Inflation Calculator

Inflation measures the rate at which the general price level of goods and services rises over time, eroding the purchasing power of each dollar. The US Bureau of Labor Statistics tracks inflation through the Consumer Price Index (CPI-U), which measures the average change in prices paid by urban consumers for a basket of goods and services including food, housing, transportation, and medical care. Since 1913, the US dollar has lost over 96% of its purchasing power -- meaning that what cost $1 in 1913 would require roughly $32 today.

The average annual inflation rate in the United States has been approximately 3.2% since 1913, though rates vary dramatically by decade. The 1970s saw double-digit inflation peaking above 13%, while the 2010s averaged below 2%. The post-pandemic period of 2021-2023 brought inflation back to levels not seen in 40 years, with CPI rising 7% in 2021 and 6.5% in 2022 before cooling in 2023 and 2024. Understanding these historical patterns helps you plan for future price changes and set realistic expectations for savings and investment growth.

Inflation has practical implications for financial planning, salary negotiations, and retirement savings. A salary that stays flat for five years at 3% inflation effectively loses about 14% of its purchasing power. Retirees on fixed incomes are particularly vulnerable because their spending power declines each year. To stay ahead of inflation, investments should earn a real return (after inflation) that is positive. Treasury Inflation-Protected Securities (TIPS), equities, and real estate have historically outpaced inflation over long periods, making them important components of an inflation-aware portfolio strategy.