Inflation Calculator
Calculate how inflation erodes purchasing power over time. Compare the value of any dollar amount across any year using historical CPI data.
Frequently Asked Questions
How does inflation affect purchasing power?
Inflation reduces what a dollar can buy over time. At 3% annual inflation, $1,000 today will have the buying power of only $744 in 10 years — a 25.6% loss in purchasing power. This is why keeping large cash reserves loses real value over time. Investments that return more than the inflation rate preserve and grow real wealth.
What is the average historical inflation rate in the US?
The US inflation rate has averaged approximately 3.1% per year since 1913. The 1970s saw high inflation averaging 7.1% per year. From 1990–2020, the average was about 2.5%, in line with the Federal Reserve's 2% target. Inflation spiked to 9.1% in June 2022 (a 40-year high) before declining. The Fed targets 2% annually as a "healthy" inflation rate.
What is the best hedge against inflation?
Historically, US equities (stocks) have outpaced inflation over long periods, averaging about 7% real annual return. Real estate, TIPS (Treasury Inflation-Protected Securities), I-bonds, commodities (gold, oil), and REITs also serve as inflation hedges. Cash and traditional bonds underperform during high inflation. Diversifying across these asset classes provides robust inflation protection.