How It Works

A dollar today won’t buy as much in the future due to inflation. This formula converts future money into “today’s dollars” so you can understand its real purchasing power.

Syntax

=future_value / (1 + inflation_rate)^years

Or using present value:

=PV(inflation_rate, years, 0, future_value)

Example

Your Retirement Projection:

Projected savings at 65: $1,000,000
Years until retirement: 30
Assumed inflation: 3%

Today’s Dollars:

=$1,000,000 / (1 + 3%)^30

Result: $411,987

Your $1M in 30 years will buy what ~$412,000 buys today.

The Impact of Inflation

Future Amount	In 10 Years	In 20 Years	In 30 Years
$100,000	$74,409	$55,368	$41,199
$500,000	$372,047	$276,840	$205,994
$1,000,000	$744,094	$553,680	$411,987

At 3% inflation

Formula: =A2/(1.03)^B1

Real Rate of Return

Your investments grow, but so do prices. Real return = nominal return minus inflation.

Approximate Method

=nominal_return - inflation_rate

Precise Method

=(1 + nominal_return) / (1 + inflation_rate) - 1

Example:

Investment return: 8%
Inflation: 3%
Real return: =(1.08)/(1.03)-1 = 4.85%

Planning with Real Returns

Use inflation-adjusted returns for retirement planning:

Scenario	Nominal	Inflation	Real Return
Stocks	10%	3%	6.8%
Bonds	5%	3%	1.9%
Savings	4%	3%	1.0%
Cash	0%	3%	-2.9%

Cash loses purchasing power every year!

Future Cost Calculator

What will something cost in the future?

=current_cost * (1 + inflation)^years

Example: College costs $30,000/year today. In 18 years at 5% education inflation:

=$30,000 * (1.05)^18 = $72,244/year

Retirement Needs Calculator

Step 1: Future Annual Expenses

=current_expenses * (1 + inflation)^years_to_retirement

Step 2: Total Needed (25x Rule)

=future_annual * 25

Step 3: In Today’s Dollars

=total_needed / (1 + inflation)^years_to_retirement

Example:

Current expenses: $50,000/year
Years to retirement: 25
Inflation: 3%

Future expenses: $50,000 * 1.03^25 = $104,689
Total needed: $104,689 * 25 = $2,617,225
Today's equivalent: $2,617,225 / 1.03^25 = $1,250,000

Building an Inflation Calculator

Input	Value
Amount	$1,000,000
Years	30
Inflation Rate	3%

Output	Formula
Future Value (nominal)	`=B1`
Today’s Equivalent	`=B1/(1+B3)^B2`
Purchasing Power Lost	`=B1-B6`
% of Original Value	`=B6/B1`

Historical Inflation Reference

Period	Average Inflation
1990-2023	2.6%
2000-2023	2.5%
2020-2023	5.0%
Long-term assumption	2.5-3.0%

For planning, 3% is commonly used as a conservative long-term estimate.

Pro Tips

Use real returns for retirement calculators - nominal projections overstate purchasing power
Healthcare inflates faster - use 5-6% for medical expense projections
Education inflates faster - use 5-6% for college savings
Social Security adjusts - benefits have COLA, so don’t double-count inflation there
Review assumptions - if actual inflation differs, adjust your plan

Common Errors

Forgetting inflation entirely: $1M in 30 years isn’t the same as $1M today
Using wrong rate: Healthcare, education, housing may inflate faster than general CPI
Double-adjusting: If your returns are already “real returns,” don’t subtract inflation again

Inflation-Adjusted Value