Inflation Purchasing Power Calculator
Example: Amount in today's dollars: 100000 $ · Expected annual inflation rate: 3 % · Years ahead: 20 years
| Purchasing power in future dollars | $55,368 |
| Purchasing power lost to inflation | $44,632 |
| Annual return needed to break even with inflation | 3.00% |
| Future value in today's equivalent dollars | $55,368 |
Worked example
Keep $100,000 in cash for 20 years at 3% inflation and it buys only $55,368 worth of goods in today's dollars — nearly half your purchasing power evaporates. To preserve $100,000 of real purchasing power you need a 3% annual return, just to stay even. To actually grow wealth in real terms, you need to earn above inflation every year.
Frequently asked questions
What inflation rate should I assume for retirement planning?
The Federal Reserve targets 2% inflation. The historical U.S. CPI average has been approximately 3% since the 1920s and closer to 3.8% since 1960. For conservative planning, 3% is a reasonable baseline; some planners use 3.5% for healthcare-heavy retirement budgets since medical inflation has historically exceeded overall CPI. Current CPI data is available monthly from the Bureau of Labor Statistics.
Does inflation affect all spending equally?
No — inflation varies by category. Healthcare costs have historically risen 4%–6% per year, outpacing overall CPI. Housing has risen faster in some decades. Food and energy are more volatile. Technology prices have generally fallen in real terms. For retirees who spend more on healthcare and less on technology, personal inflation rates may exceed the headline CPI.
Why is cash a bad long-term store of value?
Because cash earns little to no real return. A savings account at 0.5% loses purchasing power when inflation runs at 3%. Even HYSA at 4.5% may only match inflation in high-rate environments, providing near-zero real return. Over multi-decade horizons, inflation compounds relentlessly against cash holders while equity investors who earn 7%–10% nominally stay well ahead of it in real terms.