Inflation Calculator

Understanding inflation

Inflation reduces the purchasing power of money over time. This calculator shows how much less you can buy with the same amount of money in the future, helping you understand the importance of investing to outpace inflation. Statistics Canada measures inflation using the Consumer Price Index (CPI), which tracks the average price change of a basket of approximately 700 goods and services purchased by Canadian households, spanning categories like food, shelter, transportation, and clothing. The CPI is released monthly. Canadian inflation peaked at 8.1% in June 2022, driven by supply chain disruptions and energy costs, before gradually declining toward the Bank of Canada's target. The Bank targets an inflation rate of 2%, within a control range of 1-3%, and uses its overnight interest rate as the primary tool: raising the rate makes borrowing more expensive, which cools spending and lowers inflation. Inflation erodes the real value of savings over time. At 2% annual inflation, $100,000 of purchasing power today becomes equivalent to about $67,300 in 20 years. This is why investing to outpace inflation is essential for long-term financial goals, especially retirement. Canadian investors can protect against inflation using Real Return Bonds (RRBs), which adjust their principal based on CPI changes. TFSA and RRSP investments in equities and diversified portfolios have historically outpaced inflation over the long term. For retirement planning, use this calculator to understand how much your future expenses will cost in today's dollars. CPP and OAS payments are indexed to inflation, providing partial protection, but pension plans and RRIF withdrawals are typically not indexed.