CalcPad

Inflation Calculator

See how inflation affects purchasing power over time. Calculate the future cost of goods or the real value of money.

$

The amount of money today.

%

The average annual inflation rate. US long-term average is ~3%.

What Is Inflation?

Inflation is the rate at which the general level of prices for goods and services rises over time, reducing the purchasing power of money. When inflation is 3%, something that costs $100 today will cost $103 next year.

The effects compound over time. At 3% annual inflation:

  • In 10 years: $1,000 buys what $744 buys today.
  • In 20 years: $1,000 buys what $554 buys today.
  • In 30 years: $1,000 buys what $412 buys today.

This is why keeping all your savings in a standard checking account (earning ~0.01%) effectively loses money every year.

Historical US Inflation Rates

The US has experienced varying inflation rates throughout history:

  • 1920s-1930s: Deflation during the Great Depression
  • 1970s-1980s: High inflation peaking at 13.5% in 1980
  • 1990s-2010s: Low, stable inflation averaging ~2.5%
  • 2021-2023: Post-pandemic inflation peaking at 9.1% in June 2022
  • Long-term average (1913-present): Approximately 3.2% per year

The Federal Reserve targets 2% annual inflation as a healthy rate for the economy.

Protecting Against Inflation

To maintain purchasing power, your investments need to earn returns that exceed the inflation rate:

  • High-yield savings: 4-5% APY (currently above inflation)
  • Treasury I-Bonds: Rate adjusts with inflation
  • TIPS: Treasury Inflation-Protected Securities
  • Stock market: Historically returns 7% after inflation
  • Real estate: Property values and rents tend to rise with inflation

Frequently Asked Questions

What inflation rate should I use?
For long-term projections, 3% is a reasonable estimate based on the US historical average. For more conservative planning, use 3.5-4%. If you want to model a specific scenario, the Bureau of Labor Statistics publishes current CPI data.
What does "purchasing power" mean?
Purchasing power is the real value of money — how much goods and services it can buy. If you have $1,000 and inflation is 3% per year, after 10 years your $1,000 still exists but can only buy what $744 could buy today. The number on the bill stays the same, but its real value has decreased.
Is inflation always bad?
Moderate inflation (2-3%) is considered healthy for an economy. It encourages spending and investment rather than hoarding cash. Deflation (falling prices) can be more harmful, as it encourages people to delay purchases and can lead to economic stagnation. High inflation (above 5-6%) is problematic because it erodes savings and makes planning difficult.

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