Inflation Purchasing Power Calculator
What will today's money be worth later?
About this calculator
Inflation is the general rise in prices over time. A dollar kept in a drawer buys a little less each year, so money set aside for a goal years from now is worth less than its face value suggests. This calculator answers two sides of the same question: what a sum of money today will be worth in today's dollars after a number of years, and what something that costs that sum today is likely to cost then. It also shows how much purchasing power is lost along the way and the return your savings would need to earn just to stand still.
How to use this calculator
Enter an Amount, either cash you hold today or the price of something you buy. Enter the Annual Inflation Rate you expect and the number of Years. The long-run average for U.S. consumer prices has been roughly 3% a year, but individual years have ranged widely, from close to zero to well above that, so try a few rates to see the range. Under Advanced assumptions you can enter a Tax Rate on Returns if the money would sit in a taxable account; it raises the return needed to keep pace. Results update as you type, and the inputs are kept in the page address so a link reproduces them.
The method
Inflation compounds like interest, but in reverse for the holder of cash. After n years at an inflation rate r, prices are higher by a factor of (1 + r)^n. The future price of something that costs the amount today is the amount times that factor. Purchasing power in today's dollars is the amount divided by the same factor, rounded to the cent. The percent of value lost is one minus purchasing power divided by the amount. To keep pace, money has to grow as fast as prices, so the return needed is the inflation rate itself; if tax is due on the whole return, the pre-tax return must be the inflation rate divided by one minus the tax rate. The table and chart repeat the calculation for every year up to the period you enter.
Worked example using the default values
$10,000 at 3% inflation for 10 years is worth $7,441 in today's dollars, a loss of 25.6% of its purchasing power. Put the other way, something that costs $10,000 today would cost about $13,439 in 10 years. To keep pace, the money would have to earn 3.00% a year after tax; in an account taxed at 22%, that means 3.85% a year before tax. Over 30 years at the same rate, the $10,000 would be worth $4,120 in today's dollars, and at 2% inflation for 10 years it would be worth $8,203.
Interpreting the results
The headline figure is what the money will buy, measured in the prices of today, which is the fairest way to judge whether a savings goal is big enough. If the purchasing power looks low, the gap between it and the amount is the cost of holding cash that earns nothing. The future price is useful in the other direction: if you are saving for a car, tuition or a home repair years away, aim for the future price rather than today's sticker price. The return needed to keep pace is a floor, not a target; earning only that leaves you exactly where you started in real terms.
Practical tips
Money you need within a year or two belongs in safe accounts such as high-yield savings, certificates of deposit or Treasury bills, which tend to pay a rate close to inflation. Money for goals a decade or more away usually needs some growth investments to stay ahead of rising prices, with the trade-off of short-term swings. Treasury Inflation-Protected Securities (TIPS) and Series I savings bonds are designed to track U.S. consumer prices. Review fixed incomes, pensions and insurance coverage limits now and then, since a fixed dollar amount quietly shrinks every year.
Limitations
The calculator uses a single constant inflation rate for the whole period, while real inflation changes from year to year and differs by category; health care, housing and education have often risen faster than the overall index, while some electronics have become cheaper. It measures purchasing power against a general price level, so your own costs may rise faster or slower. The tax adjustment assumes the whole return is taxed each year at one rate; real accounts may be tax-deferred, tax-free or taxed at different rates for interest and gains. The figures are estimates, not forecasts.
Frequently Asked Questions
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