What inflation rate should I use?

The U.S. historical average is about 3% per year over the past century, though the 2010s averaged closer to 2% and 2021–2023 averaged above 5%. Use a conservative 3% for long-term planning and adjust for current conditions when projecting short-term costs.

How does this relate to investment returns?

Your real return is the nominal return minus inflation. A 7% investment return during a 3% inflation year produces a 4% real return. Inflation calculators help you check whether your savings are actually growing in purchasing power.

Economics

Inflation Calculator

Inflation reduces what a dollar can buy over time. This calculator shows how much a given amount of money in one year is equivalent to in another year, using a constant annual inflation rate. It is useful for comparing historical prices, projecting future costs, or understanding the real return on an investment.

Inflation

How it works

Formula & methodology

Future Value = Present Value × (1 + Inflation Rate)^Years. To find the past equivalent: Past Value = Future Value / (1 + Inflation Rate)^Years. The U.S. long-run average CPI inflation rate is roughly 3% per year, though it varies significantly by decade. You can enter any rate to model different scenarios.

Source: BLS: CPI Inflation Calculator methodology

Example

Worked example

Example: $10,000 today at 3% average annual inflation will have the purchasing power of roughly $13,439 in 10 years — meaning you would need $13,439 in year 10 to buy what $10,000 buys today.

FAQ

Frequently asked questions

What inflation rate should I use?: The U.S. historical average is about 3% per year over the past century, though the 2010s averaged closer to 2% and 2021–2023 averaged above 5%. Use a conservative 3% for long-term planning and adjust for current conditions when projecting short-term costs.
How does this relate to investment returns?: Your real return is the nominal return minus inflation. A 7% investment return during a 3% inflation year produces a 4% real return. Inflation calculators help you check whether your savings are actually growing in purchasing power.

Tips

Practical tips

When comparing salaries or prices across different years, always inflation-adjust first — a raise that sounds large can actually be a pay cut in real purchasing power if inflation outpaced it.
Use a higher inflation assumption (4-5%) for categories that have historically outpaced general inflation, like healthcare and college tuition, rather than the general 3% average.

Results are estimates for general informational purposes only and do not constitute financial, tax, or legal advice. Always confirm important figures with a qualified professional or your lender before making a financial decision.