Inflation Calculator

What this computes

Inflation is the one financial force that works on everyone's money whether or not they invest. A dollar bill left in a drawer keeps its face value forever and loses buying power every year. This calculator quantifies that erosion in three equivalent ways:

1. Future cost. What something that costs $X today will cost after N years of inflation at a given rate.
2. Present value. What a dollar amount arriving N years from now — a pension, an insurance payout, a bond's face value — is worth in today's purchasing power.
3. Purchasing-power loss. The percentage of buying power a static dollar amount gives up over the horizon.

All three are the same exponent read from different angles, so the calculator computes them together and lays out a year-by-year table (up to 50 rows) so you can watch the compounding happen. The math runs entirely in your browser.

The math

Future cost          = Amount × (1 + rate)^years
Present value        = Amount / (1 + rate)^years
Purchasing power lost = 1 − 1 / (1 + rate)^years
Price-level multiple = (1 + rate)^years

Nothing here is exotic — it is compound interest with the sign of sympathy reversed. Where compounding works for an investor, inflation compounds against a saver holding static dollars. The same exponential term, (1 + rate)^years, drives all four lines.

A worked example

Take $1,000 of today's spending, a 3% annual inflation rate, and a 20-year horizon — the defaults in the calculator above.

• Price-level multiple: 1.03²⁰ = 1.8061
• Future cost: $1,000 × 1.8061 = $1,806.11
• Present value of a future $1,000: $1,000 / 1.8061 = $553.68
• Purchasing power lost: 1 − 1/1.8061 = 44.6%

Both directions matter in practice. If your household spends $1,000 a month on groceries today, plan on roughly $1,806 a month for the same basket in 20 years. And if someone promises you a fixed $1,000 monthly pension starting in 20 years, mentally relabel it $554 — that is what it buys in today's terms.

The rule of 72 gives a fast sanity check: divide 72 by the rate to get the doubling time. At 3%, that is 72 / 3 = 24 years, and the exact math agrees — $100 compounds to $203.28 after 24 years at 3%, a shade over double. The same 24-year clock also marks when a fixed income stream loses half its buying power: at 3% over 24 years, purchasing-power loss is 50.8%.

Inflation is compound interest running against you. Same exponent, opposite beneficiary.

Where the 3% default comes from

The calculator defaults to 3.0% per year. That is not a forecast; it is the long-run historical record rounded to a planning number. The geometric mean of BLS CPI-U annual averages from 1926 through 2025 works out to 2.97% per year (as of June 2026). The geometric mean is the right average here because inflation compounds — an arithmetic average of annual rates would overstate the cumulative effect.

A century-long average smooths over violent episodes, and the recent past supplies one. US CPI-U rose 7.0% in 2021, 6.5% in 2022, and 3.4% in 2023 (December-over-December, per BLS) — the sharpest stretch since the early 1980s. The record also contains outright deflation in the early 1930s and a decade of sub-2% prints in the 2010s. The long-run mean absorbs all of it, which is precisely why it is more useful for a 30-year plan than whatever last quarter's annualized print happens to be.

If the 2021-2023 episode makes you want a margin of safety, the honest move is not to abandon the average but to stress the assumption: rerun your plan at 3.5% or 4% and see whether it still holds. At 4% instead of 3%, the 20-year price-level multiple climbs from 1.81 to 2.19 — a meaningful difference for any budget quoted in today's dollars.

Why FIRE math uses real returns

Long-range retirement math has two ways to handle inflation, and only one of them is pleasant. You can inflate every future expense year by year and compound your portfolio at a nominal return — two moving exponents, easy to mismatch. Or you can subtract inflation from the return once and do everything in today's dollars: a real return.

That is why most FIRE calculations, including the ones on this site, use roughly 7% real for US stocks rather than the ~10% nominal long-run figure. With a real return, your FIRE number stays in today's dollars — 25× your current annual spending — and never needs re-inflating. The Standard FIRE calculator works this way: every input and output is a today's-dollar figure, and inflation is already inside the return assumption.

The two methods agree when done correctly. Inflating $40,000 of annual expenses at 3% for 20 years gives $72,244 (40,000 × 1.8061), and a portfolio compounding at 10% nominal reaches the inflated target at the same moment a today's-dollar portfolio compounding at roughly 6.8% real reaches $1,000,000 (the precise relationship is 1.10 / 1.03 − 1 = 6.80%, not 10% − 3% = 7% — the subtraction is a close shortcut, not the exact identity). The real-return framing simply removes a whole category of unit errors: it is painfully easy to compound a portfolio in nominal terms while leaving expenses frozen in today's terms, which silently overstates how prepared you are.

Use this calculator when you need the missing conversion: a number quoted in future dollars (a pension, a face-value bond, a 529 target) that has to be compared against a plan kept in today's dollars, or vice versa.

Common mistakes

• Mixing nominal and real numbers in one plan. The most expensive spreadsheet error in retirement planning: compounding the portfolio at 10% nominal while holding expenses at today's level. Pick one frame — all-nominal or all-real — and stay in it.
• Using the arithmetic average of annual inflation rates. Inflation compounds, so the geometric mean is the correct summary. Over volatile stretches the arithmetic mean overstates cumulative inflation.
• Treating a fixed pension or annuity as constant income. A $3,000/month payment with no cost-of-living adjustment buys 44.6% less after 20 years at 3%. Discount any non-indexed income stream before counting on it.
• Extrapolating last year's rate forward. A single hot or cold year is weather, not climate. Anchor multi-decade assumptions to the long-run mean and stress-test around it.
• Assuming your personal basket tracks CPI. Headline CPI-U is an urban-consumer average. Tuition and medical care have historically run hotter; electronics have run cooler. Weight the rate toward what you actually buy.

What this calculator doesn't model

• Variable inflation paths. The calculator applies one constant rate. Real history is lumpy — the compounding answer over a volatile path equals the constant geometric-mean rate, but year-to-year budget stress does not show up here.
• Category-specific inflation. One rate for the whole basket. If you are projecting college costs or healthcare premiums specifically, raise the rate rather than relying on headline CPI.
• Wage growth. Incomes inflate too, and over long stretches wages have roughly kept pace with prices. This page isolates the price side only.
• Investment returns. The whole point of investing is to outrun this page. For the offsetting exponent, use the compound interest calculator, or the investment return calculator to see a past investment's growth net of inflation.
• Taxes. Inflation interacts badly with taxes on nominal gains — you pay tax on the inflation component of interest as if it were real income. That second-order effect is out of scope here.