When to use this calculator
This tool answers two very different questions using the same formula:
- "How much are my savings losing if I keep them idle?" — Enter your account balance, an inflation rate (2% is the central bank target), and the years you want to simulate. See how many dollars of real purchasing power you're losing over time.
- "How much will this item cost in the future?" — Enter the current price of a house, car, annual household groceries, or monthly rent. See how much it will rise in nominal terms.
- "Is my raise really a raise?" — A +3% gross raise with 4% inflation is actually a loss of purchasing power. Simulate your future salary to find out.
- "Is my savings account protecting me?" — If it yields less than inflation, you're losing value even as the balance grows.
How the formula works
Inflation compounds just like interest. The formula for future purchasing power in today's dollars is:
Real value = Amount / (1 + inflation)^years
While for the nominal future price of a good:
Future price = Price today × (1 + inflation)^years
At 2% annual inflation, $100,000 today has the purchasing power of approximately:
| Years | Real purchasing power | Erosion |
|---|---|---|
| 5 | $ 90,573 | -9% |
| 10 | $ 82,035 | -18% |
| 20 | $ 67,297 | -33% |
| 30 | $ 55,207 | -45% |
| 35 | $ 50,003 | -50% |
Keeping $100,000 idle for 35 years is equivalent to halving its real value.
Why investing is a necessity, not a choice
A zero-yield account with 2% inflation generates a real loss of 2% per year, compounded. Over 20 years, that's like throwing away a third of your savings. Not investing does not mean "not taking risk" — it means accepting a certain, progressive loss.
The Rule of 72 applied to inflation: at 2%, purchasing power halves in about 36 years (72/2). At 3%, in 24 years. At 4%, in 18 years.
US inflation: historical data
The United States has seen very different phases:
- 1970s-1980s — double-digit inflation, peaked at 13.5% in 1980
- 1990s-2000s — gradual return, averaging 2-3% per year
- 2010-2020 — stable below 2%
- 2022 — spike to 8.0% (post-pandemic + energy crisis)
- 2024-2026 — return toward the Fed's 2% target
Calculator limitations
The calculation assumes constant inflation over the entire horizon. In reality the rate changes year by year: periods of low inflation alternate with shocks like 2022. Use 2-3% for conservative scenarios, 4-5% for pessimistic ones. History suggests never underestimating long-term inflation risk.