Convert between today's dollars and future dollars to see the real cost of inflation.
Inflation can be read forwards or backwards, and the two readings answer different questions. Forwards: what will the thing I want to buy cost in twenty years. Backwards: what will the cash I am holding be worth in today's money. The calculator gives both, plus the percentage of purchasing power that disappears, which is the number people actually feel.
On the defaults, $10,000 of spending today becomes $18,061 in twenty years at 3%. Read backwards, $10,000 left in a drawer for twenty years is worth $5,537 in today's money, a loss of 44.6% of its purchasing power. Same inflation rate, same period, two different sentences.
The Bureau of Labor Statistics publishes the Consumer Price Index for All Urban Consumers, usually written CPI-U. The index stood at 336.940 in September 2026, measured against a 1982-84 base of 100. A year earlier it was 324.800, so the twelve-month change was 3.74%. The August reading was 3.40% year over year, which means the September number accelerated slightly rather than continued a decline.
Recent history is unusually wide. The annual averages ran 4.70% in 2021, 8.00% in 2022, 4.12% in 2023, and 2.95% in 2024. Across the nine years from 2016 through 2024 the average was 3.18% and the median was 2.44%, and the gap between those two figures is entirely the 2021 and 2022 spike. That is the reason the calculator defaults to 3% rather than 2%. Three percent sits between the median and the mean, and it is the number that survives both a calm decade and a bad one.
Looked at cumulatively, the average price level in 2015 has risen 42.2% by September 2026. Something that cost $10,000 at the 2015 average now costs $14,220. Something that cost $10,000 at the 2019 average now costs $13,179. Neither of those numbers involves a forecast. They already happened, and they are the reason a savings balance that looks larger than it did five years ago can buy less.
The rate is an annual compound rate applied to the price level, not to your income. Years is the holding period, and the exponent does the heavy lifting. The fourth line is the one most often skipped: subtracting inflation from a nominal return (7% minus 3% equals 4%) is an approximation that gets worse as both numbers rise. Dividing is the correct form, and at 7% nominal against 3% inflation the exact real return is 3.88%, slightly below the 4% the subtraction suggests.
$10,000 of spending today, twenty years, 3%. The factor is 1.03 to the twentieth power, or 1.8061. Forward, $10,000 becomes $18,061. Backward, the $10,000 you hold becomes $5,537 of today's purchasing power. The 44.6% loss is not a fee anyone charged you. It is the arithmetic of a price level that rose while the cash sat still.
| Years | $10,000 will cost | Cash of $10,000 is worth | Purchasing power lost |
|---|---|---|---|
| 1 | $10,300 | $9,709 | 2.9% |
| 5 | $11,593 | $8,626 | 13.7% |
| 10 | $13,439 | $7,441 | 25.6% |
| 15 | $15,580 | $6,419 | 35.8% |
| 20 | $18,061 | $5,537 | 44.6% |
| 25 | $20,938 | $4,776 | 52.2% |
| 30 | $24,273 | $4,120 | 58.8% |
The first few years look harmless, which is exactly why the damage goes unnoticed. Ten years costs a quarter of the value, and ten years is the length of an ordinary car purchase plus a home repair plus a career change. At thirty years the loss is 58.8%, and no realistic savings account rate closes a gap that large.
| Inflation over 20 years | $10,000 will cost | Cash of $10,000 is worth |
|---|---|---|
| 2.0% | $14,859 | $6,730 |
| 2.5% | $16,386 | $6,103 |
| 3.0% | $18,061 | $5,537 |
| 3.5% | $19,897 | $5,026 |
| 4.0% | $21,911 | $4,564 |
Two percentage points of inflation, from 2% to 4%, moves the twenty-year cost by $7,052 on a $10,000 base. Nobody can forecast that rate over two decades with any confidence, which is the honest case for running the calculation at 4% as well as 3% and asking whether the plan still holds at the pessimistic end.
Divide 70 by the inflation rate to get the years until prices double. At 3% that is 23.3 years, and the exact figure is 23.4. At 2% it is 35 years, at 4% it is 17.7. Any inflation number that doubles prices within a working career deserves attention when the same number is being applied to a savings plan, because it means the plan needs to double its nominal target just to stand still.
