Inflation & Purchasing Power Calculator
See how inflation erodes the value of money — calculate future purchasing power, historical equivalents, or real investment returns.
| Horizon | 2% Inflation | 3% Inflation | 4% Inflation |
|---|---|---|---|
| 5 years | — | — | — |
| 10 years | — | — | — |
| 20 years | — | — | — |
| 30 years | — | — | — |
| 40 years | — | — | — |
What Inflation Does to Savings
Inflation silently erodes the purchasing power of money sitting idle. $10,000 in a savings account earning 1% when inflation is 3% loses about 2% of real value every year. After 20 years at 3% inflation, that $10,000 only buys what $5,537 would buy today.
Why Real Returns Matter More Than Nominal
A 7% return sounds good — but if inflation is 4%, your real return is only about 2.88% (using the Fisher equation). The Fisher equation gives the precise real return: (1 + nominal) / (1 + inflation) − 1. The simple approximation (nominal − inflation) is close but slightly overestimates real return at higher rates.
Historical US Inflation Averages
US inflation has averaged approximately 3.5% annually since 1950, though it varies widely by decade. The 1970s saw double-digit inflation; the 2010s averaged under 2%. The Federal Reserve targets 2% long-term. For planning purposes, 2.5–3.5% is a reasonable range to use for projections.