Question 1

What does this inflation calculator show?

Accepted Answer

It shows how the price of goods rises over time and how the purchasing power of a fixed amount of money erodes at your chosen average inflation rate.

Question 2

How is future cost calculated?

Accepted Answer

Future cost = Present cost × (1 + inflation rate)^years. Purchasing power is the inverse: Present value = Future amount / (1 + inflation rate)^years.

Question 3

What inflation rate should I use?

Accepted Answer

The Federal Reserve targets 2% long-term US inflation. Recent years have been higher; historical averages since 1913 are around 3%. Pick a rate that matches your planning horizon.

Question 4

Is this the same as CPI?

Accepted Answer

It uses a constant annual rate rather than actual CPI data, so it's an estimate. For historical comparisons, use the BLS CPI Inflation Calculator.