Inflation

Inflation is the slow, steady increase in the prices of goods and services across an economy. Its practical effect is that the same dollar buys a little less each year, so money kept in cash quietly loses value over time. In the United States, inflation is most commonly measured by the Consumer Price Index, which tracks the cost of a representative basket of household purchases.

Inflation is the reason long-term plans cannot ignore it. A salary or a retirement target that looks comfortable today will buy noticeably less in twenty years, and investments need to outpace inflation just to preserve real wealth. A useful shortcut is the rule of 72: divide 72 by the inflation rate to estimate how long prices take to double, so at 3 percent that is about 24 years. Our inflation playbook shows what a dollar really buys over time, and the inflation calculator puts numbers to it.