What is the impact of inflation? More than you might realize! The Inflation Calculator calculates the impact of inflation on purchasing power. The user may do historical calculations or what-if projections on possible future inflation.
Purchasing power is calculated in two ways:
The Equal Value (Equivalent Purchasing Power) method will calculate how much you will need in the future to have the equivalent value as some amount today. That is, it will take $1,276.28 five years in the future to buy what $1000 will buy today if the average rate of inflation is 5%. You can use this result to know how an investment is doing in terms of "Constant Dollars."
The Actual Value (Declining Purchasing Power) shows what the starting amount will buy in current dollars at some point in the future. For example, $1000 will buy $773.78 worth of goods or services in five years with a rate of inflation of 5%.
This calculator has been updated so that the offical USA Consumer Price Index (CPI) values are used as defaults for historical inflation calculations. The default value can however be edited. The user can change the inflation rate annually to allow for or project changing rates of inflation.
This is a very important calculator for financial planning. Depending upon the rate of inflation, it ca be a very grave error to ignore its consequences. Just for the "fun" of it, use this calculator to see what the consequences of 2.5% inflation over 20 years has on your retirement planning
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