Inflation Calculator
What will today's money be worth tomorrow — or what was past money worth now?
Year-by-Year
What Is Inflation, Really?
Inflation is the gradual decline of money's purchasing power over time. A dollar that buys a candy bar today won't buy the same candy bar in 20 years — not because the candy is different, but because the dollar is worth less in real terms. The standard measure in the U.S. is the Consumer Price Index (CPI), published monthly by the Bureau of Labor Statistics. It tracks the average price change for a fixed basket of consumer goods and services. The Wikipedia article on inflation covers the economic theory in depth.
The Long-Run U.S. Average
Since the BLS began tracking CPI in 1913, the average annual U.S. inflation rate has been roughly 3.2%. There have been deflationary periods (the Great Depression in the 1930s, when prices actually fell), extreme inflation periods (the late 1970s and early 1980s hit double digits, peaking around 13.5% in 1980), and most recently a post-COVID spike that hit 9.1% in June 2022 — the highest in 40 years. The long-run 3% average remains a reasonable planning assumption.
A retiree planning to spend $60,000/year
You're 35 today and want to retire at 65 with $60,000/year of spending power. Sounds straightforward — but inflation makes that target a moving goalpost.
| Inflation Rate | $60,000 today = X in 30 years | Loss of buying power |
|---|---|---|
| 2% (Fed target) | $108,679 | 45% |
| 3% (historical avg) | $145,636 | 59% |
| 4% (above average) | $194,615 | 69% |
| 6% (1970s-style) | $344,605 | 83% |
Most retirement calculators only show nominal projections. If you see "you'll have $1.5M at 65" without an inflation adjustment, you might think you've got 25 years of $60,000 spending. But at 3% inflation, that $1.5M actually has roughly $620,000 of today's buying power. Always model in real (inflation-adjusted) dollars for long-horizon goals.
Why It Matters for Saving and Investing
If your savings account pays 2% and inflation runs at 3%, your money loses 1% of buying power per year — your balance grows on paper but you're getting poorer in real terms. This is why long-term savers need investments that beat inflation:
- Stocks — historically ~10% nominal, ~7% real (after inflation)
- Real estate — roughly tracks inflation plus 1-2%
- Investment-grade bonds — ~2-3% real over long horizons
- TIPS (Treasury Inflation-Protected Securities) — directly indexed to CPI, guaranteed to outpace inflation
- I Bonds — U.S. savings bonds with rates tied to CPI; max $10,000/year purchase per person
- Cash / savings accounts — usually lose to inflation over time
Cash under the mattress loses roughly half its value over 25 years at 3% inflation. Cash in a 0.5% savings account during 3% inflation is mathematically the same thing, just slower.
The Formula
FV = PV × (1 + i)n
Where PV = present value, i = annual inflation rate (decimal), n = years, FV = future value. To go backwards (what was today's $100 worth in 2000?), just rearrange: PV = FV / (1 + i)n.
Why the Fed Targets 2% Inflation
The Federal Reserve's official 2% target exists because:
- Slight inflation lubricates labor markets. Employers can give "real" pay cuts via small nominal raises during downturns without firing people.
- It provides interest-rate cushion. If rates are normally around 4-5%, the Fed has room to cut in a recession. With 0% inflation, nominal rates would already be near zero.
- Deflation is worse than mild inflation. When prices fall, people delay purchases, which prolongs recessions (Japan's "lost decades" are the classic example).
Most central banks in developed economies target 2% (European Central Bank, Bank of England, Bank of Japan, Bank of Canada).
Common Inflation Mistakes
- Confusing nominal returns with real returns. "My account earned 6%!" — at 4% inflation, that's only 2% real growth.
- Trusting future fixed-dollar income. A pension paying $40,000/year today loses real value every year unless it has a COLA (cost-of-living adjustment).
- Ignoring inflation in salary negotiations. A 3% raise during 4% inflation is a pay cut.
- Believing in "transitory" claims too quickly. Many recent inflation spikes were called transitory by economists; some weren't.
Frequently Asked Questions
How do I find the historical inflation rate?
The U.S. Bureau of Labor Statistics publishes monthly CPI data going back to 1913. Tools like usinflationcalculator.com let you look up exact rates between any two years. For other countries, check your national statistics office.
Why is 2% the Fed's target?
Central banks target small positive inflation because mild inflation is easier to manage than deflation, gives them room to cut interest rates in recessions, and helps grease real wage adjustments. Zero or negative inflation can lead to spending freezes that deepen downturns.
What's "core" vs "headline" inflation?
Headline CPI includes everything. Core CPI strips out food and energy (which are very volatile) to give a cleaner read on underlying price trends. The Fed pays more attention to core PCE (Personal Consumption Expenditures), a related measure.
Is hyperinflation a realistic worry?
Not in most developed economies. Modern central banks have strong tools to control inflation. Hyperinflation (think 1920s Germany, Zimbabwe, Venezuela) requires extreme fiscal and monetary failure together. The bigger realistic risk is sustained moderate inflation eroding savings over years.
Can I protect against inflation completely?
TIPS and I Bonds are explicitly indexed to inflation and are the closest thing to a guaranteed real return. A diversified portfolio with stocks, real estate, and TIPS historically outpaces inflation by 3-5% per year. Holding only cash is the worst long-term hedge.