How it works
Inflation is the rate at which money loses purchasing power over time. The Bureau of Labor Statistics publishes the Consumer Price Index (CPI), which tracks price changes in a representative basket of goods; the long-run US planning default is roughly 3% per year, though any single category — healthcare, tuition, rent — can diverge sharply. This calculator applies your inflation rate compounded annually in both directions. Forward: what will today's dollars cost in the future? Reverse: what is a future dollar worth in today's terms? On the defaults — $1,000 today, 10 years, 3% inflation — the future nominal cost is $1,343.92. That same $1,000 of today's purchasing power requires $1,343.92 in ten years just to buy the same basket. The reverse view reports $744.09: if someone promised you $1,000 in ten years, it would feel like $744 of today's money at 3% inflation. Purchasing power lost over the decade is $255.91 on this starting amount. Planners underuse the reverse calculation. A retirement goal of $1,000,000 in 25 years is only about $477,000 of today's purchasing power at 3% — which reframes whether the target is adequate. Nominal account balances feel reassuring; real balances drive decisions. Pair with the real return calculator to strip inflation from investment returns, the compound interest calculator for nominal growth, and the retirement calculator when building a corpus target that must fund future spending.
Formula
Future cost (nominal) = amount × (1 + inflation/100)^years
Real value (today's $) = amount / (1 + inflation/100)^years
Purchasing power lost = amount − real value
Worked example — $1,000 · 10 years · 3%
Future cost = $1,343.92
Real value = $744.09
Purchasing power lost = $255.91
Tips
- Use 3% for general planning; use 5–7% for education and healthcare line items where CPI understates your personal basket.
- Compare savings account yields to inflation — 4% APY with 3% inflation is barely 1% real return.
- Salary raises below inflation are pay cuts in purchasing power; negotiate in real terms when you can.
- Re-run annually — a plan built on last year's inflation assumption drifts quietly.
- For retirement targets, always ask "how much is that in today's dollars?" before celebrating a nominal milestone.
Frequently asked questions
- What will $1,000 be worth in 10 years at 3% inflation?
- It will take $1,343.92 to buy what $1,000 buys today — that is the future cost figure. Conversely, $1,000 received in 10 years has the purchasing power of about $744 today.
- Where does the 3% default come from?
- It approximates the modern US long-run CPI average and matches the Federal Reserve's 2% target plus a small buffer. Check the latest BLS CPI release for the current headline rate, but plan with a long-run assumption rather than a single month's print.
- Does inflation affect all prices equally?
- No. Tuition, healthcare and rent often rise faster than headline CPI; electronics frequently fall. For a specific goal — college, a down payment, medical costs — use an inflation rate closer to that category's history.
- How do I protect savings from inflation?
- Cash in checking loses real value every year. I Bonds, TIPS, equities (which historically outpace inflation over long horizons) and assets whose prices track inflation are the common defences. The mix depends on horizon and risk tolerance.
- How is this different from the real return calculator?
- This tool converts a dollar amount across time using inflation alone. The real return calculator takes an investment return and subtracts inflation to show the true gain. Use both: one for spending goals, one for portfolio performance.