Inflation Calculator

Inflation is the rate at which prices for goods and services rise over time, eroding the purchasing power of money. If inflation is 3%, something that costs $100 today will cost $103 next year. Over 25 years at 3%, prices nearly double. Understanding inflation is essential for retirement planning, salary negotiations, and investment decisions.

The US Federal Reserve targets 2% annual inflation. The historical average since 1913 is approximately 3.1%. Use 2% for optimistic long-term projections, 3% for a historical baseline, or 4–5% if you want a conservative (pessimistic) scenario for retirement planning. Always test multiple rates to see a range of outcomes.

If your savings earn less than the inflation rate, you're losing real purchasing power even as your nominal balance grows. A 1% savings account during 3% inflation means your money loses 2% of its real value every year. To preserve wealth, your investments need to earn returns that exceed the inflation rate — this is why holding too much cash long-term is risky.