See how inflation changes the value of money over time — what something will cost in the future, and how much your buying power erodes.
How Inflation Erodes Money
Inflation is the gradual rise in prices over time, which means each dollar buys a little less every year. A 3% inflation rate sounds small, but compounded over decades it roughly cuts the buying power of cash in half every 24 years. Understanding inflation is essential for retirement planning, salary negotiations, and long-term saving.
Two Sides of the Same Coin
This calculator shows inflation two ways. "Future cost" tells you what something priced today will cost later — useful for budgeting future expenses. "Future buying power" tells you what today's dollars will be worth in the future — useful for understanding why cash loses value if it isn't invested.
Tip: Money sitting in a low-interest account loses value to inflation every year. To preserve and grow buying power, your return needs to beat the inflation rate — which is why long-term savers invest rather than hold cash.
The Rule of 70
To estimate how long it takes inflation to halve your buying power, divide 70 by the inflation rate. At 3% inflation, money loses half its value in about 23 years. At 5%, it's just 14 years. Higher inflation dramatically accelerates the erosion of savings.
Frequently Asked Questions
How does the inflation calculator work?
It compounds an average annual inflation rate over the number of years you choose. Future cost multiplies your amount by (1 + rate) raised to the number of years; future buying power divides by the same factor to show value in today's dollars.
What is a normal inflation rate?
Central banks in developed economies typically target around 2% per year. Historically, long-run U.S. inflation has averaged roughly 3%. Individual years can be much higher or lower, so use an average that reflects your time horizon.
Why does inflation matter for retirement?
Because retirement can last 30 years or more, even modest inflation sharply reduces buying power over time. A fixed income that seems comfortable today may fall short decades later, which is why retirement plans build in inflation adjustments.
How can I protect my money from inflation?
Investing in assets that historically outpace inflation — stocks, real estate, and inflation-protected bonds — helps preserve buying power. Holding large amounts of cash for the long term guarantees a loss of value to inflation.
What is the Rule of 70?
It's a shortcut to estimate how long it takes for inflation to halve your money's value: divide 70 by the inflation rate. At 3.5% inflation, buying power halves in about 20 years.