Inflation Calculator
What today's money will actually buy in the future, and the real return left after inflation takes its share.
An investment returning 7% while inflation runs 3% grows purchasing power at 3.88% a year, not +4%. Subtraction is the common shortcut; the exact figure divides the growth factors.
Purchasing power of today's money
Cash held for 20 years at 3% inflation loses 45% of its purchasing power. This is the strongest argument against holding long-term savings in cash: the balance never falls, so the loss is invisible on a statement.
Inflation compounds exactly like investment growth, only against you. At 3% a year, prices double in about 23 years, so a fixed pile of cash buys roughly half as much. The same arithmetic runs in two directions: your money buys less, or the same basket of goods costs more. Both are shown because people reason about it each way.
Frequently asked questions
What is a normal rate of inflation?
The Federal Reserve targets 2% a year, and long-run US inflation has averaged roughly 3% over the past century, with sustained periods well above and below that. Using 2.5% to 3% is a reasonable planning assumption.
What is the difference between nominal and real returns?
Nominal is the raw percentage an investment earned. Real subtracts the effect of inflation, so it measures the change in what the money can actually buy. Real return is the only one that matters for long-term planning.
How does inflation affect retirement planning?
Enormously, because retirement horizons are long. Spending $60,000 today implies about $108,000 a year after 20 years at 3% inflation. Any plan quoting a nominal balance decades out is overstating what that money will buy.
Does inflation help borrowers?
Yes, for fixed-rate debt. You repay a fixed nominal amount with money that is worth less each year, so inflation quietly transfers value from lender to borrower. Variable-rate debt offers no such protection, since the rate usually rises with inflation.
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Calculators model hypothetical outcomes from the inputs you provide. They are informational only, not financial, investment, tax, or legal advice.