Inflation Calculator
Inflation Calculator
Section titled “Inflation Calculator”Calculate the impact of inflation on purchasing power over time and see how your money’s value changes with different inflation rates.
Guide: Investment Returns After Inflation
Also available as: Inflation Adjustment Calculator • Inflation Rate Calculator • Cost of Living Calculator
Use Cases
Section titled “Use Cases”This inflation calculator is commonly used for retirement planning, investment decisions, salary negotiations, and setting long-term financial goals to ensure savings maintain their value.
What is Inflation?
Section titled “What is Inflation?”Inflation is the rate at which prices for goods and services rise, eroding purchasing power. As inflation increases, each dollar buys less over time.
Examples
Section titled “Examples”- 7,441 in purchasing power (loses $2,559)
- 57,964 in 5 years at 3% inflation
- 134,392 in 10 years at 3% inflation
- At 4% inflation, prices double in 18 years
Inflation Rate Quick Reference
Section titled “Inflation Rate Quick Reference”If you don’t know what inflation rate to use, these are common planning assumptions:
| Annual Inflation | Typical Use Case | What It Means |
|---|---|---|
| 1% | Very low inflation periods | Prices rise slowly; purchasing power erodes gradually |
| 2% | Many central-bank targets | “Normal” long-run planning assumption |
| 3% | Conservative planning | Builds in extra buffer for higher-than-target inflation |
| 4% | High inflation environment | Prices can double in ~18 years |
| 5% | Stress test | Use to see worst-case impact on long-term goals |
Tip: for long time horizons, small rate changes compound heavily. Comparing 2% vs 3% over 30 years is often more important than small changes in starting value.
Common Mistakes & Tips
Section titled “Common Mistakes & Tips”Using Wrong Inflation Rate: For long-term planning in stable economies, use 2-3% annual inflation. Don’t use overly optimistic rates that underestimate inflation’s impact.
Ignoring Inflation Completely: Many people forget to account for inflation in long-term goals. 1 million today.
Personal vs Official Inflation: Your actual inflation rate may differ from official statistics based on spending patterns, location, and lifestyle.
Forgetting Compound Effect: Inflation compounds annually. 3% inflation for 10 years doesn’t equal 30% loss - it’s actually 34.39% due to compounding.
Frequently Asked Questions
Section titled “Frequently Asked Questions”What is a good inflation rate for calculations?
Section titled “What is a good inflation rate for calculations?”For long-term planning in stable economies, use 2-3% annual inflation. This aligns with central bank targets. For conservative planning, use 3-4%.
How do I protect my savings from inflation?
Section titled “How do I protect my savings from inflation?”Keep cash in high-yield savings accounts, invest in stocks or real estate that historically outpace inflation, consider TIPS, and maintain a diversified investment portfolio.
Why is inflation bad for savers?
Section titled “Why is inflation bad for savers?”Inflation erodes purchasing power of money in savings. If inflation is 3% and your savings earn 1%, you’re losing 2% in real purchasing power annually.
How does inflation affect debt?
Section titled “How does inflation affect debt?”Inflation helps borrowers with fixed-rate debt. If you owe money at a fixed rate, inflation means you’re paying back with money worth less than when you borrowed it.
What’s the difference between nominal and real returns?
Section titled “What’s the difference between nominal and real returns?”Nominal return is the stated return without adjusting for inflation. Real return is return after subtracting inflation. Always focus on real returns for accurate planning.
Related Calculators
Section titled “Related Calculators”- Compound Interest Calculator - Calculate investment growth
- Amortized Loan Calculator - Calculate loan payments
- Unit Converter - Convert between different units
- Scientific Calculator - Advanced math calculations