Inflation Calculator

How the inflation calculator works

Inflation is the general rise in prices over time. At 3% a year, something that costs $1,000 today costs $1,030 next year and about $1,806 in 20 years. The calculator uses compound growth: future cost = today’s cost × (1 + inflation)^years. Purchasing power works the other way: value of today’s cash = amount ÷ (1 + inflation)^years.

What inflation rate should I use?

The US Federal Reserve, the Bank of England, the European Central Bank and the Reserve Bank of Australia all aim for inflation of about 2% a year over time. Over the long run, US inflation has averaged roughly 3% a year, with much higher periods (the 1970s and 2021–2023) and lower ones. For long-term planning, 2.5–3% is a common assumption.

The rule of 72

Divide 72 by the inflation rate to estimate how many years it takes prices to double: at 3%, about 24 years; at 4%, about 18; at 6%, about 12. That means cash sitting idle for 24 years at 3% inflation buys only half as much.

Why inflation matters for your money

• Savings: if your savings account pays less than inflation, your money loses real value. Compare rates with the compound interest calculator.
• Retirement: a retirement goal set in today’s dollars needs to be much larger in future dollars — the retirement calculator shows both.
• Salary: a raise smaller than inflation is a pay cut in real terms.
• Debt: fixed-rate debt becomes easier to repay as wages and prices rise.

Protecting against inflation

Common approaches include diversified stock investments for long horizons, Treasury Inflation-Protected Securities (TIPS) and I bonds in the US, real estate, and keeping only short-term cash needs in savings accounts.

Frequently asked questions