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5 Percent Inflation Over 10 Years

This page shows the buying power of a 10-year balance when prices rise 5 percent a year. The starting return is 6.5 percent.

Inflation of 5 percent cuts the $70,784 balance to a buying power of $43,455.

$
$
%
years
%
Final balance
$70,784
Total you put in
$45,000
Interest earned
$25,784
Final balance after inflation
$43,455
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
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How buying power is worked out

Picture a loop that repeats 120 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 1.629. That number is one plus the inflation rate of 5 percent raised to the power of 10.

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Worked example

Put $15,000 in and add $250 a month for 10 years at 6.5 percent. The balance reaches $70,784 before inflation of 5 percent is applied.

Inflation takes $27,329 off the balance in buying power. What remains is $43,455.

Questions about this calculator

What if inflation were 6 percent instead of 5 percent over 10 years?

The balance would buy about $39,525 instead of $43,455.

How much would you need at the end to keep up with 5 percent inflation over 10 years?

$70,784 has the buying power of $43,455. To match $70,784 of buying power you would need $115,299 in future money.

Which inflation rate should I use for a 10-year plan when testing 5 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 5 percent leaves $43,455 of buying power while 7 percent leaves $35,983 and 3 percent leaves $52,670.

What real return is left at 6.5 percent growth and 5 percent inflation over 10 years?

Roughly 1.4 percent a year over 10 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.