calculator is for education only and does not constitute financial advice.

How does inflation affect my retirement savings?

Inflation is one of the biggest risks to retirement planning. If you retire with $1,000,000 and inflation averages 3% per year, in 20 years that million dollars will only buy what $554,000 buys today. Your fixed pension or bond income loses purchasing power every year. This is why: (1) your retirement plan should include an inflation assumption, (2) you should hold some assets that historically beat inflation (stocks, real estate), and (3) you may want to consider inflation-protected securities like TIPS. Social Security in the U.S. has a cost-of-living adjustment (COLA), but most private pensions do not.

What investments historically beat inflation?

Over long periods (20+ years), historical U.S. stock returns vary with the period and data series. A quoted 7% real return already accounts for inflation; it must not be compared to inflation and adjusted a second time. Caspenda uses 7% only as an illustrative nominal input, before any optional inflation adjustment. Real estate and commodities also tend to keep pace with inflation over the long term. Bonds and cash typically do NOT beat inflation after taxes — a 4% bond yield minus 3% inflation and taxes may leave you with a negative real return. Treasury Inflation-Protected Securities (TIPS) are specifically designed to keep pace with CPI. The key is diversification: don't hold all your wealth in cash, especially over long time horizons. Past performance doesn't guarantee future results.

What's the difference between nominal and real returns?

Nominal return is the raw percentage your investment earns — e.g., a fund that goes from $10,000 to $10,700 has a 7% nominal return. Real return is what's left after subtracting inflation. If inflation was 3% that year, your real return is approximately 4% (7% − 3%). The exact formula is: real return = (1 + nominal) ÷ (1 + inflation) − 1. Real return is what actually matters for your purchasing power. A 5% nominal return in a 5% inflation environment means you're not getting ahead at all — you're just treading water. Always evaluate investments by their real, after-tax return, not the headline nominal number.