Purchasing Power Calculator

How it is calculated

The tool discounts today's amount by compound inflation: real value = amount ÷ (1 + rate ÷ 100)years and power lost = amount − real value. Amount is the sum in dollars, rate is the average annual inflation in percent (3 means 3%), and years is the time span. The result is what the same sum would be worth in today's money after that many years of steady price rises, not what it will be worth if you invest it. A rate of 0 or a span of 0 years leaves the amount unchanged. A negative rate (falling prices) is accepted and gives a real value above the amount, shown as a negative loss; a rate of −100 or lower and negative years return no result. Real inflation varies from year to year, so the answer depends on the average you assume.

Common mistakes

• Entering 0.03 for the rate. The field is in percent, so 3% is typed as 3; 0.03 would mean three hundredths of a percent and show almost no loss.
• Using a single year's inflation figure for a 20-year horizon. Inflation moves around, so try a lower and a higher average to see the range.
• Reading the result as a forecast of your balance. The tool shows what the sum is worth in today's terms; it ignores any interest you earn on the money.
• Adding the yearly rate up instead of compounding it. 3% for 20 years is not a 60% loss that leaves 40%; the tool leaves about 55% of the value, because each year's loss applies to a smaller amount.