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2 Percent Inflation Over 20 Years

This page shows the buying power of a 20-year balance when prices rise 2 percent a year. The starting return is 6.5 percent.

The balance reaches $177,452 but buys about what $119,420 buys at the start.

$
$
%
years
%
Final balance
$177,452
Total you put in
$75,000
Interest earned
$102,452
Final balance after inflation
$119,420
Year by year
YearTotal put inBalance
1$18,000$19,096
2$21,000$23,465
3$24,000$28,128
4$27,000$33,103
5$30,000$38,411
6$33,000$44,074
7$36,000$50,117
8$39,000$56,564
9$42,000$63,444
10$45,000$70,784
11$48,000$78,615
12$51,000$86,971
13$54,000$95,887
14$57,000$105,399
15$60,000$115,549
16$63,000$126,379
17$66,000$137,934
18$69,000$150,262
19$72,000$163,417
20$75,000$177,452
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How buying power is worked out

Picture a loop that repeats 240 times. Inside the loop the balance is multiplied by one plus the monthly rate of 0.5417 percent. Then the monthly deposit of $250 is added. When the loop ends the balance is your result. To see buying power, take the final balance and divide it by 1.486. That number is one plus the inflation rate of 2 percent raised to the power of 20.

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Worked example

Put $15,000 in and add $250 a month for 20 years at 6.5 percent. The balance reaches $177,452 before inflation of 2 percent is applied.

Prices grow by a factor of 1.49 at 2 percent over 20 years. The final balance therefore buys about as much as $119,420 does at the start.

Questions about this calculator

What if inflation were 3 percent instead of 2 percent over 20 years?

The balance would buy about $98,251 instead of $119,420.

How much would you need at the end to keep up with 2 percent inflation over 20 years?

$177,452 has the buying power of $119,420. To match $177,452 of buying power you would need $263,684 in future money.

Which inflation rate should I use for a 20-year plan when testing 2 percent?

Use a long-run average you are comfortable with. Prices rarely rise at a steady pace so test a low and a high case. Here 2 percent leaves $119,420 of buying power while 4 percent leaves $80,987 and 0 percent leaves $177,452.

What real return is left at 6.5 percent growth and 2 percent inflation over 20 years?

Roughly 4.4 percent a year over 20 years. That is how fast your buying power grows.

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This page is for education only and is not financial or tax advice.