What $100,000 is worth after 20 years of 5% inflation
After 20 years of 5% inflation, what $100,000 buys today will cost $265,330, and $100,000 held in cash will buy only $37,689 worth of today's goods, a loss of 62.31%.
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The numbers for these inputs
| Year | Cost of the same goods | Buying power of the amount | Buying power lost |
|---|---|---|---|
| 1 | $105,000 | $95,238 | 4.76% |
| 2 | $110,250 | $90,703 | 9.3% |
| 3 | $115,763 | $86,384 | 13.62% |
| 4 | $121,551 | $82,270 | 17.73% |
| 5 | $127,628 | $78,353 | 21.65% |
| 6 | $134,010 | $74,622 | 25.38% |
| 7 | $140,710 | $71,068 | 28.93% |
| 8 | $147,746 | $67,684 | 32.32% |
| 9 | $155,133 | $64,461 | 35.54% |
| 10 | $162,889 | $61,391 | 38.61% |
| 11 | $171,034 | $58,468 | 41.53% |
| 12 | $179,586 | $55,684 | 44.32% |
| 13 | $188,565 | $53,032 | 46.97% |
| 14 | $197,993 | $50,507 | 49.49% |
| 15 | $207,893 | $48,102 | 51.9% |
| 16 | $218,287 | $45,811 | 54.19% |
| 17 | $229,202 | $43,630 | 56.37% |
| 18 | $240,662 | $41,552 | 58.45% |
| 19 | $252,695 | $39,573 | 60.43% |
| 20 | $265,330 | $37,689 | 62.31% |
How it works
Inflation compounds like interest. If prices rise by a steady rate each year, goods that cost one amount today cost amount x (1 + rate)^years after that many years.
The other side of it is buying power: money held in cash for that long buys only amount / (1 + rate)^years of today's goods.
Real inflation changes from year to year and differs between goods, so a single steady rate is an illustration. Use it to see the size of the effect, not to predict a price.
Common mistakes
- Ignoring inflation when judging a savings rate: a 3% account in a 3% inflation year gains nothing in real terms.
- Using the average inflation of one country for a price in another.
- Assuming every price rises at the headline rate; housing, food and electronics move differently.
Questions
How much will $100,000 of goods cost in 20 years?
$265,330 at 5% a year.
What will $100,000 be worth in 20 years?
In today's buying power, $37,689: inflation takes away 62.31% of it.
What inflation rate should I use?
Many central banks aim for about 2%; use the average rate of your country over a long period rather than one recent year.
How do I protect savings from inflation?
Earn a return at or above inflation: compare the interest rate with the inflation rate, and see the compound interest calculator for the effect of growth.
More inflation examples
- What $1,000 is worth after 10 years of 3% inflation
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