Calculate how inflation erodes your purchasing power over time. See future costs of goods, the real value of your money, and how much you need to save to maintain your standard of living.
Future Cost
$180,611.12
Purchasing Power
$55,367.58
Loss in Value
$44,632.42
Loss Percentage
44.63%
Inflation is the rate at which the general level of prices for goods and services rises over time, reducing purchasing power. A 3% inflation rate means something costing $100 today will cost $103 next year.
Most central banks target an inflation rate of around 2% per year. Historically, inflation in developed countries averages 2-3% annually. Rates above 5% are generally considered high inflation.
Common inflation hedges include investing in stocks (historically outpace inflation), real estate, Treasury Inflation-Protected Securities (TIPS), commodities, and I Bonds. Keeping all savings in cash loses value to inflation over time.
The Consumer Price Index (CPI) tracks the average price change of a basket of goods and services over time. Other measures include Core CPI (excludes food and energy), PCE (Personal Consumption Expenditures), and PPI (Producer Price Index). Each captures different aspects of price changes.
Deflation is a sustained decrease in the general price level. While lower prices sound good, deflation can be harmful — consumers delay purchases expecting lower prices, businesses earn less revenue, and debt becomes harder to repay. Central banks generally try to prevent deflation.
Hyperinflation (inflation exceeding 50% per month) is typically caused by governments printing excessive money to fund spending, often during wars or political crises. Historical examples include Zimbabwe (2008), Venezuela (2018), and Weimar Germany (1923).
Over long periods, wages generally keep pace with inflation, but there can be significant short-term gaps. Real wage growth (wages minus inflation) has averaged about 0.5-1% annually in developed countries. During high-inflation periods, wages often lag behind price increases.
Inflation measures the average price change across all goods and services nationally. Cost of living varies by location and includes housing, food, transportation, and taxes specific to where you live. A city can have a high cost of living even when national inflation is low.