Adjusting for inflation

What are the calculations necessary to adjust a particular dollar value for inflation?

E.g. I have $A in today's dollars. 35 years from now, assuming inflation is 2.5%, that will be like having $X

And the reverse:

E.g. I anticipate that my investment portfolio will have a value of $B in 35 years. Assuming 2.5% inflation, that's $Y in today's dollars

Is it just as simple as X = A * (1.025^35), and Y = B / (1.025^35) ? Or is it more complicated than that?
LVL 31
Frosty555Asked:
Who is Participating?
 
Brad RubinConnect With a Mentor Commented:
You should be using finance calculations for both Future Value and Net Present values. These are prepackaged calculations in Excel. You can also find them in the Finance formula sections in the formula builder.

Example:
=FV(2.5%,35,0,-$A)
=PV(2.5%,35,0,-$B)
0
 
ozoCommented:
$X=$A*(1+2.5/100)^35
$B=$Y*(1+2.5/100)^35
0
 
nickg5Connect With a Mentor Commented:
Inflation the last two years has been around 1.7 to 1.8%

There are simple compound interest calculators which take less time than maybe even opening Excel.

Here is one and I made up numbers:
$30,000 savings
30 years
compounded yearly at 2.5%
After 30 years your $30,000 would be $62,927.

You can change the numbers as you like.
http://www.csgnetwork.com/interestcomplexsavcalc.html

p
0
Free Tool: Subnet Calculator

The subnet calculator helps you design networks by taking an IP address and network mask and returning information such as network, broadcast address, and host range.

One of a set of tools we're offering as a way of saying thank you for being a part of the community.

 
Frosty555Author Commented:
So you can treat inflation calculations the same way you would treat a compound interest calculation?
0
 
ozoCommented:
Modulo whether percentage is reported as nominal APR, effective APR, APY, AER, and which index is used to measure inflation
0
 
nickg5Commented:
Here is a great article on how to calculate inflation.
http://inflationdata.com/inflation/Inflation_Articles/CalculateInflation.asp

The rate of inflation that the U.S. government calculates decides the cost of living raises for retired people, etc.
Last year the rate was calculated to be 1.7%
0
All Courses

From novice to tech pro — start learning today.