Inflation Calculator
It shows two sides of the same coin: what a fixed sum of money will still buy after years of inflation, and what the same basket of goods will cost.
What $1,000 will buy in 10 years
$744.09
Future cost
$1,344
Purchasing power
$744
Value lost
$256
Total inflation
34.4%
Power retained
74.4%
Rate used
3.0% / yr
| Year | Cost of goods | Money worth |
|---|---|---|
| 0 | $1,000 | $1,000 |
| 1 | $1,030 | $971 |
| 2 | $1,061 | $943 |
| 3 | $1,093 | $915 |
| 4 | $1,126 | $888 |
| 5 | $1,159 | $863 |
| 6 | $1,194 | $837 |
| 7 | $1,230 | $813 |
| 8 | $1,267 | $789 |
| 9 | $1,305 | $766 |
| 10 | $1,344 | $744 |
What it calculates
It shows two sides of the same coin: what a fixed sum of money will still buy after years of inflation, and what the same basket of goods will cost.
Why it matters
Inflation is the quietest cost in any long-term plan. At 3% a year, money loses about a quarter of its purchasing power in a decade.
Who it's for
Savers checking whether their interest rate beats inflation, retirees planning withdrawals, and anyone comparing a price today with a price years ago.
Formula
- i
- Average annual inflation rate
- n
- Number of years
- FV
- Future cost of the same goods
Worked example
$1,000 at 3% inflation for 10 years
- 1Factor = 1.03¹⁰ = 1.3439
- 2Future cost = 1,000 × 1.3439
- 3Purchasing power = 1,000 ÷ 1.3439
The same basket costs $1,343.92; today's $1,000 buys $744.09 worth
How the inflation calculator works
Inflation compounds exactly like interest, just in the wrong direction. Multiplying by (1 + i)ⁿ gives what something will cost; dividing by the same factor gives what a fixed sum will be worth. The two are reciprocals, which is why a 34% rise in prices is a 26% fall in purchasing power rather than a 34% one.
Inflation compounds exactly like interest, only against you. Multiplying by (1 + i)ⁿ gives what something will cost; dividing by the same factor gives what a fixed sum will still buy.
The two are reciprocals, which is why a 34% rise in prices is a 26% fall in purchasing power rather than a 34% one.
Common mistakes
- Treating a 30% price rise as a 30% loss of purchasing power — it is 23%.
- Comparing a nominal investment return to zero instead of to inflation.
- Assuming one headline rate applies to your spending; housing and education usually run hotter.
Tips and best practice
- Judge savings by the real return: nominal rate minus inflation.
- Long retirement plans should model income in today's money, not nominal dollars.
Frequently asked questions
How do I calculate the effect of inflation?
Multiply by (1 + rate)^years to get a future cost, or divide by the same factor to get today's purchasing power in future terms.
What is a normal inflation rate?
Most developed-market central banks target about 2% a year. Long-run historical averages run closer to 3%, with much higher spikes in some periods.
What is the real rate of return?
Roughly your nominal return minus inflation. A 5% return with 3% inflation is about 2% real — precisely, (1.05 ÷ 1.03) − 1 = 1.94%.
Does this use official CPI data?
No. It compounds an average annual rate you choose, so you can model any scenario. For a specific historical period, use the published CPI figures for those years.
Related calculators
Methodology & trust
- Formula source
- Standard compounding applied to a constant annual inflation rate.
- Last updated
- 2026-07-28
- Privacy
- Every calculation runs in your browser. No inputs are sent to a server or stored.
- Accessibility
- Keyboard navigable, labeled inputs and WCAG AA color contrast.