What is this calculator?
This calculator adjusts an amount for cumulative inflation in either direction: forward, to see what a sum will need to be in future to buy what it buys today, or backward, to see what a future amount is worth in today's money.
Use it when:
- You are planning a long-term goal and want it stated in future currency.
- You want to know what a projected corpus is really worth in today's purchasing power.
- You are comparing a historical amount against a present-day one.
Intended for: Long-term savers, retirement planners, and anyone comparing amounts across different points in time.
How is this calculated?
- The tenure is converted to a number of years.
- The annual inflation rate compounds, exactly as interest does: prices rise by the rate each year on the already-risen level.
- In FORWARD mode, the amount is multiplied by that cumulative factor — the answer to "how much will I need then to match what this buys now?"
- In BACKWARD mode, the amount is divided by the same factor — the answer to "what is this future sum worth in today's money?"
- The cumulative change is reported both as an amount and as a percentage, so the erosion is visible rather than implied.
Formulas
Future (inflated) value
Future = Amount × (1 + f)^t
What a sum must grow to in order to preserve its purchasing power.
- f
- Annual inflation rate as a decimal (e.g. 0.06 for 6%)
- t
- Number of years
Present (deflated) value
Present = Amount / (1 + f)^t
What a future sum is worth in today's purchasing power.
Example
An expense of 100,000 today, projected 10 years forward at 6% annual inflation.
- The cumulative factor is 1.06^10 ≈ 1.7908.
- 100,000 × 1.7908 ≈ 179,085.
Result: You would need about 179,085 in 10 years to buy what 100,000 buys today — a cumulative rise of roughly 79%.
Frequently asked questions
Why does inflation compound?
Each year's price rise applies to the already-higher price level, not to the original one. Six per cent for ten years is therefore about 79% in total, not 60%.
Which inflation rate should I use?
Published consumer price indices give a general figure, but your personal rate depends on what you actually spend on — education, healthcare, and housing often inflate faster than the headline index.
How do I compare an investment return against inflation?
Project the investment forward at its nominal return, then run the result backward through this calculator at your inflation rate. What remains is the real, inflation-adjusted outcome.
Assumptions
What this calculator takes as given:
- The inflation rate entered is constant across the whole period and compounds annually.
- A single rate represents the entire basket of goods you care about.
Limitations
What this calculator cannot know or does not model:
- Real inflation varies year to year and by category; a single constant rate is a simplification.
- Personal inflation differs from headline indices depending on your spending pattern.
- It does not know or fetch any published index — the rate is entirely yours to supply.
- Currency movements and cross-border price differences are not modelled.
References
- Consumer Price Index — concepts and uses — International Labour Organization / IMF CPI Manual. Background on how published inflation rates are constructed and what they do and do not represent.