About this calculator
Inflation is a silent tax on cash. A dollar buys less every year, and at 3% inflation it takes about 24 years for the purchasing power of money saved to halve. This is the reason cash savings feel adequate right up until the moment they do not.
How it works
The calculator projects your money forward at your investment return and separately measures its real, inflation-adjusted value. When the return is below the inflation rate, you can see exactly how much purchasing power you lose in real terms even though the nominal balance grows.
Frequently asked questions
How do I calculate the future value with inflation?
Multiply the present amount by (1 + inflation rate)^years. At 3% for 20 years, multiply by 1.806, so $100,000 becomes an amount that costs $180,600 to replace.
What has average inflation been in the US?
Roughly 3% to 3.5% annually over the long run, though individual years range from deflation to well above 7%. Using about 3% is a reasonable planning assumption.
Does inflation affect my savings account?
Yes, inversely. A deposit account earning 5% with 3% inflation has a real return of about 2%. If your savings earn less than inflation, your purchasing power is shrinking even as the balance grows.
What is the real return on my investments?
Real return is your investment return minus inflation, approximately. A 7% return with 3% inflation gives about 4% real growth. This is the number that reflects whether you are genuinely better off.
Should I worry about inflation if I am young?
Less than if you are near retirement, because a longer horizon lets equity growth outpace inflation and your income typically rises with prices. The main risk is holding large cash balances in a low-yield account.
What inflation rate should I use for planning?
Use about 2% to 3% for long-horizon financial planning, and check current readings for near-term decisions. Using a higher rate produces more conservative and safer assumptions.