Calculate the real purchasing power loss over time with CPI-based projections, salary erosion, and inflation-adjusted return charts.
Inflation Impact Calculator connects a starting dollar amount, an inflation assumption, and a time horizon to show how rising prices change what that money can buy. It also compares salary or investment growth with inflation and charts the resulting real values over time. A common source of confusion is that future cost and remaining purchasing power are reciprocal views, not interchangeable figures: the amount needed later to buy today's basket rises, while the real value of a fixed nominal balance falls.
For starting amount A, annual inflation rate i, and n years, the price-level factor is (1 + i)^n. A basket costing A today would require A multiplied by that factor after n years. A fixed nominal amount available then has present purchasing power equal to A divided by the factor. Purchasing power loss is the difference from A, commonly expressed in dollars and as a percentage.
Salary and investment views separate nominal growth from changes in the price level. Salary erosion compares projected pay with the increase required to preserve its starting purchasing power. For investments, the compounded real rate is (1 + nominal return) / (1 + inflation) - 1; subtracting inflation directly is only an approximation. The chart extends these compounded comparisons across the chosen horizon.
No. It reports the consequence of the inflation rate and time horizon used in the calculation. Actual prices can follow a different path, and individual spending patterns may diverge from CPI. The result is best used to compare scenarios, set a purchasing-power target, or test how sensitive a plan is to a higher or lower inflation assumption.
Because both rates compound against their own bases. The exact one-period relationship divides the nominal growth factor by the inflation growth factor: (1 + nominal return) / (1 + inflation) - 1. Direct subtraction is a convenient approximation when both rates are small, but the difference becomes more noticeable as either rate increases or the projection extends over many periods.
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