Step 5 of 5 — Account for inflation
See how inflation erodes purchasing power and what you need to earn to stay ahead.
Email your complete financial analysis
No spam, ever. We only email you about topics you care about. Unsubscribe anytime.
All 5 steps complete. Save your results to snapshot and explore another journey.
Future value needed = Today's amount × (1+inflation)^years. Purchasing power = Today's amount / (1+inflation)^years. Real return = (1+nominal)/(1+inflation)-1.
At 3% inflation: $10,000 today buys only $7,441 of goods in 10 years. At 5% inflation: $6,139. At 8%: $4,632. Cash loses value every year.
Long-term US average is ~3% per year. 2022 saw 8%+ (highest in 40 years). Fed targets 2%. Recent trend: 3-4% post-pandemic.
Invest in assets that outpace inflation: stocks (7-10% average), real estate, I-bonds, TIPS. HYSA at 4-5% only barely keeps up at current rates.
Real return = Nominal return - Inflation rate. If your portfolio returns 9% and inflation is 3%, your real return is 6%. This is your actual purchasing power gain.
A $1M portfolio targeted for retirement in 20 years needs to be $1.81M at 3% inflation to have the same buying power. Always plan in real (inflation-adjusted) dollars.
Calculations are for educational purposes only. Consult a qualified financial advisor for personalized advice.