Inflation Calculator

About Inflation Calculator

Calculate how inflation changes the value of money over time. Enter an amount and a time period to see what past money is worth today (past-to-present) or how today's money will shrink in the future (present-to-future). The calculator uses a constant annual rate you choose, with presets for common scenarios.

How Is Inflation Calculated?

The compound inflation formula adjusts money for price changes over multiple years:

Future value of prices: Future Price = Current Price x (1 + r)^n

Past-to-present adjustment: Today's Value = Past Amount x (1 + r)^n

Present purchasing power in the future: Future Buying Power = Current Amount / (1 + r)^n

Where r is the annual inflation rate and n is the number of years.

Worked example (past to present): What is $50,000 from 2000 worth in 2025 at 2.8% average inflation?

• $50,000 x (1.028)^25 = $50,000 x 1.999 = $99,950
• An income of $50,000 in 2000 needed to be roughly $100,000 by 2025 to buy the same goods
• Cumulative inflation over 25 years: 99.9%

Worked example (present to future): What will $100,000 buy in 20 years at 3% inflation?

• $100,000 / (1.03)^20 = $100,000 / 1.806 = $55,368
• Your $100,000 will only buy $55,368 worth of today's goods
• Purchasing power loss: 44.6%

Historical Inflation Rates

Annual inflation varies year to year but tends to average 2-3% in developed economies. Some context from recent decades:

Period	US Average (CPI)	UK Average (CPI)	Context
1960-1970	2.5%	3.6%	Post-war stability
1970-1980	7.4%	13.7%	Oil crises, wage-price spirals
1980-1990	4.7%	6.3%	Volcker rate hikes, gradual decline
1990-2000	2.8%	2.7%	Great moderation, low inflation
2000-2010	2.5%	2.1%	Tech bust, financial crisis, near-zero at end
2010-2020	1.7%	2.0%	Historically low, central bank targets
2020-2025	4.6%	5.1%	Pandemic stimulus, supply chain disruptions

For long-term planning (20+ years), using 2.5-3% for the US and UK is a reasonable assumption. The Federal Reserve and Bank of England both target 2% annual inflation.

How Inflation Erodes Purchasing Power

Even "low" inflation adds up over time. Here is how much $100,000 can buy in today's terms at different rates:

Years	At 2%	At 3%	At 4%	At 5%
5	$90,573	$86,261	$82,193	$78,353
10	$82,035	$74,409	$67,556	$61,391
15	$74,301	$64,186	$55,526	$48,102
20	$67,297	$55,368	$45,639	$37,689
25	$60,953	$47,761	$37,512	$29,530
30	$55,207	$41,199	$30,832	$23,138

At 3% inflation, money loses half its buying power in about 24 years. At 5%, it takes just 14 years. This is why cash savings that earn below the inflation rate are actually losing real value every year.

Why Inflation Matters for Retirement

Inflation is the silent risk in retirement planning. If you retire at 65 and live to 95, 30 years of inflation at 3% means prices will roughly double. A retirement income that feels comfortable at 65 buys only half as much by 85.

Example: You need $60,000/year in today's terms during retirement. If you retire in 20 years:

• At 3% inflation: you will need $60,000 x 1.806 = $108,367/year on day one of retirement
• At age 85 (35 years away): $60,000 x 2.814 = $168,842/year

This is why the retirement calculator includes an inflation adjustment. Always plan in "real" (inflation-adjusted) terms, not nominal.

Real Returns: Investment Growth Minus Inflation

The "real return" on an investment is the nominal return minus inflation. This is what actually grows your purchasing power:

Investment	Nominal Return	After 3% Inflation	Real Return
Savings account	4.5%	3.0%	1.5%
Government bonds	4.0%	3.0%	1.0%
Corporate bonds	5.5%	3.0%	2.5%
Global equities	8.0%	3.0%	5.0%
Cash under mattress	0%	3.0%	-3.0%

Cash in a savings account earning 4.5% while inflation runs at 3% gives you a real return of only 1.5%. Over 20 years, $100,000 grows to $143,000 in real purchasing power, not the $241,000 the nominal balance shows. Stocks have historically delivered 5-7% real returns, which is why they are the standard vehicle for long-term wealth building.

The Rule of 72 for Inflation

The Rule of 72 tells you roughly how many years it takes for prices to double: divide 72 by the annual inflation rate.

• At 2% inflation: prices double in ~36 years
• At 3%: ~24 years
• At 4%: ~18 years
• At 6%: ~12 years
• At 10%: ~7 years (roughly what countries like Turkey and Argentina have experienced recently)

Wage Growth vs Inflation

If wages grow faster than inflation, real incomes rise and living standards improve. If inflation outpaces wages, people get poorer in real terms even as their nominal pay increases. In the US, median real wages grew about 0.5-1% per year from 1990-2020 (wages grew at ~3%, inflation at ~2.5%). During 2021-2023, real wages fell for many workers as inflation spiked above 7% while wages lagged behind.

When negotiating a salary increase, anything below the inflation rate is effectively a pay cut in real terms. A 3% raise during 4% inflation means your purchasing power decreased by 1%.

To see how your savings can outpace inflation, the compound interest calculator lets you compare growth rates to inflation. For projecting investment growth in real terms, the investment return calculator shows the impact of inflation on long-term returns.

All calculations run locally in your browser. No data is sent anywhere.