Inflation Calculator

Future prices = amount x (1 + inflation)^years. Buying power = amount / (1 + inflation)^years. Real return is (1 + nominal return) / (1 + inflation) - 1. Subtracting the two rates is a close approximation at low numbers and drifts as either rises.

What does inflation do to savings?

It reduces what they buy without changing the balance. At 3 percent, money loses about a quarter of its purchasing power in ten years and nearly half in twenty, which is why cash held long-term quietly shrinks.

What is a normal inflation rate?

The Federal Reserve targets 2 percent. The long-run US average since 1913 is closer to 3, with long calm stretches and sharp exceptions such as the early 1980s and 2022.

Is the real return just the return minus inflation?

Close, but not exact. 7 percent growth with 3 percent inflation gives a real return of 3.88 percent, not 4. The difference is small at ordinary rates and grows when either number gets large.