Inflation Calculator

How Inflation Erodes Purchasing Power

Inflation compounds just like investment returns — but in reverse. At 3% annual inflation, $100,000 today has the purchasing power of only $74,409 in 10 years, $55,368 in 20 years, and $41,199 in 30 years. This is not a hypothetical risk — it is the guaranteed outcome of holding cash or low-yield assets over long time horizons. The calculator above shows exactly how much purchasing power you lose based on your specific inflation assumption and time period.

Real Return vs Nominal Return

Nominal return is what your investment earns on paper. Real return is what you actually gain in purchasing power after subtracting inflation. If your savings account earns 2% but inflation runs at 3.5%, your real return is approximately -1.5% — you are losing purchasing power even while earning interest. The Fisher equation gives the precise calculation: Real Return = (1 + Nominal) ÷ (1 + Inflation) − 1. For long-term financial planning, always think in real returns, not nominal ones.

How to Protect Against Inflation

The most effective long-term inflation hedge is equities — stocks represent ownership of businesses that can raise prices alongside inflation. Real estate and commodities also tend to track inflation over long periods. For the fixed-income portion of a portfolio, Treasury Inflation-Protected Securities (TIPS) and Series I savings bonds offer direct inflation linkage guaranteed by the U.S. government. The key insight: cash and low-yield savings accounts are not "safe" from an inflation perspective — they guarantee a slow, steady loss of purchasing power. True safety means growing faster than inflation.