Inflation Calculator

How this conversion works

Every conversion here is driven by the Consumer Price Index for All Urban Consumers (CPI-U), published monthly by the US Bureau of Labor Statistics. CPI tracks what a representative basket of goods and services costs over time, which makes it the standard yardstick for purchasing power.

The conversion is a simple ratio: amount × (CPI in target year ÷ CPI in base year). If the index doubled between two years, then every dollar in the earlier year would be worth two dollars in the later one.

The average annual rate shown alongside each result is compound — the rate that applied every single year would produce the same total change. It is not the arithmetic mean of yearly inflation rates.

Reading the numbers the right way

A common mistake is treating cumulative inflation as the figure that matters. A coffee that cost 25 cents in 1970 costs about $2.10 today, which is a large multiple, but the important number is the roughly 4% average annual rate quietly compounding behind it.

The same logic applies in reverse: this tool also shows what an amount in a later year was worth in earlier dollars, which is how you compare salaries, house prices or tuition across decades without fooling yourself.

Where CPI falls short

CPI measures a national average basket, so it will not match your personal experience exactly. Things that change how closely it fits you:

• Housing costs dominate the index — renters and owners experience inflation differently, especially when mortgage rates move.
• Healthcare, tuition and childcare have historically risen faster than the headline index.
• Electronics and apparel have fallen relative to the index over long periods.
• Substitution bias: when beef gets expensive, shoppers buy chicken, and the index adjusts for some but not all of that behaviour.
• Regional differences are ignored — a dollar in San Francisco and a dollar in rural Ohio do not buy the same basket.

Using inflation numbers in planning

For long-horizon planning most people use 2.5% to 3% as a working assumption, which is roughly what the Federal Reserve targets and what long-run history suggests. Use a higher assumption if your spending is concentrated in categories that inflate faster than the average.

When you project a retirement portfolio, always discount future balances back to today’s purchasing power. A $2 million balance forty years from now sounds impressive until you convert it, and ignoring the difference is the single most common planning error this tool can fix.