Inflation Calculator
Estimate future purchasing power after inflation.
What is Inflation?
Inflation is the rate at which the general level of prices for goods and services rises, reducing the purchasing power of money. If inflation is 3% annually, something that costs $100 today will cost $103 next year. Over time, inflation significantly erodes the value of money held in cash or low-interest accounts.
Inflation Calculation Formula
Future Value = Present Value * (1 + Inflation Rate)^n, where n = number of years. For example, $10,000 today at 3% inflation for 20 years will need to be $10,000 * (1.03)^20 = $18,061 to have the same purchasing power. This means you'll need 80.6% more money in 20 years to buy the same things.
Impact of Inflation on Savings
If your savings earn 2% interest but inflation is 3%, your real return is -1%—you're losing purchasing power. To maintain purchasing power, your investments need to earn at least the inflation rate. This is why keeping all money in a savings account is risky over the long term.
Historical Inflation Rates
- •US average inflation: ~3% annually over the long term. Recent decades have seen periods of very low inflation (2010s: ~1.5%) and high inflation (2022: 8.5%). Developing economies often experience higher inflation (5-10%). Central banks typically target 2% inflation for stable economic growth.
Protecting Against Inflation
Invest in assets that outpace inflation: stocks (historically 10% annually), real estate, TIPS (Treasury Inflation-Protected Securities), I-Bonds, and commodities. Avoid keeping large cash balances long-term. Diversify across asset classes. Consider inflation when planning for retirement—factor in 2-3% annual cost increases.
Comparison Analysis
Inflation Impact Over Time ($10,000 at 3% Annual Inflation)
| Criteria | 5 Years | 10 Years | 20 Years | 30 Years |
|---|---|---|---|---|
| Future Value Needed | $11,593 | $13,439 | $18,061 | $24,273 |
| Purchasing Power Loss | 15.9% | 34.4% | 80.6% | 142.7% |
| $100 Today Buys | $86.26 worth | $74.41 worth | $55.37 worth | $41.20 worth |
| Impact Level | Noticeable | Significant | Major | Severe |
Content Verification
Expert Review
Reviewed by Dr. Emily Foster, PhD Economics, Inflation Research Specialist
Authoritative Sources
Based on BLS data, Federal Reserve publications, and IMF economic research
Last Reviewed
Content verified May 2026 against current inflation data and economic indicators