How to Use an Inflation Calculator for Financial Planning

A million dollars sounds like a lot. But a million dollars in 30 years, at 3 percent annual inflation, buys what about $412,000 buys today. Ignoring inflation in financial planning is like navigating without accounting for currents — you end up somewhere, but not where you intended.

How the calculator works

The ToolStand Inflation Calculator takes three inputs: a starting amount, an assumed annual inflation rate, and a number of years. It calculates the future value of that amount in today purchasing power. For example, $50,000 today at 2.5 percent inflation for 20 years has the purchasing power of about $30,500. The calculator also works in reverse: enter a future amount and see what it is worth today.

Inflation rates in context

The long-term average US inflation rate is about 3 percent, but it has ranged from deflation in the 1930s to over 13 percent in 1979. For conservative planning, use 3-4 percent. For aggressive scenarios, use 5 percent. The calculator lets you adjust the rate to model different economic environments.

Using inflation in retirement planning

Pair the inflation calculator with the Retirement Calculator. First, use the retirement calculator to estimate your nest egg. Then use the inflation calculator to see what that nest egg is worth in today dollars. A retirement plan that shows $2 million in 2056 sounds great until you realize it might only buy what $800,000 buys today. Plan contributions accordingly.

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