At 3% a year for 20 years, what costs $1,000 today would cost about $1,806.11 — an 80.6% total price rise, and today's $1,000 would buy 44.6% less. Inflation compounds like interest in reverse: at a constant annual rate, prices multiply by (1 + rate)^years while the purchasing power of a fixed sum shrinks by the same factor.
Suppose you put the default values into Inflation Calculator:
Plug those into the formula future = amount · (1 + r)^y; past = amount / (1 + r)^y and the result is:
The calculator applies constant-rate compounding in either direction: future cost multiplies the amount by (1 + r)^y, past value divides by it. Total inflation over the period is the factor minus 1 (80.6% at the defaults), while purchasing power lost is 1 − 1/factor (44.6%) — two descriptions of the same change measured from opposite ends. The constant rate is the simplification: actual US inflation, as measured by the BLS Consumer Price Index, varies year to year, so the flat rate you enter stands in for a long-run average rather than reproducing any particular historical stretch.
References: BLS Consumer Price Index.
Last reviewed July 2, 2026 · Editorial policy