Inflation Calculator
Inflation quietly shrinks what your money can buy. See the real impact over time.
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Historical US average is around 3%
The impact of inflation
In 20 years
$10,000 today will have the buying power of
$5,537
in 20 years
Something costing $10,000 today will cost
$18,061
Purchasing power lost
$4,463
Buying power vs. cost over time
How $10,000 changes over 20 years at 3% inflation
Why inflation matters
How this inflation calculator works
At 3% average inflation, $10,000 today only buys about $5,537 worth of goods in 20 years, even though the number in the account has not changed at all. Inflation is the gradual rise in prices that erodes what cash can buy over time, and it works quietly in the background of every long-term money decision.
These figures use a constant rate for illustration. Real inflation varies year to year, running higher in some stretches and lower in others, but the compounding effect over decades holds regardless of the exact path it takes.
Why cash alone loses ground
Money sitting in a low-interest account loses purchasing power every year inflation outpaces its return. A savings account paying 1% while inflation runs at 3% is losing 2% of real value a year, even though the balance on the statement keeps going up. That mismatch is easy to miss because the number in the account never goes down, only what it can actually buy.
This is why long-term savings are often invested rather than kept entirely in cash. Historically, diversified investments have outpaced inflation over long periods, while cash sitting still tends to fall behind it.
What this means for a retirement number
A retirement target calculated in today's dollars needs to account for the fact that prices 30 years from now will be higher, sometimes much higher, than they are today. Skipping this step is a common mistake: someone plans around what $60,000 a year buys today without adjusting for the fact that the same lifestyle could cost double that by the time they retire.
How this is calculated
It shows how a sum's buying power changes over time at a given inflation rate.
Future cost = today's amount × (1 + inflation rate) raised to the number of years. Buying power runs the same formula in reverse, dividing instead of multiplying.
What it assumes
- Inflation is treated as a steady annual average.
- Real inflation varies by year and by what you buy.
Frequently asked questions
What inflation rate should I use?
3% is a reasonable long-run US average to plan around, though any single year can run well above or below that. Use a higher rate to stress-test a plan against a worse-than-average stretch.
Does this mean I should keep less money in cash?
It means cash sitting idle loses purchasing power every year inflation outpaces its interest rate, which is why long-term savings are usually invested rather than held entirely in cash, while short-term needs still belong in safe, liquid accounts.
How is this different from the compound interest calculator?
Compound interest shows money growing; this shows purchasing power shrinking. Used together, they show the real, inflation-adjusted return an investment needs to clear before it's actually building wealth.
Based on the constant inflation rate you enter; real inflation changes year to year. For educational purposes only, not financial advice.