Calculate how inflation erodes your purchasing power. Discover what your money will be worth in the future given a specific inflation rate.
About Inflation
Inflation erodes the purchasing power of money over time. ₹100 today might only be worth ₹60 in 10 years at 5% inflation. This calculator helps with retirement planning, savings targets, and financial goal setting. Understanding inflation is crucial for long-term financial planning and ensuring your money maintains value.
How It Works
The calculator uses the formula: Future Value = Initial Amount × (1 + Inflation Rate)^Years. This shows nominal future value and calculates purchasing power loss. The real value indicates what that future amount is worth in today's money. For example, ₹1 lakh at 5% inflation for 10 years becomes ₹1.63 lakhs nominally, but only ₹61,391 in today's purchasing power.
Frequently Asked Questions
What is inflation? ▼
Inflation is the rate at which prices of goods and services increase over time. At 5% inflation, items costing ₹100 now will cost ₹105 next year. Your money buys less as prices rise.
Why does inflation matter for savings? ▼
If you save ₹1 lakh and inflation is 6% yearly, that money's purchasing power drops. You need returns higher than inflation to grow real wealth. If your savings earn 4% but inflation is 6%, you're losing money in real terms.
What's the difference between nominal and real value? ▼
Nominal value is the amount you see: ₹1.63 lakh. Real value adjusts for inflation to show purchasing power in today's money: ₹61,391. Real value matters more for financial planning because it shows actual purchasing power.
What inflation rate should I use? ▼
India's historical average inflation is 5-6%. Use current inflation rates for short-term planning. For long-term retirement planning, use conservative estimates: 5-7%. Higher inflation erodes savings faster, so plan accordingly.
How does this affect my retirement planning? ▼
If you need ₹50,000/month retirement income today and inflation is 5%, you'll need ₹129,000/month in 20 years. Ignore inflation and you'll fall short. Always factor inflation into retirement corpus calculations.