Inflation runs in two directions
Most inflation calculators answer only one question — usually “what will this cost later?” But the same force has a mirror image: a fixed amount of money you’ll receive in the future is worth less, in real terms, than the same number of dollars today. This calculator shows both at once, so you can plan a future budget and judge whether a future payout keeps up with prices.
The two formulas
Future cost = A · (1 + i)n
Today’s value = A ÷ (1 + i)n
where A = the amount in today’s money, i = the annual inflation rate, and n = the number of years. The two are reciprocals — prices compound up at exactly the rate that purchasing power decays down.
Worked example
Say $50,000 covers a year of your spending today, and inflation averages 3.0% a year for the next 20 years. Here is what happens to that money in both directions:
| Step | Amount |
|---|---|
| Amount today | $50,000 |
| Assumed annual inflationcompounded yearly for 20 years | 3.0% |
| What the same goods will cost in 20 yearsprices rise 80.6% cumulatively over the period | $90,306 |
| = Purchasing power of $50,000 in 20 yearsa fixed sum quietly loses 44.6% of its buying power to cumulative inflation | $27,684 |
Computed with this calculator's default settings — open the tool above and you'll see the same numbers, then change any input to match your own scenario.
More than a one-way inflation converter
- Bidirectional by default. See the future cost of today’s money and the today’s-money worth of a future amount, side by side — not just one direction.
- Purchasing power lost, quantified. A single percentage tells you how much real value a fixed sum surrenders over the period.
- Lifestyle framing. See exactly how much more you’d need each year to maintain the same standard of living.
- The two curves, charted. Watch rising costs and falling purchasing power diverge year by year.
Frequently asked questions
What is inflation?
Inflation is the rate at which the general level of prices rises over time, which means each unit of money buys a little less than it did before. A 3% annual inflation rate means a basket of goods that costs $100 this year costs about $103 next year. Because the effect compounds, even modest rates add up substantially over a decade or two — which is why this calculator shows both the rising cost of goods and the falling purchasing power of a fixed sum.
How does the rule of 72 apply to prices?
The rule of 72 is a quick mental shortcut: divide 72 by the inflation rate to estimate how many years it takes for prices to double. At 3% inflation, prices roughly double in 72 ÷ 3 = 24 years; at 6%, in about 12 years. It works in reverse for purchasing power too — at 3%, the buying power of a fixed sum roughly halves over the same 24 years. The calculator computes the exact figures, but the rule is a handy sanity check.
Why does inflation erode fixed incomes?
A fixed income — like a pension that pays the same dollar amount every year, or cash sitting under the mattress — does not rise with prices. As goods get more expensive, that unchanging number buys progressively less. Over 20 years at 3% inflation, a fixed payment loses roughly 45% of its real value. This is why retirees and savers care about inflation-adjusted (real) returns, not just the nominal dollar figure.
What is the difference between real and nominal values?
A nominal value is the raw dollar figure with no adjustment. A real value is that figure restated in the purchasing power of a reference year — usually today — so amounts across different years can be compared fairly. This calculator gives you both directions: the future cost of today’s money (a nominal projection) and the today’s-money worth of a future amount (a real, inflation-adjusted figure).
What inflation rate should I use?
Long-run inflation in developed economies has averaged roughly 2–3% per year, and many central banks explicitly target around 2%. For long-term planning, 2.5–3% is a common assumption. Individual years can be much higher or lower, and the prices you personally face — housing, healthcare, education — may rise faster than the headline average, so it can be worth modelling a higher rate to stress-test a plan.
Disclaimer: This calculator is for educational purposes only. It assumes a constant annual inflation rate compounded yearly; actual inflation varies year to year and by category of spending. It is not financial advice.