How to Use This Calculator
- Enter the amount of money you want to track — for example a savings balance, a fixed pension, or a price.
- Enter the number of years into the future.
- Set an average annual inflation rate. Around 2–3% reflects long-run norms; try a higher figure to stress-test.
- Read the results. "Future purchasing power" is what today's amount will buy in future dollars. "Value lost" and "% lost" quantify the erosion. "Needed to keep pace" is how large the sum must grow just to stand still. The chart shows the decline year by year.
The Formula Explained
Inflation compounds, just like interest. The future purchasing power of a fixed amount is:
And the amount you would need in the future to buy what A buys today is:
- A — amount of money today
- f — average annual inflation rate (as a decimal)
- y — number of years
The share of value lost is 1 − 1 ÷ (1 + f)ʸ.
Frequently Asked Questions
What is a normal rate of inflation?
Many central banks, including the U.S. Federal Reserve, target about 2%. The long-run historical average in the United States is closer to 3%. Individual years vary widely, and categories like healthcare and tuition often rise faster than the overall index.
How is inflation measured?
The headline figure usually comes from the Consumer Price Index (CPI), which tracks the cost of a fixed basket of goods and services a typical household buys. The year-over-year percentage change in that index is the inflation rate.
How do I protect my savings from inflation?
Holding only cash locks in a slow loss of purchasing power. Over long periods a diversified mix of stocks and real assets has outpaced inflation, and TIPS and I-bonds are government bonds designed specifically to track the CPI.
Related Calculators
- Real ROI — combine inflation with taxes to find your true investment return.
- Present & Future Value — discount future cash flows to today's dollars.
- Rule of 72 — divide 72 by the inflation rate to see how fast prices double.