What money today will be worth in the future after inflation

The quiet tax most people under-weight

Inflation is the most financially damaging force that most people don't include in their planning. 10,000 in 1994 had the purchasing power of roughly 21,000 today — so leaving 10,000 under the mattress for 30 years cost you 11,000 in real terms without you making a single bad decision. The calculator above shows what a sum was worth in any past year, or what it will be worth in any future year at a given inflation rate. Running this against decisions you're tempted to make "keep it in cash for safety" is often the most useful financial exercise available.

How inflation is actually measured

Inflation is officially measured by CPI (Consumer Price Index) and CPIH (including owner-occupier housing costs). Both are calculated by tracking the prices of a representative basket of around 700 goods and services, weighted by household spending patterns. The basket is updated annually — items people stop buying drop out; items gaining popularity get added. In 2024, for example, gluten-free bread was added; some traditional items were removed. This is why "official inflation" can differ from your personal inflation rate: your specific spending pattern isn't the national average. Someone who spends heavily on rent faces different inflation than someone whose mortgage is paid and who cooks at home.

The difference between CPI and RPI

RPI (Retail Price Index) is the older measure, still used for some specific purposes (rail fares, some pension schemes, index-linked gilts). RPI is typically 0.5–1.5% higher than CPI because of methodological differences — it uses a different averaging formula and includes housing costs (mortgage interest) differently. For financial contracts with RPI escalation clauses (like some pensions and corporate bonds), the higher RPI figure gives better protection. For most personal planning, CPI is the more honest number and the one economists recommend.

Why your personal inflation differs from the headline

Headline CPI is an average. Your inflation depends on what you actually buy. Three specific components behave very differently from the headline:

Housing. For renters, rent inflation in cities has run 5–8% recently — far above headline CPI. Mortgage-payers with fixed rates face 0% until reset, then potentially large jumps. Owner-outright face 0% on housing indefinitely.

Energy. Has run 30%+ in some years, -10% in others. Volatile and bigger for homes with high heating needs.

Food. Inflation on basic staples often exceeds general CPI, especially in volatile periods. Matters more to lower-income households because food is a larger share of their spending.

If you're planning for retirement and your spending is heavy in any of these categories, the headline CPI figure may understate your actual cost pressure. Build in a buffer above CPI for personal inflation risk.

The "real" vs "nominal" distinction

This is where most financial planning goes wrong on inflation. Nominal numbers are the headline figures — what you see on your bank statement. Real numbers are nominal minus inflation — what the money can actually buy. A pension projected to grow to 500,000 in 30 years at 6% nominal is projected to be 500,000 in 2054 units. At 2.5% inflation over those 30 years, the real purchasing power of that 500,000 is equivalent to 238,000 in today's money. The 500,000 figure is not wrong — it's just not what most people mean when they think about financial planning. Real numbers are the honest basis for long-term plans.

Inflation's compounding effect on long horizons

At 2.5% annual inflation, prices roughly double every 28 years. At 3.5%, every 20 years. At 5%, every 14 years. For a 25-year-old planning 40 years to retirement, even modest inflation means the prices they'll face in retirement are roughly 2.7× today's at 2.5% inflation. Planning retirement spending in today's units therefore dramatically understates future nominal requirements. The right frame is either: plan in real (today's) units using real investment returns, or plan in nominal units with explicit inflation estimates applied to both expenses and returns. Mixing the two — nominal returns with today's expenses — consistently overstates how comfortable the future will be.

What actually protects against inflation

Different asset classes respond differently to inflation. Equities tend to keep pace with inflation over decades (companies can raise prices), though short-term volatility can mask this. Index-linked gilts explicitly track inflation and are the purest protection available. Property historically tracks inflation reasonably well, though returns vary widely by location. Cash savings lose purchasing power any time the interest rate is below inflation (which has been most of the last 15 years for easy-access accounts). Long-duration fixed-rate bonds are the worst inflation hedges — their fixed payments become worth progressively less in real terms. The portfolio implication: for long-term real wealth preservation, cash-heavy portfolios have typically lost purchasing power; equity-heavy portfolios have typically preserved or grown it.

Current-year inflation vs long-run average

Inflation in any specific year can vary enormously from the long-run average. CPI was 11.1% in October 2022 and 2.0% in early 2025. Long-run average over 100+ years is roughly 3%. Planning assumptions should use the long-run average for multi-decade horizons, not the current year's figure. A plan built assuming 11% permanent inflation fails in different ways than one built assuming 0%. For conservative long-term planning, 3–3.5% is the historically-defensible central estimate.

What the calculator can show you

Historical purchasing power: what an amount from year X is worth today, or what today's amount equals in year X. Future projections: what a sum today will be worth in future years at various inflation rates. Running both uses on amounts you care about (expected retirement income, ambitious savings goals, historical salaries) makes the impact of inflation concrete in a way generic warnings don't.

What it can't do

The tool applies uniform inflation rates. Reality includes variable personal inflation rates, product-specific inflation, and volatility around the average. Use the tool as a reasonable central estimate; add 20% margin for personal inflation risk; and treat any long-horizon projection as a range, not a point.