Question 1

How does inflation reduce purchasing power?

Accepted Answer

Inflation means prices rise over time, so each dollar buys less. At 3% annual inflation, something that costs $100 today would cost about $243 in 30 years. Your $100 would only have the purchasing power of about $41 in today's terms.

Question 2

What is a typical inflation rate?

Accepted Answer

The U.S. Federal Reserve targets 2% annual inflation. Historically, the long-term average has been around 3%. However, inflation can spike significantly higher during certain periods — for example, it exceeded 9% in 2022.

Question 3

Do salary raises keep up with inflation?

Accepted Answer

It depends on your field and employer. Average annual wage growth in the U.S. has historically been around 3-4%, which roughly tracks inflation. However, many workers receive raises below the inflation rate, meaning their real purchasing power declines over time. Tracking your raise rate against inflation helps you understand whether your standard of living is improving or eroding.

Inflation Impact Calculator

Assumptions

Future Purchasing Power

Purchasing Power Lost

Income vs. Inflation

Purchasing Power Over Time

Year-by-Year Breakdown