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How inflation shrinks your savings
At 3% inflation, $1,000 twenty years from now buys only what about $554 buys today. Over a long retirement, that adds up.
What $1,000 buys in the future, in today's dollars
| Years from now | At 2% inflation | At 3% inflation | At 4% inflation |
|---|---|---|---|
| 5 | $906 | $863 | $822 |
| 10 | $820 | $744 | $676 |
| 15 | $743 | $642 | $555 |
| 20 | $673 | $554 | $456 |
| 25 | $610 | $478 | $375 |
| 30 | $552 | $412 | $308 |
Higher inflation shrinks money faster. Inflation in the U.S. has averaged a little over 3% a year over the long run, with some years much higher.
What it means for retirement
If you spend $4,000 a month today, at 3% inflation you'll need about $5,400 a month in 10 years and about $7,200 a month in 20 years to live the same way. A plan that ignores inflation can look fine on paper and still run short.
How to plan for it
- Social Security rises with inflation each year, so it holds its value better than most income.
- Most pensions don't. A fixed pension buys less every year.
- Some growth helps. Savings held only in cash often grow slower than prices rise.
Our calculator includes inflation by default. Your spending and Social Security go up each year, so the answer isn't falsely rosy.
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