Transparent method
The formula
Worked example
Example inputs
How to interpret the result
Inflation is a steady tax on money that sits still, and compounding makes it grow over time. A basket costing $50,000 today would cost about $67,196 in ten years at 3 percent inflation, and a dollar would buy about 25.6 percent less. At 2 percent the same basket would cost about $60,950, and at 5 percent about $81,445. A few tenths of a point in the assumption changes long plans by thousands.
Before you rely on it
What to check
Use a range of inflation rates and plan for the higher one for things like health care and education, which have tended to rise faster than prices in general.
The common error
Where people go wrong with inflation calculator
Ignoring inflation in a retirement or savings goal. A target that is enough in today's dollars will not be enough in the dollars you will actually spend.
Sensitivity evidence
How annual inflation rate changes the estimated future cost
| Annual inflation rate | Estimated future cost | Loss of purchasing power |
|---|---|---|
| 1.0% | $55,231 | 9.5% |
| 2.0% | $60,950 | 18.0% |
| 3.0%worked example | $67,196 | 25.6% |
| 4.0% | $74,012 | 32.4% |
| 5.0% | $81,445 | 38.6% |
Every input, tested
Which input moves the estimated future cost most
| Input | Tested from | To | Estimated future cost at each end | Swing |
|---|---|---|---|---|
| Current cost | $45,000 | $55,000 | $60,476 to $73,915 | $13,439 (20%) |
| Annual inflation rate | 2.0% | 4.0% | $60,950 to $74,012 | $13,062 (19%) |
| Years from now | 7.0 years | 13.0 years | $61,494 to $73,427 | $11,933 (18%) |
Two variables at once
Estimated future cost by annual inflation rate and current cost
| Annual inflation rate \ Current cost | $40,000 | $50,000 | $60,000 |
|---|---|---|---|
| 1.0% | $44,185 | $55,231 | $66,277 |
| 2.0% | $48,760 | $60,950 | $73,140 |
| 3.0% | $53,757 | $67,196 | $80,635 |
| 4.0% | $59,210 | $74,012 | $88,815 |
| 5.0% | $65,156 | $81,445 | $97,734 |
Step by step
The worked example, input by input
| Input | Value used |
|---|---|
| Current cost | $50,000 |
| Annual inflation rate | 3.0% |
| Years from now | 10.0 years |
| Estimated future cost | $67,196 |
| Loss of purchasing power | 25.6% |
Where the inputs come from
Current cost is today's price or budget, annual inflation rate is your assumption for the yearly increase, and years from now is the horizon. Long-run US inflation has averaged around 3%, but individual years and categories vary widely, and costs such as healthcare and education have often risen faster than the overall index. Use a category-specific rate if you are planning for one expense.
When the result stops applying
Actual inflation is uneven and unpredictable, so a constant rate is a simplification. Price indexes average many goods, and your own basket may differ. The calculation projects costs forward; to adjust historical dollars, use official CPI data for specific years. High inflation periods break simple assumptions.
What to compare it with
Adjust returns with the real yield calculator, and pay with the real wage page. The future value and retirement goal calculators use nominal figures that should be adjusted for inflation. The percentage change and CAGR pages compute inflation between two price levels.
People also ask
Frequently asked questions
What inflation rate should I assume?
Around 2% to 3% is common for long-term planning, with a higher rate for healthcare and education. Test a higher figure to see how sensitive your plan is.
How does inflation affect savings?
It erodes buying power. If your savings earn less than the inflation rate, their real value falls even though the balance grows.
Is inflation the same for everyone?
No. Your personal inflation depends on what you buy, and categories such as housing, food and healthcare can rise at different rates than the overall index.