Purchasing power
What inflation does to your money
Inflation is the gradual rise in the general price of goods and services. A dollar tomorrow buys less than a dollar today. This calculator converts a nominal amount into its real value — what that money will actually buy once inflation is taken into account.
For example, at 3% annual inflation, a fixed $100,000 will buy only about $55,000 worth of goods in 20 years. The gap is not a tax or a fee — it is the silent erosion of purchasing power, and it is one of the most important reasons long-term savers must earn a return above the inflation rate.
The formula
The real value of a nominal amount V after t years at inflation rate i is:
The percentage of purchasing power lost is simply (1 − 1/(1+i)t) × 100%. The chart shows the nominal amount held flat (green) while its real value decays year by year (gold) — the widening gap is the inflation effect.
How to use it
Enter a nominal amount, an assumed annual inflation rate, and a time horizon. The result tells you the real value in today's dollars and how much purchasing power you would lose. Use it to sanity-check long-term goals: a retirement target that ignores inflation will look bigger on paper than it will feel in practice.
Explore more tools
- Compound interest calculator — grow your money with compound interest.
- Retirement calculator — how much to save each month.
- Compounding frequency comparison — annual vs daily compounding.