Inflation calculator
What an amount of money is worth after inflation, forwards or backwards, and how much purchasing power the years take out of it.
Same purchasing power in 20 years
$180,611
Prices up 80.6% in total at 3% a year
- What the same cash buys
- $55,368
- Purchasing power lost
- $44,632
- Cumulative inflation
- 80.61%
| Starting amount | $100,000 |
|---|---|
| Compounded at 3% for 20 years | 80.61% |
| Equivalent amount | $180,611 |
- Compounded annually. Published inflation is an average across a basket, so your own rate depends on what you buy.
At 3% a year, $100,000 needs to become $180,611 over 20 years just to buy the same things — the cash itself would only buy $55,368 worth.
How this is calculated
How this is calculated
Inflation compounds like interest, in reverse
Each year’s rise applies to the already-risen price, so 3% for 20 years is not 60% but 80.6%. That gap between the simple and compounded figure is why long-horizon plans built on adding up percentages come out short.
future amount = amount × (1 + rate)^yearsTwo questions, one calculation
Asking what $100,000 will need to be in 20 years and asking what $100,000 from 20 years ago is worth today use the same factor of 1.806. Forwards multiplies by it, backwards divides — which is why a wage that has not moved in a decade has fallen by around a quarter.
past value = amount ÷ (1 + rate)^yearsThe headline rate is an average of a basket
Published inflation weights a fixed basket of goods, with housing typically around 20% of it. If your spending is concentrated in rent, insurance or education — categories that have run well above the average — your personal rate is higher than the number in the news.
Worked example: $100,000 held for 20 years at 3% inflation
| Amount | $100,000 |
|---|---|
| Rate | 3% a year |
| Years | 20 |
| Same purchasing power | $180,611 |
|---|---|
| What the cash buys | $55,368 |
| Cumulative inflation | 80.6% |
Cash sitting still loses $44,632 of purchasing power over the period. A deposit paying 3% would break even; anything less is a real loss even though the balance grows.
What this assumes
- A constant annual rate for the whole period.
- Annual compounding.
- No tax on any return earned on the money.
- The published basket matches your own spending.
Where this commonly goes wrong
- A savings rate below inflation is a loss in real terms even though the balance rises — 2% interest against 3% inflation loses 1% a year.
- Salary comparisons across decades are meaningless in nominal terms: $60,000 in 2006 is roughly $95,000 of 2026 purchasing power.
- Long-horizon goals stated in today’s money — a $1m retirement, a $50,000 deposit — quietly shrink unless the target itself is inflated.
Questions
How do I calculate inflation over multiple years?
Multiply by one plus the rate, raised to the number of years. At 3% over 20 years the factor is 1.806, so $100,000 becomes $180,611 — not the $160,000 that adding 3% twenty times would suggest.
What does inflation do to my savings?
It erodes what the balance buys. $100,000 left in cash for 20 years at 3% inflation still reads $100,000 but buys what $55,368 buys today, a loss of $44,632 in purchasing power.
What interest rate do I need to keep up with inflation?
At least the inflation rate, and more once tax is counted. If inflation is 3% and you pay 30% tax on interest, you need roughly 4.3% before tax simply to stand still in real terms.
Why does my own inflation feel higher than the published rate?
Because the published figure is a weighted average across a fixed basket. Rent, insurance and education have run well above the headline in most markets, so anyone whose spending is concentrated there experiences a higher personal rate.
Should I state financial goals in today’s money or future money?
Set the goal in today’s money so it is meaningful, then inflate it before choosing a contribution. A $1m target 25 years out at 3% needs $2.09m of future dollars to deliver the same lifestyle.
Does inflation help borrowers?
Yes, on fixed-rate debt. The balance is fixed in nominal terms while incomes and prices rise, so a 30-year loan is repaid in progressively cheaper money. Variable-rate debt loses that benefit when rates rise with inflation.
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Sources
This calculator does arithmetic on the figures you enter. It does not account for tax, fees, or your personal circumstances.
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