North Dakota inflation calculator

What the calculator computes

Two figures, from the same three inputs.

The first is purchasing power: your amount divided by one plus the rate, compounded over the number of years. That answers "what will this sum buy later". The second is the amount you would need instead: your amount multiplied by the same factor. That answers "what will this basket cost later". They are the same arithmetic pointed in opposite directions, and people routinely mean one while quoting the other.

The table underneath breaks the same calculation into five-year steps, because the compounding is not intuitive and seeing it march is more persuasive than a single endpoint.

A worked example at the tool’s defaults

The calculator opens with $50,000, twenty years, and a rate of 3%.

After twenty years at 3%, $50,000 has the buying power of roughly $27,700 in today’s money. That is $22,300 of purchasing power gone, or about 45% of the original value, without a single dollar leaving the account.

The second column is the one that matters for planning. If something costs $50,000 today and you intend to buy it in twenty years, budgeting $50,000 is budgeting a little over half of it.

Why the default is 3% and not a forecast

Three per cent is a planning convention. It sits above the Federal Reserve’s stated longer-run goal of 2% and below what the United States has experienced in its worse stretches, which makes it a reasonable middle for a long horizon.

It is not a prediction. Nobody can tell you what inflation will average over the next twenty years, and a calculator that implied otherwise would be lying to you. Run it at 2% and at 4% as well: at 2% over twenty years the $50,000 keeps about $33,600 of buying power, at 4% about $22,800. The spread between those two is larger than most people expect, and it is the honest range of the exercise.

A useful shortcut for sanity-checking any rate is the rule of 72. Divide 72 by the inflation rate and you get roughly the number of years for prices to double: 24 years at 3%, 36 at 2%, 18 at 4%.

Is the CPI your inflation rate?

Almost certainly not, and this is the most important caveat in the whole tool.

The Consumer Price Index measures a national basket of goods and services with fixed weights derived from surveyed spending. Your own rate depends on what you actually buy. The published categories do not move together, and they never have:

• Rent and housing dominate the budget of anyone who does not own, and move with local markets rather than the national average.
• Healthcare has its own trajectory, which matters enormously if you are retired and barely at all if your employer covers you.
• Food and energy are volatile enough that they are often stripped out to see the underlying trend.
• Electronics frequently fall in price while everything else rises.

A retired homeowner and a renting family with young children face different inflation rates in the same year, in the same city. The BLS publishes the components as well as the headline, which is the place to check rather than assuming the average is yours. Housing costs by metro are covered in the cost of living section, and they usually explain more of a household’s real inflation than any national figure.

Weights are the part most people miss. The index is not an average of price changes, it is a weighted average, and the weights come from what households collectively spend rather than from what you spend. Shelter is the largest single component, which is why the headline figure tracks housing more closely than it tracks anything you notice at the till.

Shelter is also measured in a way that surprises people. For owner-occupiers the index uses the rental value of the home rather than mortgage payments or house prices, because a house is treated as an asset and the thing being consumed is somewhere to live. A household with a fixed mortgage therefore experiences almost none of the shelter inflation the index reports, while a renter signing a new lease can experience a great deal more of it.

Medical care carries a smaller weight in the national basket than it does in the budget of anyone managing a chronic condition or approaching retirement, and the same is true of childcare for the years it applies. Where two or three categories dominate your spending, your rate is mostly those categories and only loosely the headline.

The BLS publishes the component indexes alongside the headline figure, and that is the useful thing to check. A rough weighted average built from the three or four lines that dominate your own budget will describe your position better than any national number can.

Does a raise that matches inflation leave you even?

Not quite, for two reasons.

The first is tax. A raise is taxed, so a 3% raise leaves you with less than 3% more spending power. Brackets and the standard deduction are adjusted for inflation each year, which prevents the worst of the drift, but state and local systems vary and not all of them adjust. The taxes section covers what does and does not get indexed.

The second is that your personal basket may have risen faster than the national index the raise was benchmarked against. If your rent went up 8% in a year when the headline index went up 3%, a 3% raise is a real-terms cut for you regardless of what the average did.

What this calculator cannot capture

The code is explicit about its own limits, and they are the right ones.

• It uses a single constant rate. Actual inflation moves, sometimes sharply, and a long average hides periods that felt very different while they were happening. Compounding at a steady 3% and compounding at an average of 3% reached through a spike and a lull do not produce identical paths.
• The official CPI measures a national basket. Your rate depends on what you buy, where you live and what stage of life you are at.
• It says nothing about returns. The tool shows what money loses to inflation, not what it might earn to offset that. Money invested has its own rate and its own risk; that is a separate question, covered in the investing section.
• It is not a forecast. Nothing in it predicts anything. It projects one assumption forward.

For anything with a long horizon, the projections here are illustrations rather than advice. The limits of everything on this site are set out in the disclaimer.

What does this mean for cash held for years?

It means the balance and the value move in opposite directions.

A savings balance that never falls feels safe, and over a short horizon it is. Money needed in the next year or two should not be exposed to markets, and an emergency fund is not an investment. Over a long horizon the same balance is losing quietly. Run this calculator with your own cash balance and the number of years you expect to hold it, and the loss is stated in the third line of the result.

Interest offsets part of that and rarely all of it, and the offset is smaller than the headline rate suggests, because interest in a taxable account is taxed as ordinary income while the erosion itself is not deductible. A rate that matches inflation before tax does not match it after tax.

The practical division is by purpose rather than by amount. Money with a job in the next couple of years belongs somewhere boring and instant, and the real-terms loss is the price of that certainty. Money with a horizon measured in decades faces the arithmetic on this page in full, and whether an investment outpaces inflation, with the risk that comes attached, is a separate question covered in the investing section.

What is worth avoiding is holding a large balance for a long horizon by default rather than by decision.

The mistake that quietly wrecks a long plan

Setting a retirement or savings target in today’s dollars and never adjusting it.

Someone who decides they need $50,000 a year to live on, and plans for that figure twenty years out, has planned for roughly $27,700 a year of actual living. The number looks right, feels right, and is short by about 45%. The same error appears in college savings targets, in insurance cover chosen once and never revisited, and in any fixed sum that sounded generous when it was written down.

Two related mistakes are worth naming. Holding a large cash balance for a long horizon is a guaranteed real-terms loss even while the balance rises, which is why long-term money and emergency money get treated differently in the banking section. And comparing salaries or house prices across decades without adjusting for inflation produces conclusions that are simply wrong; the BLS publishes its own inflation calculator for exactly that job.

A short checklist

• Run the calculation at 2%, 3% and 4% rather than trusting one rate
• Express any long-term target in future dollars, not today’s
• Check the CPI components that dominate your own spending
• Compare a raise against your own costs, not only the headline index
• Separate money you need soon from money that has a long horizon
• Revisit fixed targets, including insurance cover, every few years