Calculate Real Purchasing Power Over Time
See how inflation erodes your money. Calculate future purchasing power and inflation-adjusted returns.
Inflation: The Silent Wealth Destroyer
At 3% annual inflation, $100,000 today has the purchasing power of only $55,368 in 20 years. Your money loses nearly half its value without any spending. This is why keeping large amounts in savings accounts (earning 0.5-4%) barely keeps pace with inflation. Investing in stocks (historical 10% nominal, ~7% real) is necessary to grow wealth after inflation.
Real vs Nominal Returns
Your brokerage shows nominal returns (not adjusted for inflation). An 8% nominal return with 3% inflation is only a 4.85% real return. This distinction matters for retirement planning — you need enough money to buy goods at future prices, not today prices. Always plan using real (inflation-adjusted) returns to avoid a nasty surprise in retirement.
The real return on cash (savings accounts) has been negative for most of the past 20 years — the interest rate has been below the inflation rate. Holding excess cash beyond a 3-6 month emergency fund guarantees losing purchasing power. Every dollar above your emergency fund should be invested.
