The Inflation Calculator computes the impact of inflation on the value of money and your purchasing power in the future.
Supports two modes: calculate the future value of a price (how much it will cost later) and calculate real purchasing power (what it will be worth later). Year-by-year projections help with long-term financial planning.
Calculator information
📋 How to use this calculator
- Choose a mode: compute Future Value (what an item will cost later) or compute Purchasing Power (what today's money will be worth later).
- Enter the starting price/value in USD for the base year.
- Enter the average annual inflation rate in percent. A 2-3% default aligns with the Fed's long-run U.S. target.
- Set a time horizon in years (1-50). The longer the horizon, the bigger the compounding effect.
- Click Calculate to see the ending value, total change, and a year-by-year projection table.
- Use the results to plan for retirement, education funds, or investment targets that need to outpace inflation.
🧮 Future Value & Real Purchasing Power
Future Value: FV = PV * (1 + i)^n; Purchasing Power: PP = PV / (1 + i)^n
- FV = future price/value (USD)
- PV = present value/price (USD)
- i = annual inflation rate as a decimal (3% = 0.03)
- n = time horizon (years)
- PP = future purchasing power of today's PV
The Federal Reserve targets 2% PCE inflation over the long run; CPI has averaged ~2.5% over the past two decades.
💡 Worked example: Price of a $500,000 home 20 years from now
Given:- PV (current price) = $500,000
- Inflation i = 3% per year
- Time horizon n = 20 years
Steps:- Compute inflation factor: (1 + 0.03)^20
- = (1.03)^20 = 1.8061
- FV = 500,000 * 1.8061
- FV = $903,056
Result: A comparable home is projected to cost about $903,000 in 20 years - roughly 1.8x today's price. Either save more aggressively or invest at returns that beat inflation.
❓ Frequently asked questions
What is the average U.S. inflation rate?
Per BLS data, annual U.S. CPI inflation 2014-2024 ranged from 0.1% to 8.0%, averaging about 2.8%. The Federal Reserve targets 2% PCE inflation over the long run under its dual mandate. The worst recent stretch was 2021-2022 post-pandemic supply shocks (peaking at 9.1% in June 2022). For long-horizon planning, 2.5-3% per year is a reasonable assumption.
What's the difference between inflation and deflation?
Inflation is a sustained rise in the general price level, eroding the dollar's purchasing power. Deflation is a sustained decline, boosting real purchasing power but often signaling weak demand and recession. The U.S. has only briefly experienced annual deflation (notably 2009). Monetary policy aims for low, stable inflation - not zero or negative.
Why does inflation erode purchasing power?
If inflation runs 5% per year, average prices rise 5%, so a flat paycheck buys less. $100 today is worth about $95.24 a year from now in real terms (100/1.05). The effect compounds exponentially year over year, which is why holding large amounts of cash is a guaranteed loss in real terms.
How do I protect savings from inflation?
Invest in vehicles that historically outpace inflation: total-market index funds (long-run ~7% real return), TIPS (Treasury Inflation-Protected Securities), Series I savings bonds, REITs, and broad-based commodities or gold. Avoid parking large balances in savings accounts paying less than the inflation rate. Diversify, and target real returns at least 2-3 percentage points above inflation.
What's the difference between headline and core inflation?
Headline (CPI-U) inflation includes all goods and services, including volatile food and energy. Core inflation strips out food and energy to reveal the underlying trend. The Fed monitors both but weighs core PCE most heavily in setting interest rates because it is more persistent and less noisy.
📚 Sources & references
Last updated: May 11, 2026