# Inflation calculator (future cost and purchasing power)

> Calculate what a purchase will cost after inflation, what your money will still buy, and your real return after inflation.

Interactive version: https://www.calcopenly.com/finance/inflation-calculator
Subject: Finance calculators

Inflation raises prices by a percentage each year, and it compounds like interest. At a steady rate π, a purchase costing A today costs A(1 + π)^n after n years, and cash held for n years buys only A ÷ (1 + π)^n of today's goods. The real return on savings follows Irving Fisher's relation: (1 + nominal rate) ÷ (1 + inflation) − 1.

With the defaults, 1,000 and 3% inflation for 10 years, the same purchase will cost 1,343.92 and cash of 1,000 will buy 744.09 of today's goods, a 25.59% loss of purchasing power. Savings earning 6% have a real return of 2.9126% a year, not 3%, and grow to 1,332.56 in today's money.

The inflation rate is held constant. Official price indices such as the US CPI-U move unevenly and differ by basket and country, so for past prices use the index values themselves, for example through the BLS CPI inflation calculator.

## Inputs

- **Amount today**
- **Inflation rate (per year)**
- **Years**
- **Return on savings (per year)**: Used for the real return; enter 0 for cash kept at home

## Results

- Future cost of the same purchase — main result
- What the amount will buy, in today's money
- Purchasing power lost
- Total price rise
- Real return (per year)
- Savings at that return, in today's money

## Formula

$$
\text{Future cost} = A(1+\pi)^{n},\quad \text{Purchasing power} = \frac{A}{(1+\pi)^{n}},\quad r_{\text{real}} = \frac{1+i}{1+\pi} - 1
$$

## Worked examples

### 1,000 at 3% inflation for 10 years, savings at 6%

- Amount today: 1000
- Inflation rate (per year): 3%
- Years: 10
- Return on savings (per year): 6%
- **Future cost of the same purchase: 1,343.92**
- **What the amount will buy, in today's money: 744.09**
- **Purchasing power lost: 25.59%**
- **Real return (per year): 2.9126%**
- **Savings at that return, in today's money: 1,332.56**
- Checked against: Python decimal: 1000·1.03^10 = 1343.9164; 1000/1.03^10 = 744.0939; 1.06/1.03 − 1 = 2.912621 %

### Zero inflation

- Amount today: 1000
- Inflation rate (per year): 0%
- Years: 10
- Return on savings (per year): 6%
- **Future cost of the same purchase: 1,000.00**
- **Purchasing power lost: 0.00%**
- **Real return (per year): 6.0000%**
- **Savings at that return, in today's money: 1,790.85**
- Checked against: With π = 0 the real rate equals the nominal rate; 1000·1.06^10 = 1790.8477 (Python decimal)

### Deflation of 2% for 5 years

- Amount today: 100
- Inflation rate (per year): -2%
- Years: 5
- Return on savings (per year): 1%
- **Future cost of the same purchase: 90.39**
- **What the amount will buy, in today's money: 110.63**
- **Real return (per year): 3.0612%**
- Checked against: Python decimal: 100·0.98^5 = 90.3921; 100/0.98^5 = 110.6292; 1.01/0.98 − 1 = 3.0612 %

### 50,000 at 6.5% for 20 years

- Amount today: 50,000
- Inflation rate (per year): 6.5%
- Years: 20
- Return on savings (per year): 8%
- **Future cost of the same purchase: 176,182.25**
- **Total price rise: 252.36%**
- **Real return (per year): 1.4085%**
- Checked against: Python decimal: 50000·1.065^20 = 176182.2532; 1.08/1.065 − 1 = 1.40845 %

## Questions

### How do you calculate the future cost of something with inflation?

Multiply today's price by (1 + inflation rate) raised to the number of years. At 3% a year, something costing 1,000 today costs 1,000 × 1.03^10 = 1,343.92 in 10 years, a total price rise of 34.39%. At 3.4% a year it would cost 1,397.03.

### How do you calculate the real rate of return after inflation?

Divide (1 + nominal return) by (1 + inflation) and subtract 1, the Fisher relation. Savings earning 6% while prices rise 3% have a real return of 1.06 ÷ 1.03 − 1 = 2.9126% a year. The shortcut 6% − 3% = 3% overstates it slightly, and the gap grows with higher rates.

### What is the current US inflation rate?

US consumer prices (CPI-U) rose 3.4% in the 12 months to August 2026, and 2.4% excluding food and energy, according to the Bureau of Labor Statistics. The Federal Reserve's target is 2% a year, measured by the PCE price index rather than the CPI; the Bank of England and the European Central Bank also target 2%.

### How long does it take inflation to halve the value of money?

ln 2 ÷ ln(1 + inflation rate) years. At 2% inflation cash loses half its purchasing power in 35.0 years, at 3% in 23.4 years and at 3.4% in 20.7 years. Even at a 2% target rate, 1,000 held as cash for 10 years loses 17.97% of what it can buy.

### How accurate is the inflation calculator?

Accuracy depends on your inputs and the method's assumptions. Decimal arithmetic uses 50 significant digits, but estimates, numerical methods and source data can be less precise; the displayed rounding does not remove those limits. It is checked against 4 worked examples whose answers come from independent sources; for example, “1,000 at 3% inflation for 10 years, savings at 6%” is checked against Python decimal: 1000·1.03^10 = 1343.9164; 1000/1.03^10 = 744.0939; 1.06/1.03 − 1 = 2.912621 %.

### Where does the method come from?

U.S. Bureau of Labor Statistics — CPI inflation calculator; Fisher, I. — The Theory of Interest (1930), real vs nominal rates.

## Sources

- [U.S. Bureau of Labor Statistics — CPI inflation calculator](https://www.bls.gov/data/inflation_calculator.htm)
- Fisher, I. — The Theory of Interest (1930), real vs nominal rates

_Note: financial information, not professional advice._