Inflation Calculator

Future cost of the same basket, buying power of today's money, cumulative inflation and the real return after inflation.

The sum whose purchasing power you want to track.
Enter as 3 for 3% or 0.03 for 3%.
Whole years; the factor compounds once a year.
Leave blank to skip the real-return output. 7 or 0.07 both mean 7%.

An inflation calculator turns one amount into three numbers. Over n years the inflation factor is (1 + i)n: the future cost of the same basket is amount × factor, and the buying power of that amount later is amount ÷ factor. Cumulative inflation is factor − 1, reported as a percentage of today's price. If a nominal annual return r is entered too, the real return is (1 + r) ÷ (1 + i) − 1, which excludes inflation from the gain. Example: 10,000 today at 3% inflation becomes a 13,439.16 basket in 10 years, so today's money buys only 7,440.94 of it — cumulative inflation 34.39%. With a 7% nominal return the real return is 3.88%, not the 4% the subtraction shortcut suggests. Zero inflation leaves every amount unchanged; higher rates and longer horizons compound the erosion.

Formulas:

How inflation compounds a fixed amount

Prices compound like interest

Inflation is compounding in the direction that hurts a saver: the same basket of goods costs (1 + i)n times as much after n years. 10,000 today at 3% inflation needs 13,439.16 in 10 years and 18,061.11 in 20 years. The second decade adds more than the first because it compounds on an already-raised price, exactly the way interest compounds on interest.

Buying power: the same factor, read backwards

Buying power divides by the factor instead of multiplying: 10,000 ÷ 1.0310 = 7,440.94. A salary of 10,000 held flat for ten years at 3% inflation buys what 7,440.94 buys today. Stretch the horizon to 20 years and it falls to 5,536.76. The two outputs are never independent — they always multiply back to amount2.

Rate sensitivity: 4% instead of 3%

One extra percentage point of inflation is not one extra percent of cost. At 4% the 10-year future cost of $10,000 is $14,802.44 rather than $13,439.16, and buying power drops to $6,755.64 instead of $7,440.94. That is the case for running a low and a high inflation assumption rather than a single number: the gap widens with the horizon.

Zero inflation and flat prices

At 0% the factor is exactly 1. The future cost and the buying power both stay at 10,000.00, cumulative inflation is 0.00%, and the real return is simply the nominal return — 7.00% on a 7% nominal. Deflation (a negative rate) is out of scope: enter 0 for flat prices rather than a negative number.

Compound interest with inflation: nominal versus real

A compound interest calculator answers a nominal question: how much will the balance be? It does not answer the question that actually matters after inflation — what will that balance buy? The two are linked by the real return.

The exact form is realReturn = (1 + nominal) ÷ (1 + inflation) − 1. At 7% nominal and 3% inflation the real return is 3.88%, while the popular subtraction shortcut (7% − 3%) says 4%. Both numbers are close, but only the first is right, and the gap widens as rates rise.

The same identity links the amounts. 10,000 at 7% nominal for 10 years grows to 19,671.51. Deflate that pot by 1.0310 and it is worth 14,637.45 in today's purchasing power — identical to compounding 10,000 directly at the 3.88% real rate. So the practical workflow is: run the nominal figures in the Compound Interest Calculator, then either deflate the result here or re-run it with an inflation-adjusted rate.

How long does money take to halve?

Inflation halves purchasing power on the same schedule that growth doubles it, so the Rule of 72 applies unchanged. At 3% inflation, 72 ÷ 3 suggests about 24 years; the exact time is ln(2) ÷ ln(1.03) ≈ 23.45 years. At 2% it is 35 years, at 4% about 17.7 years. The shortcut is least accurate above roughly 10%, where it should not be used at all.

Reading the purchasing-power chart

The chart plots two curves over the whole horizon: the rising future cost of today's basket and the falling buying power of the amount left uninvested. Both are the same (1 + i)n factor read in opposite directions, so the distance between them opens up with every year. A flat salary in a 3%-inflation world looks exactly like the falling line; a bond yielding 3.88% real looks like the rising one, only upward.

