At an average annual inflation rate of 4%, our purchasing power would decrease by over 45% over the next 15 years.

2024 current annualized Fed inflation PCE Gauge is at 3.6%. In the previous 3 years,

23: 3.6%
22: 5.5%
21: 5.8%

Let’s call it 4% inflation average, that means at the current rate we lose -50% in purchasing power in another 15 years.

Good luck! pic.twitter.com/iCHdFqUFlu

— Golden Coast (Cassandra) (@GregCrennan) July 26, 2024

Purchasing Power and Inflation: Purchasing power decreases over time with inflation. If inflation is consistent, the purchasing power of money decreases exponentially, not linearly. The formula to calculate the future value of purchasing power given a constant inflation rate is:

Where:

• $\text{Inflation Rate}$ is the average annual inflation rate.
• $t$ is the number of years.

To calculate the loss in purchasing power over 15 years with an average annual inflation rate of 4%, we use:

Let’s calculate this:

The remaining purchasing power after 15 years at a 4% average annual inflation rate would be approximately 54.2% of the original purchasing power. This means that the purchasing power would decrease by about 45.8% over the 15-year period.