Inflation Calculator See how inflation erodes purchasing power — adjust past/future values and compare real vs. nominal r...

Inflation Calculator

See how inflation erodes purchasing power — adjust past/future values and compare real vs. nominal returns.

Purchasing Power

Future Value

Real Return

Amount ($)

Year

To Year

Today’s Cost ($)

Inflation Rate (%) 3.1% (100-yr avg) 2.5% (Fed target) 3.4% (2024 actual) Custom

Years Ahead

Nominal Return (%)

Inflation Rate (%)

Years

$0

Inflation-Adjusted Value

0.00%

Change in Purchasing Power

0.00%

Avg. Annual Inflation

0.00%

Real Return

U.S. Inflation History (CPI-U)

How Inflation Is Measured

The U.S. Bureau of Labor Statistics (BLS) calculates inflation using the Consumer Price Index for All Urban Consumers (CPI-U), which tracks price changes in a “basket” of ~80,000 goods and services:

• Housing (42% of basket): Rent, utilities, maintenance
• Transportation (17%): Gas, vehicles, public transit
• Food (14%): Groceries, dining out
• Medical Care (8%), Education (6%), Other (13%)

Core CPI** excludes food & energy (volatile) — used by the Fed for policy. PCE Price Index** (Personal Consumption Expenditures) is the Fed’s preferred gauge — more flexible weighting.

2025 Note: CPI data lags by 2–4 weeks; final figures are revised monthly.

Why Inflation Hurts Fixed Incomes

✅ **Wage earners**: Often get COLA (Cost-of-Living Adjustments), but lag 6–12 months. ❌ **Retirees on fixed pensions**: No COLA = declining standard of living. ❌ **Bondholders**: $1,000 bond pays $50/year forever — but that $50 buys less each year.

Case Study: • $40,000/year pension in 2005 • 3% avg. inflation → by 2025, purchasing power = **$22,300** → Retiree needs ~$72,000 in 2025 to match 2005 lifestyle.

✅ Protection tools: Social Security COLA, TIPS, I-bonds, inflation-adjusted annuities.

Historical U.S. Inflation Trends

• 1913–2024 Avg.: 3.1% per year
• 1970s Peak: 1979–1981: 11–14% (oil shock, wage-price spiral)
• 1990s–2019: 1.5–2.5% (globalization, tech deflation)
• 2021–2023 Surge: 7–9% (pandemic stimulus, supply chains)
• 2024: 3.4% (cooling but still above Fed’s 2% target)

Purchasing Power Erosion: • $100 in **1970** = **$792 today** • $100 in **2000** = **$175 today** • $100 in **2010** = **$135 today**

📉 Rule of 72 for Inflation: 72 ÷ annual rate = years to halve purchasing power. At 3.5%: **20.6 years** to lose half your money’s value.

How to Use This Calculator

➡️ Purchasing Power

“What is $X in [Year] worth today?” — uses official CPI data.

➡️ Future Value

“What will $X/year cost in [N] years?” — project costs using custom or historical rates.

➡️ Real Return

See true investment growth: Real Return = Nominal Return − Inflation.

Note: All calculations assume annual compounding. CPI data sourced from BLS (1913–2024).