Real value of money · Future cost · Purchasing power erosion · Real investment returns · 2026
Inflation Calculator: How Purchasing Power Changes Over Time
Inflation is the rate at which the general price level of goods and services rises over time — which means your money buys less in the future than it does today. A 3% annual inflation rate means that something costing $100 today will cost $103 next year, $134 in 10 years, and $181 in 20 years. This silent erosion is one of the most important forces in personal finance.
The Rule of 70 — How Fast Inflation Doubles Prices
Divide 70 by the inflation rate to find how many years it takes for prices to double. At 3% inflation, prices double every 23 years. At 7% (near recent US highs), prices double every 10 years. This means a salary that doesn't increase with inflation results in a significant real pay cut over time.
Real Return vs Nominal Return
Your investment's nominal return is the stated percentage before inflation. The real return — what actually matters for wealth building — is the nominal return minus inflation. Using the Fisher Equation: Real Return = (1 + Nominal) ÷ (1 + Inflation) − 1. A savings account paying 2% during 4% inflation has a real return of −1.9% — you're losing purchasing power even though the number in your account grows.
How to Beat Inflation
- Invest in equities — S&P 500 has historically returned ~10% nominal (~7% real). The best long-term inflation hedge.
- Real estate — Property and rental income historically track or exceed inflation over long periods.
- I-Bonds (Treasury Inflation-Protected) — Government bonds with returns directly tied to CPI. Risk-free inflation protection.
- TIPS — Treasury Inflation-Protected Securities. Principal adjusts with CPI, guaranteed real return.
- Commodities — Gold, oil, and agricultural commodities tend to rise with inflation but are volatile.
- Avoid long-term cash — Money sitting in a 0.5% savings account during 3% inflation loses real value every year.
Frequently Asked Questions
What is the current US inflation rate in 2026?
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As of early 2026, US inflation (CPI) has moderated from the 2022 peak of 9.1% and is running approximately 2.5–3.5% annually. The Federal Reserve targets 2% inflation as the long-run goal. For long-term financial planning, using 3% as your inflation assumption is a reasonable conservative estimate. For specific current data, check the Bureau of Labor Statistics (BLS) website at bls.gov.
Does inflation affect everyone equally?
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No — inflation impacts different people differently. Those who own assets (real estate, stocks) see their wealth rise with inflation. Those who hold cash or fixed-income assets lose purchasing power. Low-income households are disproportionately affected because they spend a larger share of income on necessities like food, rent, and energy — categories that often inflate faster than headline CPI. Homeowners with fixed-rate mortgages benefit as inflation erodes the real value of their debt.
How should I account for inflation in retirement planning?
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Always use real (inflation-adjusted) figures in retirement planning. If you need $5,000/month today and expect to retire in 25 years at 3% inflation, you'll need about $10,460/month in future dollars for the same lifestyle. Our Retirement Calculator automatically adjusts for inflation. A common approach is to use a 7% nominal return assumption and 3% inflation, giving a 4% real return for long-term planning.