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Inflation-Adjusted Compound Interest Calculator
A balance of a given size buys less when prices rise. An inflation-adjusted result shows what the final balance is worth in the money of the starting year, which is a fairer picture of what you will be able to buy.
The starting figures are $20,000 plus $200 a month for 20 years at 7 percent with inflation of 3 percent.
How buying power is worked out
The calculator counts 240 months. Each month your balance grows by one twelfth of the 7 percent yearly return and then your $200 deposit goes in. The final balance is what is left after the last month. Two rates are at work. Your money grows at 7 percent a year while prices rise at 3 percent. The calculator divides the final balance by the price growth over 20 years to show its buying power.
Worked example
The balance grows to $184,960 after 20 years. You put in $68,000 of that yourself.
Prices rising at 3 percent make everything cost 1.81 times as much. The final balance therefore buys about as much as $102,408 does at the start.
Questions about this calculator
What if inflation were 5 percent instead?
With 5 percent inflation the same balance would buy about as much as $69,710 does at the start. Higher inflation shrinks the real result.
Which inflation rate should I enter?
Use a long-run average you are comfortable with. Actual inflation changes from year to year so it helps to test a low case and a high case.
What real return does 7 percent growth leave after 3 percent inflation?
Roughly 3.9 percent a year. That figure is what your buying power actually grows by.
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This page is for education only and is not financial or tax advice.