What is my policy's buying power?
Calculates the equivalent purchasing power of an amount some years ago based on a certain average inflation rate.
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Welcome to the Inflation Rate Calculator
How do we measure inflation? Typically we look at benchmarks like the Consumer Price Index (CPI), which is a measure of the average change over time in the prices paid by urban consumers for a market basket of consumer goods and services.
So what makes up the CPI “market basket”?
CPI has 8 categories, listed below, ranked in “weight” highest to lowest:
- Housing
- Transportation
- Food and Beverages
- Medical Care
- Education and communication
- Recreation
- Apparel
- Other goods and services
IMPORTANT: Inflation, although a blended average, MUST be itemized for a consumer to truly understand the impact of inflation on their own lives.
So far in 2025:
Electricity is down 3.3%
Gasoline (all types) is down 9.8%
Meats, poultry, fish, and eggs are up 7.9%
Motor vehicle insurance up 7.5%
Motor vehicle maintenance and repair is up 4.8%
Shelter costs are up 4%
*12 mth percentage change, Consumer Price Index March 2025 not seasonally adjusted
The Consumer Price Index rose 2.4% over the 12 months ending March 2025, with food prices up 3.0% and energy prices down 3.4%. Food at home increased 2.4%, led by a 7.9% rise in dairy, while meats rose just 1.1%; food away from home climbed 1.1%. Energy commodities dropped 9.5%, including a 9.8% decline in gasoline, while electricity rose 4.2%. Core inflation (all items less food and energy) increased 2.8%, driven by a 3.7% rise in shelter and notable increases in medical care services (4.4%) and motor vehicle insurance (4.8%), though used car prices remained flat and airline fares fell 5.2%.
*Consumer Price Index Summary 4/12/2025
So how does inflation, even a modest 2% per year target, impact the buying power of your life insurance death benefit for your beneficiary OR your retirement income distributions?
Why does this matter?
Inflation is the economic process of a general increase in the prices of goods and services overtime. As prices rise, the amount of goods and services that can be bought with a unit of currency decreases, which may also be referred to as a decrease in a currency's purchasing power. A common measure of the rate of inflation is the rate of change in prices from one period to the next and are usually measured both monthly and annually. Annual inflation rates are those more keenly observed by a wider audience given that fluctuations in price can be temporary. That said, monthly inflation rates are followed closely by those hoping to assess the direction in which the price level is headed.*
When creating a financial plan for your clients, inflation should be part of the conversation. The buying power of a policy sold today, could be deeply impacted by inflation rates over the coming years.
*Inflation in the U.S. - statistics & facts