Inflation calculator

How inflation erodes money

Inflation is the general rise in prices over time. In the US it is measured by the Consumer Price Index (CPI) published monthly by the Bureau of Labor Statistics. With inflation, the same amount of money buys less each year, so savings that do not earn at least the inflation rate lose real value.

Worked example

At 3.5% a year, something that costs $100 today will cost about $141.06 in 10 years. Cumulative inflation over the decade is 41.06%. Seen the other way, $100 kept under the mattress will only buy what $70.89 buys today.

Using the result

• Retirement planning: multiply today's expenses by the factor to estimate future needs.
• Salary: a raise below inflation is a pay cut in real terms.
• Investments: subtract inflation from your return to get the real return.

The US Federal Reserve targets 2% a year over the long run; recent years have been higher. For past prices between two specific dates, use the official CPI values instead of an average rate.

The page raises (1 + rate) to the number of years to get the inflation factor. The future cost is the amount times the factor, the purchasing power is the amount divided by the factor, and the cumulative inflation is the factor minus one. A negative rate models deflation. The rate is a constant average; official indices vary month to month.