Inflation Purchasing Power Calculator
Calculate how inflation erodes purchasing power over time.
See the real value of money in future dollars and the percentage lost to inflation.
What Is Purchasing Power? Purchasing power is the quantity of goods and services that a unit of currency can buy. When prices rise due to inflation, each dollar buys less than it did before. A dollar in 1980 could buy what costs roughly $3.60 today — meaning purchasing power has fallen dramatically over decades.
The Core Formula Future Value = Present Value x (1 + r)^n
Where r is the annual inflation rate (as a decimal) and n is the number of years. This tells you how many future dollars you would need to match today’s purchasing power.
The flip side — the real value of your original amount in future dollars — is:
Real Value = PV / (1 + r)^n
This shows what your money will effectively be worth after inflation erodes it.
Percentage Erosion Erosion % = (1 - 1 / (1 + r)^n) x 100
This gives the share of purchasing power that inflation destroys over the period. At 3% annual inflation over 25 years, you lose roughly 52% of purchasing power — your money buys only half of what it does today.
The Rule of 70 A useful shortcut: divide 70 by the inflation rate to estimate how many years it takes for purchasing power to halve. At 7% inflation, purchasing power halves in roughly 10 years. At 3.5%, it halves in 20 years.
Why Inflation Matters Inflation affects savings, wages, pensions, and fixed-income investments. A savings account earning 2% while inflation runs at 4% is actually losing real value each year. Investors must earn returns above the inflation rate simply to break even in real terms.
Consumer Price Index (CPI) The CPI is the most widely used measure of inflation. It tracks the average price change of a basket of goods and services over time. Central banks typically target 2% annual CPI inflation as the sweet spot between growth and price stability.
Historical Context In the United States, average annual inflation has been approximately 3.1% since 1913. Hyperinflation events — like Germany in 1923 or Zimbabwe in 2008 — show the extreme end, where purchasing power can vanish within months.