Wages. A 3% raise during a 3.74% inflation year is a pay cut. The formula is the same real return calculation: 1.03 divided by 1.0374 gives 0.993, so real pay fell 0.7%. Most people compare a raise against zero rather than against the price level, and that comparison is where the loss hides.
Returns. A savings account paying 4% during 3% inflation earns a real 0.97%. After federal tax in the 22% bracket the nominal return drops to about 3.12%, and the real return falls to 0.12%, which is close enough to zero that the account is best described as a place to park money rather than a place to grow it. The nominal rate is a promise about the number on the statement, not about what the money buys.
Fixed payments. A pension without a cost-of-living adjustment, a bond's coupon, an annuity payout, a long-term lease: each of these is a nominal number being paid out over a period when the price level keeps rising. The Social Security estimator is worth running for the opposite reason, because that benefit does get an annual COLA and therefore behaves differently from a private pension.
Long-horizon goals. A target set in today's dollars and left unadjusted is a shrinking target. The savings goal calculator takes the nominal target you give it, so the honest move is to inflate the target first, then solve for the deposit.
It applies one rate to everything. Actual inflation is a basket weighted by your own spending, and the weights matter: a renter with children and a commuter faces a different basket from a retiree with a paid-off house. The CPI is an average across urban households, and your personal rate can run a point above or below it for years at a time.
It also assumes the rate is constant. Real inflation is not. A plan that survives 3% every year for twenty years can be destroyed by two years at 8% followed by eighteen at 2%, because the compounding order matters when wages and prices adjust at different speeds.
Inflation is the discount rate applied to every other projection on this site. The compound interest calculator produces nominal future values, and this page is how you check what those values will actually buy. The savings goal calculator solves for the deposit that reaches a nominal target, and the FIRE calculator is the one place where ignoring inflation produces the largest error, because a 30-year withdrawal plan built on nominal returns overstates what the portfolio can support.
Use 3% for long-run planning in the US. The nine annual CPI averages from 2016 through 2024 came to 3.18% with a median of 2.44%, and the recent twelve-month reading was 3.74%. Two percent was a reasonable default for the 2010s and has been too low since 2021. Running the number at 4% as a stress case costs nothing and tells you whether the plan has margin.
Because the two are reciprocals, not opposites. A 3% rate over twenty years multiplies prices by 1.8061, but it divides purchasing power by the same figure, which is a 44.6% loss rather than an 80.6% gain. Both describe the same price level. People expect the two percentages to match and they never do.
It transfers wealth from lenders to borrowers, which means savers holding cash and bonds lose and anyone with a fixed-rate mortgage at a rate below inflation gains. A 30-year fixed mortgage at 6% against 3.7% inflation costs about 2.2% real, and the payment itself shrinks in real terms every year. That asymmetry is the main reason paying off a low-rate fixed mortgage early is often a poor use of cash.
It is the best public approximation and a rough fit for any individual. CPI-U covers urban households and weights shelter heavily, which overstates inflation for a homeowner with a fixed payment and understates it for a renter in a hot market. Medical costs and college tuition have risen faster than the headline index for decades, so a household with heavy spending in either area experiences a higher personal rate.
Hold assets whose return is stated in real terms or whose price rises with the price level. Treasury Inflation-Protected Securities adjust principal with CPI, I bonds do the same, and a diversified stock portfolio has historically outrun inflation over long periods, though not over every period. Cash is the one asset guaranteed to lose purchasing power at a positive inflation rate, which is why an emergency fund is a cost rather than an investment.
Yes, by entering a negative rate. At minus 1% over twenty years, $10,000 of spending falls to $8,179, and cash gains purchasing power. Deflation is rare in the US and usually arrives with falling wages and rising unemployment, so the gain to cash holders is smaller in practice than the arithmetic suggests. The Great Depression and 2008 both produced brief deflation alongside severe job losses.
All calculation logic on this page is implemented from the primary documents below. Each one is listed with the figure it supplies, so any rate or threshold in the result can be traced back to its published source.
Same compounding math, different starting question.