Inflation Calculator
Inflation is a quiet tax on money that sits still. See what your dollars will actually buy years from now, how much you'd need to keep up - and how differently cash, savings accounts, and investments hold their ground.
Your Scenario
The long-run US average is a bit over 3%; the Fed targets 2%
The Comparison
Where the money lives determines whether inflation wins
What Inflation Does
Same Money, Three Homes
Real value = what it buys in today's dollars, after 20 years
The Erosion Timeline
| Years | $10,000 buys | You'd need |
|---|---|---|
| 5 | $8,626 | $11,593 |
| 10 | $7,441 | $13,439 |
| 20 | $5,537 | $18,061 |
| 30 | $4,120 | $24,273 |
Staying Ahead of Inflation
- • Keep only your emergency fund and near-term goals in cash - in a high-yield account, never a 0% one
- • Long-term money belongs in assets that outgrow inflation: stocks, index funds, real estate
- • Judge every return in real terms: a 4% APY during 3% inflation is really earning 1%
- • Revisit salary and savings goals yearly - a raise below inflation is a pay cut
- • Retirement planning must use inflated future costs, not today's prices
How Inflation Actually Works
A Small Rate, Compounding Against You
Three percent sounds harmless - until it compounds. At 3%, prices double roughly every 24 years, which means a dollar loses half its purchasing power over the span of a typical career. The same exponential math that grows investments works in reverse on idle cash, and just as relentlessly.
That's why inflation is often called the silent tax: nothing is taken from your account, the number on the statement never goes down, but every year it buys a little less. The calculator's erosion timeline makes the invisible visible.
Nominal vs. Real: The Only Distinction That Matters
A nominal return is the number your bank quotes; a real return is what's left after inflation. Cash at 0% during 3% inflation has a real return of -3%. A high-yield savings account at 4% nets about +1% real. A diversified portfolio at 7% nets about +4% real - and that difference, compounded over decades, is most of what separates savers from investors.
The "Same Money, Three Homes" comparison above runs your own numbers through exactly this math. It's the clearest argument for why long-term money can't live in a checking account.
Putting This Into Practice
Match the Asset to the Timeline
Inflation risk and market risk trade off against each other. Money you need within a couple of years belongs in cash despite inflation, because a market drop would hurt more. Money you won't touch for a decade faces the opposite danger: in cash, its slow erosion is nearly guaranteed, while diversified investments have historically outrun inflation over long horizons.
The practical split: emergency fund and near-term goals in a high-yield savings account, everything long-term in low-cost index funds or similar growth assets.
Inflation and Your Retirement Number
The most expensive inflation mistake is planning retirement in today's dollars. A $60,000 lifestyle today costs about $108,000 a year in 20 years at 3% inflation - and it keeps climbing through a 30-year retirement. Our Retirement Calculator builds this in, but the intuition starts here.
Mistakes to Avoid
- • Holding years of expenses in checking "to be safe" - safety from one risk, guaranteed loss to another
- • Celebrating a nominal return that inflation quietly erased
- • Using today's prices for goals that are decades away
- • Assuming your personal inflation matches the headline - housing, healthcare, and education have often run hotter
- • Panic-buying "inflation hedges" after inflation has already spiked
Where the Numbers Come From
US inflation is measured by the Consumer Price Index, tracking a basket of goods and services over time. The Federal Reserve targets 2% as the healthy level - high enough to avoid deflation, low enough not to distort decisions. History says expect surprises in both directions, which is why testing your plan at 2%, 3%, and 4% is worth the extra minute.
Keep Exploring
Put your money where inflation can't catch it:
- • See compounding work for you instead in the Compound Interest Calculator
- • Park short-term cash smartly: SGOV vs VUSXX vs HYSA: Which Is Better for Your Cash?
- • Plan retirement in real dollars with the Retirement Calculator
- • Start beating inflation with Index Fund Investing for Beginners
Frequently Asked Questions
What is inflation?
A general rise in prices over time, which means each dollar buys a little less. It's measured in the US by the Consumer Price Index (CPI), which tracks the cost of a representative basket of goods and services - groceries, rent, gas, healthcare - month over month.
What is the average inflation rate?
US inflation has averaged a bit over 3% annually across the last century, though individual decades vary wildly - near zero in the 2010s, double digits in the late 1970s, a spike above 9% in 2022. The Federal Reserve targets 2%. For long-term planning, 2.5-3% is a reasonable default.
How much will $100 today be worth in 20 years?
At 3% inflation, $100 will buy about $55 worth of today's goods in 20 years - and you'd need about $181 then to match what $100 buys now. At 4% the erosion is faster: about $46 of buying power left. Run your own numbers above to see any amount and timeframe.
What is a real return?
Your return after subtracting inflation - the growth in what your money can actually buy. A 7% investment return during 3% inflation is roughly a 4% real return; a 0.01% savings account during the same period is a -3% real return. Real returns are the only ones that matter for long-term goals.
How do I protect my savings from inflation?
Match the tool to the timeline: high-yield savings accounts or Treasury bills for short-term money (they roughly keep pace), and growth assets - diversified stock index funds, real estate - for long-term money, since they've historically outrun inflation by several points a year. The one guaranteed loser is cash earning nothing.
Is my money in a savings account losing value?
In a traditional account paying near 0%, yes - it loses roughly the inflation rate every year. In a high-yield account paying around 4% against 3% inflation, you're eking out a small real gain. That gap is why moving idle cash to a high-yield account is the easiest upgrade in personal finance.
Why does the Fed want 2% inflation instead of zero?
Mild inflation keeps the economy moving - it encourages spending and investment over hoarding, gives wages room to adjust, and leaves a buffer above deflation, which is far more destructive (falling prices make consumers delay purchases and debts grow heavier in real terms). Two percent is the compromise that's become the global standard.
How long until prices double?
Divide 72 by the inflation rate for a quick estimate - the same Rule of 72 used for investment growth, running against you. At 3% inflation prices double in about 24 years; at 4%, about 18; at 6%, just 12. It's a sobering lens for any money planned to sit in cash for decades.