Explanation
Inflation and purchasing power
Inflation raises the amount needed to buy the same basket. Cash held unchanged buys less when prices increase. These are two directions of the same constant-rate estimate.
Choose the question and enter values
Choose future cost to project a current price, or purchasing power to express a fixed future cash amount in today’s dollars. Enter a constant annual rate; it is a scenario, not historical CPI data.
Future cost = A × (1 + R/100)ᵗ. Buying power today = A ÷ (1 + R/100)ᵗ.
| A | Amount (USD) |
|---|---|
| R | Inflation rate |
| t | Years |
2 years at 10%
| Amount | 100 |
|---|---|
| Inflation rate | 10 |
| Years | 2 |
| Result | $121 |
Future cost: the price factor is (1 + 10/100)^2. Multiply $100 by it for a future cost, or divide $100 by it for buying power. Rounded to cents = $121.
Cash buying power after inflation
| Amount | 121 |
|---|---|
| Inflation rate | 10 |
| Years | 2 |
| Result | $100 |
Buying power: the price factor is (1 + 10/100)^2. Multiply $121 by it for a future cost, or divide $121 by it for buying power. Rounded to cents = $100.
No inflation
| Amount | 250 |
|---|---|
| Inflation rate | 0 |
| Years | 20 |
| Result | $250 |
Future cost: the price factor is (1 + 0/100)^20. Multiply $250 by it for a future cost, or divide $250 by it for buying power. Rounded to cents = $250.
Diagram of this result
Two bars on one dollar scale compare the entered amount with its inflation-adjusted equivalent.
Both amounts are listed as exact dollar figures beside the bars.
Common mistakes
Do not subtract the annual percentage repeatedly: price changes compound. A future-cost result and a purchasing-power result use multiplication and division respectively.
Assumptions and limits
USD, nonnegative inflation from 0% to 100%, and whole years from 0 to 100. No live price-index data or forecast is supplied. Deflation is outside this calculator’s domain. Educational estimates only, not financial, tax or investment advice.
Does this use current inflation data?
No. The rate is the scenario you enter. Actual inflation varies over time and between spending categories.
Method and references
The projection compounds a constant annual rate. Official U.S. inflation is measured by the Consumer Price Index from the Bureau of Labor Statistics at https://www.bls.gov/cpi/ ; this calculator does not use that data. The examples above are independent fixtures for the formula.