Inflation Calculator

Inflation is the rate at which prices rise over time. A 3% annual inflation rate means a basket of goods that costs $100 today would cost about $103 next year on average. Inflation reduces the purchasing power of cash that is not earning a return at least equal to the inflation rate.

Future cost answers: if something costs $X today, how much will it cost in N years at this inflation rate? Purchasing power answers the inverse: if you'll have $Y in N years, how much is that worth in today's dollars? The two are linked: future cost = today × (1 + r)^n; purchasing power = future ÷ (1 + r)^n.

The U.S. long-run average is around 2 to 3%; specific periods vary widely. For planning, common choices are the Fed's 2% target, a 3% long-run estimate, or a higher near-term assumption during inflationary periods. The right answer depends on time horizon and what you are projecting. This calculator does not fetch live inflation data; you choose the rate.

No. Different categories inflate at different rates. Healthcare and education have historically risen faster than overall inflation in many countries; some electronics deflate. The calculator uses a single rate for simplicity. For specific big-ticket categories, consider using a category-specific rate.

Yes. Enter a negative inflation rate to model deflation. For example, -1% over 10 years means prices fall to about 90% of today, and purchasing power of a fixed amount rises. Deflation is historically rare and usually short-lived in developed economies.

Future value (FV) typically models money earning a positive return: 'how much will my $X grow to?' Inflation typically models prices rising or purchasing power decaying: 'how much less will $X buy?' They use the same compounding formula but answer different questions. Use the future value calculator for investment growth, this one for purchasing-power planning.

The Federal Reserve targets 2% annual inflation as healthy for the US economy. Long-term US average is about 3.2% (1913-2024). Below 1% is concerning (deflation risk), above 4% sustained is concerning (purchasing power erosion). Recent inflation peaked at 9.1% (June 2022) and has since moderated back toward the 2-3% range.

Significantly. $1 million today has the purchasing power of only about $552,000 in 30 years at 3% inflation. Retirement plans must factor in inflation by either (1) increasing savings targets to account for future dollar erosion, or (2) investing in assets that historically outpace inflation (stocks, real estate, TIPS).

The Consumer Price Index is the most widely accepted inflation measure but has critics. It uses a fixed basket of goods that may not reflect any individual's actual spending. Hedonic adjustments (adjusting for quality improvements like newer phones) lower reported inflation. For most people, the official CPI is reasonably close to their actual inflation experience, but personal inflation varies based on spending patterns.

Don't keep large amounts in low-interest checking accounts long-term. Use high-yield savings for short-term cash, CDs or Treasury bonds for medium-term goals, and stocks/index funds for long-term savings. Consider I Bonds and TIPS for explicit inflation protection. Real estate (owned or via REITs) also historically tracks inflation. The key principle: cash loses; assets that grow with the economy win.