Inflation Calculator
Inflation silently erodes purchasing power. $100 today won't buy the same in 20 years — see exactly how much less.
What Inflation Does to Your Money
Inflation is the gradual erosion of purchasing power — the same dollar buys less each year as prices rise. At the US historical average of 3% annually, the effects compound to numbers most people find surprising.
| Years | $100,000 purchasing power (3% inflation) | Amount lost |
|---|---|---|
| 10 years | $74,400 | $25,600 |
| 20 years | $55,400 | $44,600 |
| 30 years | $41,200 | $58,800 |
| 40 years | $30,700 | $69,300 |
After 30 years, $100,000 retains only $41,200 in purchasing power. Keeping significant wealth in cash is not cautious — it's a guaranteed real loss every year.
How to Use This Calculator
Enter any amount to see its future purchasing power, or the amount needed to maintain today's purchasing power at a given inflation rate. Adjust the inflation rate slider to model different scenarios — 2% for optimistic, 3% for historical average, 4-5% for cautious planning.
Investments That Beat Inflation
Stocks (best long-term hedge): Companies raise prices with inflation. The S&P 500 has returned approximately 7% annually after inflation historically. Equities are the primary inflation hedge for long-term investors.
Real estate: Property values and rents tend to rise with inflation. REITs provide liquid exposure without landlord responsibilities.
I Bonds and TIPS: Government bonds with returns tied to CPI. Guaranteed real value preservation, but lower returns than equities. Best for medium-term money (3-10 years).
Cash: Loses 2-4% of real value annually at typical inflation rates. Appropriate only for emergency funds and short-term goals.
Related: Compound Interest Calculator — see how investing beats inflation over time.
Frequently Asked Questions
What inflation rate should I use for retirement planning?
3% is the standard assumption, reflecting the US long-run average. For conservative planning, use 3.5%. The 4% rule already accounts for inflation in withdrawals — your FIRE number uses today's dollars and the withdrawal mechanism handles future price increases automatically.
How did 2021-2023 inflation affect FIRE plans?
CPI peaked at 9.1% in June 2022. Portfolios heavy in stocks ultimately recovered and outperformed. Cash and fixed-rate bond portfolios saw significant real losses. The episode reinforced why equities — despite short-term volatility — are the best long-term inflation protection for FIRE investors.
Does inflation help or hurt people with mortgages?
It helps. A fixed-rate mortgage becomes cheaper in real terms as inflation rises — you repay in dollars worth less than when you borrowed. The payment stays fixed while wages generally rise with inflation, improving your debt-to-income ratio over time.
What is "real" vs. "nominal" return?
Nominal return is what your account shows (e.g., 9%/year). Real return adjusts for inflation: 9% nominal minus 3% inflation equals 6% real. For FIRE planning, use real returns (6-7%) to avoid overestimating future portfolio growth in terms of actual purchasing power.