Inflation Calculator
Calculate how inflation erodes purchasing power over time. See what money from any year is worth today, or project future values based on expected inflation rates.
Historical Comparison
That's equivalent purchasing power after 25 years of inflation
US Inflation by Decade
| Decade | Avg Annual Inflation | Notes |
|---|---|---|
| 1920s | -0.9% | Post-WWI deflation |
| 1930s | -2% | Great Depression deflation |
| 1940s | 5.4% | WWII & post-war inflation |
| 1950s | 2.2% | Post-war stability |
| 1960s | 2.5% | Moderate growth |
| 1970s | 7.4% | Oil crisis, stagflation |
| 1980s | 5.1% | Early high, then controlled |
| 1990s | 2.9% | Stable growth |
| 2000s | 2.6% | 2008 crisis, low rates |
| 2010s | 1.8% | Low inflation era |
| 2020s* | 5.2% | COVID, supply chain (2020-24) |
Understanding Inflation
Inflation is the gradual increase in prices over time, which erodes the purchasing power of money. The most common measure is the Consumer Price Index (CPI), which tracks the cost of a basket of goods and services. The Bureau of Labor Statistics (BLS) calculates CPI monthly by surveying prices of over 80,000 items across the United States, including food, housing, transportation, and healthcare.
Understanding inflation is critical for financial planning. Whether you are saving for retirement, negotiating a salary raise, or evaluating investment returns, inflation directly impacts the real value of your money. A 5% investment return in a year with 3% inflation only delivers a 2% real return.
How Is Inflation Measured?
There are several key inflation metrics used by economists and policymakers. The CPI-U (Consumer Price Index for All Urban Consumers) is the most widely cited measure and covers approximately 93% of the US population. Core CPI excludes volatile food and energy prices to show underlying inflation trends. The PCE (Personal Consumption Expenditures) index is the Federal Reserve's preferred measure for setting monetary policy, as it captures a broader range of spending and adjusts for consumer behavior changes.
The Rule of 72
Divide 72 by the inflation rate to estimate how many years until prices double. At 3% inflation, prices double in ~24 years. At 7% inflation, prices double in ~10 years. This simple formula also works for investment growth — at a 6% return, your money doubles in ~12 years.
What Causes Inflation?
Inflation is driven by two primary forces. Demand-pull inflation occurs when consumer demand outpaces the supply of goods and services, pushing prices higher. This often happens during economic booms or when government stimulus increases spending power. Cost-push inflation occurs when production costs rise — such as higher oil prices, supply chain disruptions, or increased wages — forcing businesses to raise prices. The 2021-2022 inflation spike was largely cost-push, driven by pandemic-related supply chain issues combined with strong consumer demand from stimulus spending.
Protecting Against Inflation
Investments that typically beat inflation:
- • Stocks (historically 7-10% real return)
- • Real estate (property values tend to rise)
- • TIPS (Treasury Inflation-Protected Securities)
- • I Bonds (adjust with CPI)
- • Commodities (gold, oil tend to rise with inflation)
Investments that lose to inflation:
- • Savings accounts (typically 0.5-2%)
- • Cash under the mattress (0%)
- • Low-yield bonds (<3%)
- • CDs during low-rate periods
- • Fixed annuities without inflation riders
Inflation and Salary Planning
If your salary doesn't increase at least at the rate of inflation, you are effectively taking a pay cut every year. For example, if inflation is 4% and you receive a 2% raise, your real purchasing power has decreased by 2%. When negotiating salary increases, always factor in the current inflation rate to ensure your compensation keeps pace with the cost of living. The same logic applies to freelance rates and contract pricing — review and adjust them annually.
Inflation's Impact on Retirement
Inflation poses one of the biggest risks to retirees living on fixed income. At just 3% annual inflation, the cost of living doubles every 24 years. Someone retiring at 65 with $50,000 in annual expenses will need the equivalent of $100,000 per year by age 89 to maintain the same lifestyle. This is why financial planners recommend keeping a portion of retirement portfolios in growth assets like stocks, even during retirement, to outpace inflation over the long term.
Disclaimer
Historical CPI data is from the Bureau of Labor Statistics. Future projections are estimates and actual inflation will vary. This calculator is for educational purposes only.