$100 Today = $74 in 10 Years (Inflation Math Explained)

At 3% annual inflation, $100 today will only buy $74 worth of goods in 10 years. In 20 years: $55. In 30 years: $41. This means nearly 60% of your purchasing power disappears over three decades — not because you lost money, but because everything around you got more expensive. This is why keeping large sums in a 0% checking account is a guaranteed loss.

Here is how $100 erodes at different inflation rates. At 2% inflation: $82 in 10 years, $67 in 20, $55 in 30. At 3% inflation: $74 in 10, $55 in 20, $41 in 30. At 4% inflation: $68 in 10, $46 in 20, $31 in 30. At 5% inflation: $61 in 10, $38 in 20, $23 in 30. Use the [inflation calculator](/calculators/inflation) to run any amount over any time period.

The historical US inflation average is approximately 3.2% per year. However, recent years have been volatile: 2022 saw 8% inflation and 2023 about 4.1%, both well above the long-term average. In 2026, inflation has moderated to approximately 2.5 to 3%, closer to the Federal Reserve's 2% target.

Real versus nominal returns is the most important concept inflation teaches. If your investments earn 8% per year (nominal return) and inflation is 3%, your real return is approximately 5%. This is what actually grows your purchasing power. A savings account earning 4.0% with 3% inflation gives you only 1.0% real return — better than nothing, but not wealth-building. Use the [compound interest calculator](/calculators/compound-interest) to model growth with different real return assumptions.

How to protect against inflation: stocks have historically returned 7% real (after inflation) over long periods. Real estate typically appreciates at or slightly above inflation. TIPS (Treasury Inflation-Protected Securities) and I-bonds are specifically designed to maintain purchasing power. In Canada, Real Return Bonds serve the same purpose. For retirement planning, always use real returns (4 to 5%) rather than nominal (7 to 8%) — the [retirement gap calculator](/calculators/retirement-gap) helps you plan accordingly.

Frequently Asked Questions:

Is 3% inflation normal? Yes, the long-term US average is about 3.2%. The Fed targets 2%. Anything between 2 to 3% is considered healthy and stable.

Does inflation affect retirement planning? Enormously. A retiree spending $60,000/year needs $80,000/year in 10 years at 3% inflation just to maintain the same lifestyle. This is why retirement portfolios need growth, not just income.

What is the best hedge against inflation? Long-term stock ownership (7% real returns historically), real estate, and inflation-protected bonds (TIPS, I-bonds).