What Inflation Actually Did to Your Money
$100 in 1995 buys what $211 buys today. Prices have risen 111% in thirty years - an average of 2.52% a year. That sounds mild until you apply it to a savings account paying 0.4%, or a salary that has not moved, or a retirement plan built on today's costs.
What money was worth
Official US price data, 1913 to 2025, from the Bureau of Labor Statistics. What $100 from a given year is worth today:
| $100 in | Is $ today | Prices rose | Average a year |
|---|---|---|---|
| 1975 | $598 | 498% | 3.64% |
| 1995 | $211 | 111% | 2.52% |
| 2005 | $165 | 64.8% | 2.53% |
| 2015 | $136 | 35.8% | 3.11% |
| 2020 | $124 | 24.4% | 4.46% |
Two things stand out.
The long run is remarkably steady. Around 2.5% a year across most recent multi-decade stretches. Prices roughly double every thirty years.
The last five years were not. 4.46% a year from 2020 to 2025 - nearly double the thirty-year average. That is why household budgets have felt tighter recently in a way the long-run figure does not explain.
What it does to savings
This is where the abstract number becomes personal.
If your account pays less than prices rise, your money buys less every year even though the balance goes up. The statement number is not lying - it is just measuring the wrong thing.
$20,000 in an account paying 0.4% while prices rise 3%:
- The real return is −2.52% a year
- After ten years the balance is around $20,808
- But it buys what $15,488 buys today
You have “made” $808 and lost roughly $4,500 of purchasing power. Nothing went wrong and nobody made a mistake. The account simply was never designed to keep up.
The fix is not complicated. The gap between a big-bank rate and a good online one is often several percent - over five years on $20,000 that difference is $4,520, which the high-yield savings calculator works out for your own balance.
What it does to your salary
Here is the comparison people rarely run properly.
Going from $50,000 in 2015 to $60,000 in 2025 is a 20% rise. That sounds like progress.
Except keeping pace with prices over those ten years would have required $67,916.
| Amount | |
|---|---|
| Your pay in 2015 | $50,000 |
| Your pay in 2025 | $60,000 |
| What it needed to be | $67,916 |
| Shortfall | $7,916 |
| Real change | −11.7% |
A 20% raise that is really an 11.7% pay cut.
This is not a trick of presentation - it is what actually happened to your buying power. And it explains something a lot of people feel but struggle to articulate: that their pay went up and their life did not get easier.
If you are going into a pay review, this is the number worth taking with you. The pay rise calculator works out what a raise needs to be simply to stand still.
What it does to retirement plans
A retirement plan built on today’s costs is a plan built on a moving target.
At 2.5% a year - the calm, long-run figure - prices roughly double every thirty years. Someone thirty years from retiring needs roughly twice today’s income to have the same life.
At the last five years’ rate of 4.46%, they double in about sixteen.
This is why a fixed pension or a fixed annuity carries a risk that is easy to miss. The cheque never changes. What it buys falls every single year. Over a twenty-five year retirement at 3%, a fixed income loses more than half its purchasing power - see the annuity payout calculator for what that looks like in cash.
What to do about it
- Check your savings rate against inflation, not against zero. If it is lower, you are losing money in the only sense that matters.
- Judge pay rises against inflation. A 3% raise in a 4% year is a pay cut.
- Build inflation into long-term plans. A number that looks comfortable today will not be in twenty years.
- Be wary of fixed incomes for life without some protection against rising prices.
Look up your own years in the inflation calculator - it uses 113 years of official price data and shows what any amount was worth in any other year.
Common questions about inflation
How much have prices actually risen?
Over the thirty years to 2025, US prices rose 111%. so $100 then needs to be $211 now. That is an average of 2.52% a year. Over the last fifty years it is 498%, or 3.64% a year, because the 1970s and 80s were far more inflationary than recent decades.
Why does a savings account lose money?
If your account pays less than prices rise, your money buys less each year even though the balance grows. An account paying 0.4% while prices rise 3% has a real return of −2.52%. After ten years, $20,000 in that account buys what $15,488 buys today.
How do I tell if my pay has kept up?
Compare the rise against inflation over the same period, not against zero. Going from $50,000 in 2015 to $60,000 in 2025 looks like a 20% raise - but keeping pace would have needed $67,916. That is $7,916 behind, an 11.7% cut in real terms.
Is recent inflation unusual?
The last five years have been faster than the preceding twenty-five. Prices rose 4.46% a year on average from 2020 to 2025, against 2.52% a year over the thirty years to 2025. That is why the same salary has felt tighter recently than the long-run average would suggest.
What figures are these based on?
The Bureau of Labor Statistics consumer price series, covering 1913 to 2025 - 113 years of official data pulled directly from their public feed. Nothing here is estimated or remembered.