Inflation Calculator
See how inflation erodes purchasing power. Enter amount + years + inflation rate → real value today (or future). Useful for raises, retirement targets, savings goals.
Purchasing power over time
Inflation is the silent erosion of purchasing power. A salary that looks like a raise might actually be a pay cut if it doesn't exceed inflation; savings sitting in a bank account shrink in real terms every year; a retirement target needs to grow annually just to maintain the same buying power. This tool quantifies that drift: enter an amount, time period, and inflation rate, then see what that money actually buys at the end.
Scenarios where this matters
- Evaluating a pay rise: You've been offered a 3% raise but inflation is running at 5%. Run the numbers to see whether you're getting ahead or falling behind in real terms.
- Setting retirement savings targets: A retirement calculator might say you need £500,000. This tool shows what that £500,000 will actually purchase in 20 or 30 years' time, helping you decide if the target is realistic.
- Comparing historical prices and wages: Was a house really cheaper in the 1990s, or does it just look that way? Adjust for inflation to compare like with like.
- Planning long-horizon savings: You want to save for something expensive in 10 years. This tool shows how much extra you need to earn to offset inflation and actually reach your goal.
- Stress-testing financial plans: Run multiple scenarios: what if inflation averages 2%? What if it spikes to 6%? See how sensitive your plan is.
- Understanding real investment returns: A bond paying 4% doesn't look good at 5% inflation. This tool makes the gap visible.
Setting up the calculation
- Enter the amount, dates (or years), and annual inflation rate. The default is 3% — a rough long-term average for developed economies — but you can use your country's current rate or a custom scenario.
- Choose your direction. Calculate forward ("What will £100 buy in 10 years?") or backward ("What was £100 in 2010 worth today?").
- Review the result and the table. The tool shows the equivalent value at your target date, cumulative inflation percentage, and a year-by-year breakdown so you can see the compounding effect.
- All calculation runs in your browser. No external API, no data sent anywhere — you control the rate and can experiment freely.
Picking an inflation rate
- Long-term baseline: Most developed economies average 2–3% over 50 years. Use this for rough retirement or multi-decade planning.
- Recent published rate: Central banks and statistical agencies publish current CPI monthly. For UK, check the Office for National Statistics; for US, the Bureau of Labour Statistics; for the eurozone, Eurostat.
- Your personal inflation: Official headline CPI is an average. If you're paying heavy rent or healthcare, your personal inflation is likely higher. Young renters in expensive cities often experience 5–7% effective inflation even when headline is 3%.
Where the headline number misleads
- CPI is an average, not your basket. Headline inflation can mask wild swings in categories you care about — housing and healthcare typically outpace headline CPI; electronics and clothing lag. You may need a higher or lower rate than published figures.
- Compounding scales faster than intuition. 3% for 30 years is not 90% cumulative loss — it's 143%. Use the Rule of 72 (prices double roughly every 72 ÷ rate% years) to sense-check large time horizons.
- Wage inflation ≠ price inflation. A 4% pay rise in a 5% inflation year is a real-terms pay cut. Always compare apples to apples.
- The time period matters enormously. At 3% inflation, money loses half its value in 24 years. Change the rate or period by even a percentage point and the answer shifts significantly — always run a few scenarios.
$1,000 in 20 years
Take $1,000 today and look 20 years ahead at 3% inflation. Its purchasing power falls to about $554 — nearly halved without you spending a cent. Flip it the other way: you'd need roughly $1,806 in 20 years to buy what $1,000 buys now. That's why a "3% raise" in a 5% inflation year is really a 2% pay cut in real terms.
Quick answers
What inflation rate should I use? For long horizons, 2.5–3% is a reasonable developed-economy average. For a specific recent period, use your country's actual CPI figure. Run a low and a high scenario to bracket the uncertainty rather than trusting one number.
Is a raise below inflation actually a pay cut? In real terms, yes. If prices rise 5% and your pay rises 3%, the same salary buys ~2% less. Always compare a raise against the inflation rate, not against zero.
Does inflation compound? Yes — each year's rise is applied to the already-risen price level, just like compound interest working against you. That's why two decades of "only 3%" halves purchasing power.
Can I go backwards in time? Yes. Set the direction to backward to ask what an old amount is worth today — useful for comparing a historical salary or price to current money.
Under the hood
Two mirror-image formulas do the work. To find what a future sum is worth today, divide by compounded inflation: real value = nominal ÷ (1 + i)t. To find what you will need later to match today's money, multiply: future need = amount · (1 + i)t — where i is the annual inflation rate and t the years. The key property is that inflation compounds, just like interest but working against you: each year's rise applies to an already-risen price level, so two decades at "only" 3% nearly halves purchasing power.
The single-estimate trap
Trusting a single point estimate, and confusing nominal with real returns. Nobody knows future inflation, so run a low and a high scenario to bracket it rather than betting on one number. And remember a "3% raise" in a 5% inflation year is a 2% pay cut in real terms — always measure a raise, a bond yield or a savings rate against inflation, not against zero.
Related
Feed the real figure into the compound interest calculator to project savings in today's money, and the retirement projection to pressure-test a long-horizon plan against rising prices. Background reading: compound interest — three myths that cost real money.
CPI, Core CPI and PCE — which inflation?
"The inflation rate" is not one number. Three gauges circulate, they rarely agree in a given month, and they answer different questions. This calculator uses a headline CPI-style basket; the table shows what the others leave in or out.
| Gauge | What it measures | Who leans on it |
|---|---|---|
| CPI-U | Headline basket for urban consumers, food and energy included | Social-Security COLAs, inflation-linked bonds, most news headlines |
| Core CPI | CPI with food and energy stripped out to cut month-to-month noise | Analysts reading the underlying trend |
| PCE | Broader basket that adjusts as people substitute cheaper goods | The Federal Reserve — its 2% target is a PCE figure |
Rule of thumb: the number that shrank your savings is closest to headline CPI-U; the number the Fed is steering by is PCE, which usually runs a few tenths lower.