Inflation is the rate at which the general level of prices for goods and services is rising, and subsequently, the purchasing power of currency is falling. For example, if the inflation rate is 3%, a $100 item will cost $103 next year.

How do I calculate the future price of an item with inflation?

You can calculate a future price using the formula: Future Value = Present Value * (1 + annual inflation rate)^n, where 'n' is the number of years. This calculator automates this process using either a constant rate or historical CPI data for more accuracy.

Can inflation be negative?

Yes, negative inflation is called deflation. It occurs when the general price level of goods and services decreases, and the purchasing power of money increases. While rare, it can have significant economic consequences.

How do I adjust investment returns for inflation?

To find the real return on an investment, you adjust the nominal (stated) return for the inflation rate. The approximate formula is: Real Return ≈ Nominal Return - Inflation Rate. A more precise formula is: Real Return = ((1 + Nominal Return) / (1 + Inflation Rate)) - 1. Our calculator includes a mode for this calculation.

Where can I get historical CPI data?

Historical Consumer Price Index (CPI) data is typically published by national statistics agencies. For the United States, the Bureau of Labor Statistics (BLS) is the primary source. This calculator comes preloaded with US CPI data from 1913 to the present for your convenience.

Does inflation affect retirement savings?

Absolutely. Inflation erodes the purchasing power of your retirement savings over time. A nest egg that seems large today may be worth significantly less in 20 or 30 years. It's crucial to factor inflation into your retirement planning to ensure your savings can support your desired lifestyle.

Inflation Calculator - Estimate Purchasing Power, CPI & Inflation-Adjusted Values

Inflation Calculator

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Year	CPI	Yearly Inflation	Adjusted Value

What is Inflation?

Inflation is the rate at which the general level of prices for goods and services rises, leading to a decrease in the purchasing power of a currency. In simple terms, your dollar buys you less than it did before. For example, if the annual inflation rate is 3%, a basket of goods that costs $100 today will cost approximately $103 next year. This steady erosion of value is a fundamental concept in personal finance and economics.

How Inflation is Calculated (CPI Explained)

The most common measure of inflation is the Consumer Price Index (CPI). Government agencies, like the U.S. Bureau of Labor Statistics (BLS), calculate the CPI by tracking the prices of a representative "basket" of consumer goods and services over time. This basket includes items like food, housing, transportation, and medical care. The percentage change in the CPI from one period to another gives the inflation rate.

Example Inflation Calculation

Let's see how purchasing power has changed. Suppose you had $100 in the year 2000. How much money would you need in 2025 to have the same purchasing power? Using historical U.S. CPI data:

The average CPI for 2000 was 172.2.
Let's assume a projected CPI for 2025 is around 320.0 (note: this is an estimate).
Calculation: $100 * (320.0 / 172.2) = $185.83

This means you would need $185.83 in 2025 to buy what $100 could buy in 2000. Our calculator performs these calculations instantly for any period from 1913 onwards.

How Inflation Affects Investments and Savings

Inflation is a silent tax on your savings and investments. If your money in a savings account earns 1% interest but inflation is 3%, you are losing 2% of your purchasing power each year. This is why understanding your "real return" (your return after accounting for inflation) is critical. To grow wealth, your investments must consistently outperform the rate of inflation.

Tips to Protect Your Purchasing Power

Invest in Growth Assets: Stocks and real estate have historically provided returns that outpace inflation over the long term.
Consider Inflation-Protected Securities: Assets like Treasury Inflation-Protected Securities (TIPS) are designed to increase in value with inflation.
Diversify Your Portfolio: Don't put all your eggs in one basket. A mix of assets can help hedge against different economic conditions.
Keep Some Cash, But Not Too Much: It's essential to have an emergency fund, but holding excessive cash can lead to significant loss of purchasing power over time.
Negotiate Your Salary: Ensure your income keeps pace with or exceeds the cost of living increases to maintain your standard of living.

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Inflation Calculator

Inflation Calculator