What inflation rate should I use?

U.S. consumer inflation has averaged roughly 3% per year over the long run, though it has swung from near zero to high single digits within recent memory. Central banks in most developed economies target about 2%. Since no one knows the future path, run the calculator at 2%, 3%, and 4% to bracket the outcome.

What is the difference between the two results?

They are mirror images of the same erosion. Future cost multiplies by the inflation factor — how many dollars you will need later to buy what the amount buys today. Purchasing power divides by it — what today’s dollars will actually be worth then. In the worked example, $1,000 becomes a $1,343.92 future cost and $744.09 of purchasing power.

What do nominal and real mean?

Nominal values are face-value dollars; real values are adjusted for inflation. For investments, the real return is what actually grows purchasing power: precisely (1 + nominal) ÷ (1 + inflation) − 1, so a 7% nominal return during 3% inflation is a 3.88% real return. Simply subtracting the rates (7 − 3 = 4%) is a close everyday approximation.

Does the rule of 72 apply to inflation?

Yes. Divide 72 by the inflation rate to estimate how long prices take to double — equivalently, how long idle cash takes to lose half its purchasing power. At 3% that is about 72 ÷ 3 = 24 years.

Does this use actual historical CPI data?

No — it compounds one constant rate that you choose, which makes it a forward-looking scenario tool. To convert dollars between two past dates, use an official CPI series such as the BLS inflation calculator, which applies the actual recorded index for each year.

No — the calculation runs in your browser and nothing is transmitted or stored.

Inflation Calculator

See how inflation changes the future value and purchasing power of money over time.

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Amount today$Inflation rate%Years

Future cost

$1,343.92

Future purchasing power

$744.09

How it works

Inflation quietly reprices everything, and this calculator shows the effect in both directions. It compounds a constant annual inflation rate over a number of years — the same way consumer-price-index (CPI) style measures compound — and reports two mirror-image results: the future cost of what your money buys today, and the future purchasing power of the money itself.

The math builds a single factor: (1 + rate ÷ 100) raised to the number of years. Future cost = amount × factor — how many dollars you would need later to buy what the amount buys now. Purchasing power = amount ÷ factor — what the same dollars will actually be worth in today’s terms. Both results are rounded to the cent.

Worked example: $1,000 at 3% inflation for 10 years. The factor is 1.03 raised to the 10th power ≈ 1.3439. Future cost: 1,000 × 1.3439 = $1,343.92 — what costs $1,000 today should cost about that much in a decade. Purchasing power: 1,000 ÷ 1.3439 = $744.09 — a $1,000 bill left under the mattress will only buy what $744.09 buys now.

The constant-rate assumption is the main caveat. Actual inflation lurches year to year: U.S. CPI has averaged roughly 3% annually over the long run but has ranged from near zero to high single digits within recent memory. Your personal rate also differs from the headline number — housing, medical care, and tuition have often outpaced it. For investors the takeaway is real return: subtract inflation from a nominal return to see genuine growth in purchasing power. The rule of 72 works here too — at 3%, prices double (and idle cash halves) in about 72 ÷ 3 = 24 years.

Frequently asked questions

What inflation rate should I use?: U.S. consumer inflation has averaged roughly 3% per year over the long run, though it has swung from near zero to high single digits within recent memory. Central banks in most developed economies target about 2%. Since no one knows the future path, run the calculator at 2%, 3%, and 4% to bracket the outcome.
What is the difference between the two results?: They are mirror images of the same erosion. Future cost multiplies by the inflation factor — how many dollars you will need later to buy what the amount buys today. Purchasing power divides by it — what today’s dollars will actually be worth then. In the worked example, $1,000 becomes a $1,343.92 future cost and $744.09 of purchasing power.
What do nominal and real mean?: Nominal values are face-value dollars; real values are adjusted for inflation. For investments, the real return is what actually grows purchasing power: precisely (1 + nominal) ÷ (1 + inflation) − 1, so a 7% nominal return during 3% inflation is a 3.88% real return. Simply subtracting the rates (7 − 3 = 4%) is a close everyday approximation.
Does the rule of 72 apply to inflation?: Yes. Divide 72 by the inflation rate to estimate how long prices take to double — equivalently, how long idle cash takes to lose half its purchasing power. At 3% that is about 72 ÷ 3 = 24 years.
Does this use actual historical CPI data?: No — it compounds one constant rate that you choose, which makes it a forward-looking scenario tool. To convert dollars between two past dates, use an official CPI series such as the BLS inflation calculator, which applies the actual recorded index for each year.
Is my data uploaded?: No — the calculation runs in your browser and nothing is transmitted or stored.

Inflation Calculator

How it works

Frequently asked questions

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