Calculator guide
Project an amount's future equivalent cost and the reduced buying power of a fixed amount using a constant annual inflation rate.
Formula or method
Future equivalent cost = today's amount × (1 + annual inflation rate ÷ 100)^years. Purchasing Power Lost = future equivalent cost − today's amount. Future Buying Power of Today's Amount = today's amount ÷ (1 + annual inflation rate ÷ 100)^years.
How to use this calculator
- Enter Today's Amount in dollars and an assumed Annual Inflation Rate in percent.
- Enter the number of Years to project.
- Compare the future equivalent cost with the buying power of the original amount if you do not increase it.
Worked example
At 3% annual inflation for 10 years, $10,000 × 1.03^10 = $13,439.16 in future equivalent cost. The displayed Purchasing Power Lost is $3,439.16 (the increase in cost); the Future Buying Power of Today's Amount is $10,000 ÷ 1.03^10 = $7,440.94 in today's dollars.
Understanding the result
The future equivalent cost answers what might be needed later to buy what $10,000 buys now. The calculator's Purchasing Power Lost output is the nominal increase in equivalent cost, not the $2,559.06 decrease in the real value of a fixed $10,000.
Limitations and assumptions
- Uses a single constant, user-entered rate compounded once per year; actual inflation varies over time and by purchase category.
- Does not forecast an official price index, taxes, investment returns, or changes in consumption.
Frequently asked questions
Is the inflation rate a forecast?
No. You choose a hypothetical annual rate for the calculation.
Why is buying power below the starting amount?
At positive inflation, an unchanged dollar amount buys less in future years.
Does Purchasing Power Lost mean the same thing as lost buying power?
Here that label shows the added future cost; the separate Future Buying Power output shows the deflated value of the original amount.
Sources
Scenario estimate only; actual price changes may differ.