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Inflation Calculator — Purchasing Power
Calculate how inflation erodes purchasing power over time. See what your money will be worth in the future and how much things will cost.
About This Calculator
Inflation silently erodes the purchasing power of your money every year, and most people don't notice until they look back and realize what things used to cost. At 3% annual inflation, $100,000 today will only buy about $55,000 worth of goods and services in 20 years — a 45% loss of purchasing power. This matters enormously for retirement planning, salary negotiations, long-term investment decisions, and understanding why keeping money in a low-interest savings account actually loses value over time. Our inflation calculator shows both the future cost of goods and the real value of your money.
The Formula Behind This Calculator
Real value = Nominal / (1 + rate)^years Rule of 72: 72 / rate = Years prices double Historical US average: ~3%/yr.
Understanding the math helps you verify results and make better decisions for your project.
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How to Use
- 1Enter the current dollar amount you want to evaluate.
- 2Set the expected annual inflation rate (3% is the long-term US average).
- 3Choose the number of years to project.
When to Use
- →Planning retirement savings to account for future cost of living increases.
- →Evaluating whether a salary increase keeps pace with inflation.
- →Understanding the real return on a low-yield investment or savings account.
Tips
- ✓Historical US inflation averages about 3% per year, but it has ranged from -2% to 13%+.
- ✓Your investments need to earn MORE than inflation to grow real purchasing power.
- ✓Healthcare and education costs have inflated at 5-7% annually — much higher than the general rate.
FAQ
What is a normal inflation rate?
The US Federal Reserve targets 2% inflation. The long-term historical average is about 3%. Developing countries may see 5-10% or more. Hyperinflation (50%+ monthly) is rare but devastating.
How does inflation affect my savings?
If your savings earn less than inflation, you lose purchasing power. A savings account at 4% with 3% inflation gives only 1% real return. This is why holding too much cash long-term is costly.
Is inflation always bad?
Moderate inflation (2-3%) is considered healthy for the economy. It encourages spending and investment over hoarding cash. Deflation (negative inflation) can actually be more harmful, causing economic stagnation.
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