Back to the Rabbit Hole

The Future Worth of Your Dollars: What does it look like?

Calculated using: https://www.calculator.net/inflation-calculator.html

If current trends continue, your dollar-based savings in 30, 40, or 50 years will be worth a fraction of what they are today. In the table, we can see what happens to $100,000 over different time periods and inflation rates. Over the last 50 years, the average inflation rate is right around 3.8%. At that rate, your $100k will only be worth a mere $33k in 30 years time. The purchasing power of fiat currencies is set on a slow decline, thanks to continuous inflation and money printing. The future of your wealth depends on the actions you take today.

A Real World Example: Your 401K

Calculated using: https://www.calculator.net/401k-calculator.html

Let’s imagine you diligently invest in your 401k, contributing regularly over 35 years. You’re optimistic, assuming a solid 10% annual growth in the stock market. At the end of this period, your portfolio grows to a seemingly impressive $7 million. Over the last 50 years the average inflation rate is around 3.8%, and it is safe to assume this number will increase over the next 35 years, so let’s assume 4.5% for this example. Over these 35 years inflation has been quietly eroding the purchasing power of every dollar you've accumulated. By the time you retire, the only real spending power you have left is equal to the contributions you put in—everything the stock market added has been entirely eroded by inflation. So while the nominal amount looks substantial. In terms of what you can actually buy, you’re standing in the same spot you started. I suppose this is better than nothing, you didn’t lose spending power, but is this really what years of hard work and savings should amount to?

Feel free to play around with numbers that make more sense for you and experiment with what what inflation does to your spending power over time.