Inflation Calculator
An inflation calculator translates future dollars into today's purchasing power: $100,000 received 20 years from now buys only about $55,367.58 worth of today's goods if inflation averages 3%. It also converts a nominal return into a real one — 7% during 3% inflation is truly 3.88%, not 4%.
Purchasing Power of a Future Amount
$100,000.00 in 20 years buys what this buys today:
$55,367.58
At 3% inflation, that's a 44.6% loss of purchasing power.
Real (Inflation-Adjusted) Return
A 7% return during 3% inflation is really:
3.88%
Via the Fisher equation — not the 4.0% that simple subtraction suggests.
Nominal dollars vs real dollars
A nominal dollar is the one printed on your statement; a real dollar is measured by what it buys. Inflation is the exchange rate between them, and it only moves one way. At a steady 3% — roughly what long-run U.S. inflation has averaged over the past century, though individual decades have swung far above and below it — prices double about every 23 years. That means a fixed sum loses half its purchasing power over the same span while its nominal value sits perfectly still. Nothing was "lost," no statement showed a decline; the erosion is invisible precisely because the number never changes.
Why simple subtraction understates the damage
The intuitive shortcut — real return equals nominal return minus inflation — is close but systematically flattering. The correct relationship is the Fisher equation: one plus the real rate equals one plus the nominal rate, divided by one plus inflation. Division matters because inflation erodes your principal as well as your gains. That's why 7% nominal against 3% inflation yields 3.88% real rather than an even 4%, and the gap widens as either rate climbs. Small as it looks, feeding the flattering number into a 30-year plan compounds the optimism — our real-returns article works through exactly how much.
Why the other calculators on this site show nominal values
Deliberately, and for interpretability. When the main calculator or the retirement calculator projects a balance, that figure is in future dollars with no hidden adjustments — so you can check it against the formula, the growth table, and your own arithmetic. Blending inflation into those projections would make every intermediate number unverifiable. The honest two-step workflow: project nominally there, then bring the result here to see it in today's dollars. (Keep the two mental buckets separate and you'll also never be fooled by the difference between a account that compounds monthly and one that merely quotes a prettier rate — frequency and inflation are separate effects that both hide inside "7%.")
Putting the two modes together
The two calculators above answer complementary questions. Purchasing power answers "what will that future amount actually be worth?" — essential for judging any long-range target, since a retirement goal set in nominal dollars quietly shrinks every year. Real return answers "how fast is my wealth genuinely growing?" — the yardstick for comparing an investment against inflation itself. If your nominal return merely matches inflation, your real return is zero: more dollars, same life. Growth in what your money can do, not in how many units of it exist, is the thing worth compounding.
Solve for any variable with Goal Mode
This page adjusts single amounts and rates for inflation. In CompoundFX, inflation and tax adjustments are built into the projections themselves — in the free tier — and Goal Mode can solve for any variable with those adjustments applied.
Free to download. Optional one-time Pro upgrade. No subscription.
