Inflation Calculator - Save Enough to Account for Inflation
Nurturing your financial nest egg is an important goal for all investors,
particularly if you are near retirement or already retired. Hopefully,
savvy investing along with prudent spending and budgeting will prevent
you from draining down your retirement money too quickly. But one factor
that no one can control is the constant increase in the price of goods
and services caused by inflation. Even the most financially-wise people
wince at the thought of inflation eating away at the purchasing power
of their savings and investments.
Just about everything that we buy goes up in price with time. For example,
an item that costs $100 today would cost $134.39 in ten years given a
three percent inflation rate. In 15 years, the same item would cost $155.80,
or over 50 percent more than today.
Another way to understand the impact of inflation is to determine the
value of today's dollar in the future. For instance, $100 that you have
today, in 15 years given a three percent inflation rate, would be worth
only $64.19. Inflation over time does erode the value of money.
You can use the inflation calculator to help you study the impact inflation
is likely to have on your finances. Suppose that you needed $60,000 for
your first year of retirement. How much money would you need in 20 years
to maintain the same purchasing power as today? Assume the annual inflation
rate averages three percent.
Enter 60000 (no commas or dollar sign) in the Today's Amount: field.
Then enter 3 in the Annual Inflation Rate: field: and 20 in the Number
of Years: field. The calculator shows two results. The first result (Reduced
Amount) is $33,220.55, which represents the value of $60,000 in 20 years.
The second result (Required Amount) is $108,366.67, which is amount of
money that you need in 20 years to match the purchasing power of $60,000.
You can see how inflation reduces the value of your money in the future.
Therefore, you need to factor it into your nest egg planning and implementation.
Form Input
On the calculator form, enter only numbers (with or without decimal points).
Do not enter:
- Currency symbols like dollar signs
- Commas
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