# Inflation Calculator

The **Inflation Calculator** below can help you calculate **future** values based on an assumption of the annual inflation rate. This is especially helpful for **retirement planning**, where you may need to decide on how much money you can live on after retirement. Use this inflation calculator along with the Annuity Calculator - a tool for deciding how long your retirement nest egg may last.

## Inflation Calculator

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**Disclaimer**: This calculator and information on this page is for educational purposes only. We do not guarantee the results or the applicability to your unique financial situation. You should seek the advice of qualified professionals regarding financial decisions.

## How the Inflation Calculator Works

Many of the online inflation calculators, such as the Inflation Calculator on bls.gov are based on the historical values for the Consumer Price Index (CPI). These are useful for historical comparisons, and you can also look at historical inflation rates to help you decide on what rate to assume for the future.

The above Inflation Calculator is allows you to make predictions about the future based on any inflation rate that you specify. It uses formulas similar to the **PV** (present value) and **FV** (future value) formulas in Excel.

### Example

Let's make a rough estimation that inflation will be 2% per year from now on. Here a couple scenarios to show how you would apply the PV and FV formulas.

**Calculate Equivalent Present Value**: First, let's say that I was using the Annuity Calculator to help me figure out how long my nest egg would last, and I had originally planned on an initial payout of $50,000 per year. I'm not planning to retire for 20 years, so based on today's prices, that $50,000 is actually worth a lot less. I'd use the PV formula to figure out the inflation-adjusted value:

=33,648.57

Wow! That is a lot less than $50000. So, instead of making this mistake now and having to delay my retirement for a few years, let's figure out what I need to plan for.

**Calculate Equivalent Future Value**: Let's say that today I can comfortably live on $50000 per year. If I want to maintain that same lifestyle, I would need a little more each year to live on. To estimate how much I'd need 20 years from now, I'd would use the FV formula:

=74,297.37

So, when I retire, I need to plan on needing $74000 my first year of retirement if I want to maintain the same lifestyle that $50000 affords me today. Inflation will cause that need to increase each year after I retire, but the Annuity Calculator does take that into account.

Planning for Retirement? Don't Forget About Inflation

### References

- Discount Factors at
*Vertex42.com* - Consumer Price Index at
*www.bls.gov*- The U.S. Bureau of Labor Statistics provides that data for historical inflation rates based on the CPI. - Graph of Historical Inflation at
*wikipedia.org*