Inflation maths in Excel and on a TI-84

Every output on this page is a power of (1 + i), so any spreadsheet or scientific calculator reproduces it:

Worked examples

Example 1: 10,000 at 3% inflation for 10 years with a 7% nominal return

Enter amount = 10000, rate = 3, years = 10, nominal = 7. Factor = 1.0310 = 1.343916. Future cost: $13,439.16; buying power: $7,440.94; cumulative inflation: 34.39%; real return: 3.88%.

Example 2: the same 10,000 over 20 years

Change only years = 20. Factor = 1.0320 = 1.806111. Future cost: $18,061.11; buying power: $5,536.76; cumulative inflation: 80.61%; real return stays 3.88% because the nominal and inflation rates did not change. Doubling the horizon does not double the damage — it more than doubles it.

Example 3: zero inflation, 10 years, 7% nominal

Enter amount = 10000, rate = 0, years = 10, nominal = 7. Factor = 1.000000. Future cost: $10,000.00; buying power: $10,000.00; cumulative inflation: 0.00%; real return: 7.00% — with flat prices the nominal return is the real return.

Example 4: leaving the nominal return blank

Clear the optional field (nominal = blank) and the calculator reports only the inflation side: $13,439.16 future cost, $7,440.94 buying power, 34.39% cumulative inflation. The real-return tile is hidden rather than showing a misleading number.

Related tools

The Inflation Calculator answers "what will this amount be worth?". Related questions:

Frequently asked questions

How do I calculate the future cost of inflation?

Raise 1 plus the annual inflation rate to the number of years, then multiply by the amount. The factor is (1 + i)n, so 10,000 at 3% inflation for 10 years costs 10,000 × 1.0310 = 13,439.16. The same basket costs 18,061.11 after 20 years, because the second decade compounds on an already-raised price rather than on today's.

What is the difference between future cost and buying power?

They are the same factor read in opposite directions. Future cost multiplies the amount by (1 + i)n — what the basket costs later. Buying power divides the amount by (1 + i)n — what today's money still buys later. At 3% inflation over 10 years, 10,000 becomes a 13,439.16 basket while today's 10,000 buys only 7,440.94 of it.

How do I calculate the real rate of return?

Use the exact Fisher form: real return = (1 + nominal) ÷ (1 + inflation) − 1. A 7% nominal return against 3% inflation gives (1.07 ÷ 1.03) − 1 = 3.88% a year. Compounding 10,000 at that real rate for 10 years lands at 14,637.45 in today's purchasing power, the same answer as growing the money at 7% nominally (19,671.51) and then deflating it by 1.0310.

Why is the real return not just nominal minus inflation?

Subtracting gives an approximation, not the answer, because inflation divides the purchasing power of the whole pot rather than taxing it once. At 7% nominal and 3% inflation the shortcut says 4% while the exact real return is 3.88% — about 0.12 percentage points a year, which compounds to a visible gap over decades. The shortcut is good enough for mental math at low rates, but use (1 + nominal) ÷ (1 + inflation) − 1 for anything you act on.

Does the calculator work for zero inflation or deflation?

Zero inflation is supported: the factor becomes 1, so the future cost and buying power both stay at 10,000.00, cumulative inflation is 0.00%, and the real return equals the nominal return (7.00% on a 7% nominal). Deflation (a negative rate) is out of scope — enter 0 for flat prices rather than a negative number.

What inflation rate should I enter?

Use the rate that matches the spending you are modelling, not the headline index, and keep the horizon honest. A 3% assumption is a common long-run planning figure; a shorter horizon should use the current rate. Because the factor compounds, a 1 percentage-point error is small over one year and large over thirty — run the calculation twice with a low and a high rate to see the range rather than pretending one number is a forecast.