Fixed Pension vs Inflation Calculator
Your pension, the inflation you expect, and any COLA it pays
Your result will appear here
Fill in the fields on the left and this updates as you type.
Know what this estimate is based on
- Jurisdiction
- General mathematical model
- Scope and limitations
- Educational estimate only. Confirm the assumptions, current rules, fees, and rounding that apply to your situation before making a decision.
- Source links checked
- Jul 30, 2026
Built and regression-tested by Smart Tools Lab. It has not been individually reviewed by a licensed financial, tax, or legal professional.
How to use
- 01
Enter your monthly pension before tax, as the plan pays it.
- 02
Enter the inflation rate you expect. For scale, CPI-U rose 3.4% in the 12 months to August 2026 and averaged 2.5% a year from 2005 to 2025; try both.
- 03
Enter your age now and how many years to show. A pension that pays for life can run 30 years or more.
- 04
If your plan pays a partial or capped cost-of-living adjustment, enter it as a yearly percentage; enter 0 if it pays none.
- 05
Read what the check buys in ten and twenty years, the exact year it loses half its value and the monthly amount you would need later to match today, then use the table for any year.
Formula
Real value in year t = pension ÷ (1 + inflation)^t. With a partial COLA c, the check in year t = pension × (1 + c)^t, and its real value = pension × (1 + c)^t ÷ (1 + inflation)^t. Years to lose half = ln 2 ÷ ln(1 + inflation); with a partial COLA below inflation it is ln 2 ÷ ln((1 + inflation) ÷ (1 + c)), and never if the COLA matches or beats inflation. Purchasing power lost by year N = 1 − 1 ÷ (1 + inflation)^N. Amount needed in year N to match today = pension × (1 + inflation)^N. Purchasing power lost over N years = the sum, for each year t from 0 to N − 1, of 12 × (pension − its real value in year t). The age at which it loses half = your age + the years to lose half.
Example
A 65-year-old has a $2,500 monthly pension with no COLA and assumes 3% inflation. In ten years it buys what $1,860 buys today, 25.6% less; in twenty years, what $1,384 buys. It loses half its purchasing power in ln 2 ÷ ln 1.03 = 23.4 years, at age 88.4, around 2049, slightly sooner than the rule of 72's 24.0 years. By year 30 it buys 58.8% less, the equivalent of $1,030 today, and matching today's $2,500 would take $6,068 a month. Across those 30 years the lost purchasing power adds up to $294,346 in today's dollars. With a 1% partial COLA the check reaches $3,050 in twenty years and buys what $1,689 buys today, it takes 35.3 years to lose half its value, and the 30-year loss falls to $212,932.
Definitions
- Purchasing power
- What a sum of money can buy. Inflation reduces it: the same dollar amount buys less as prices rise.
- Real value
- An amount expressed in today's dollars, by dividing a future amount by the inflation that will have built up by then.
- Half-life
- The number of years until a fixed amount buys half what it buys today, equal to ln 2 ÷ ln(1 + inflation rate).
- Partial COLA
- A cost-of-living adjustment set below inflation, often a fixed percentage or a cap on the CPI increase, which slows but does not stop the loss of purchasing power.
- Rule of 72
- A shortcut that estimates the years for a value to halve (or double) as 72 divided by the percentage rate. It is close for moderate rates but not exact.
Good to know
How inflation shrinks a fixed check
A pension that pays the same amount every month feels safe, and in one sense it is: the number never falls. But the prices it pays for do not stay still, and inflation compounds. Each year's price rise is applied to prices that have already risen, so the loss of purchasing power accelerates in dollar terms even when the inflation rate is steady. On this page's example, a $2,500 monthly pension at 3% inflation buys what $1,860 buys today after ten years, 25.6% less. After twenty years it buys what $1,384 buys today. By year 30 it buys 58.8% less, the equivalent of $1,030 in today's money, and matching today's $2,500 would take a check of $6,068. The clearest single measure is the half-life, the time until the pension buys half what it buys now. The exact figure is the natural logarithm of 2 divided by the natural logarithm of one plus the inflation rate. At 3% that is 23.4 years, so a pension that starts at 65 has lost half its value by about 88.4. The familiar rule of 72 estimates 72 ÷ 3 = 24.0 years, which is close but slightly late; the shortcut works well at moderate rates and drifts at higher ones. The half-life shortens quickly as inflation rises, which is why a few years of high inflation do so much damage to fixed incomes. Nothing about this shows up on a bank statement. The deposit is the same every month, and the loss arrives as a slowly rising cost of groceries, utilities, insurance and property tax. That is exactly why it is worth measuring deliberately. Adding every month together, the example pension loses about $294,346 of purchasing power over 30 years, in today's dollars: money that has to come from somewhere if spending is to stay where it is.
Pensions with a cost-of-living adjustment, and pensions without
Whether a pension keeps its value depends almost entirely on one feature: its cost-of-living adjustment. Social Security has a full one by law. Benefits rise each year with CPI-W, the index SSA uses, and the adjustment for 2026 is 2.8%. Many employer pensions, especially from private companies, have none, and pay the same dollar amount for life. Others fall somewhere in between, and those are the ones that deserve a careful read of the plan documents. Public-sector plans commonly include some adjustment, but its form varies. Some pay a fixed percentage every year regardless of inflation. Some follow CPI up to a cap, so in a high-inflation year retirees get the cap and absorb the rest. Some adjustments are compound, applied to the current benefit, and some are simple, applied only to the original amount. Some are granted only when the plan's funding allows, or at the discretion of a board or legislature, which makes them far less certain than a guaranteed one. The field on this page takes any of these as a single yearly percentage, so enter what you can reasonably expect rather than the best case. The effect of even a partial adjustment is large over a long retirement. On the example, a 1% yearly adjustment against 3% inflation lets the $2,500 check grow to $3,050 in twenty years, which buys what $1,689 buys today instead of $1,384. It stretches the half-life from 23.4 years to 35.3 years and cuts the purchasing power lost over 30 years from $294,346 to $212,932. An adjustment that matches inflation stops the loss entirely, which is why a partial one should be read as reducing inflation risk rather than removing it. Before you retire, ask the plan administrator three questions: is there an adjustment, how is it calculated, and is it guaranteed.
Choosing an inflation rate for a long retirement
Every figure on this page depends on the inflation rate you enter, and no one knows what inflation will be over the next thirty years. The practical answer is to use a reasonable central assumption and then test a higher one. Recent data give a sense of the range. CPI-U rose 3.4% in the twelve months to August 2026, according to the Bureau of Labor Statistics. Over the twenty years from 2005 to 2025, the annual average index rose from 195.3 to 321.943, an average of 2.5% a year, a period that includes both the low inflation of the 2010s and the surge that followed. That surge is a reminder that averages hide episodes. The CPI-U annual average rose 8.0% in a single year, from 270.970 in 2021 to 292.655 in 2022. For a fixed pension, a burst like that is permanent damage: the price level does not come back down afterward, so every later check buys less for the rest of retirement. The timing matters too. A spell of high inflation early in retirement lowers the real value of every check that follows it, so it costs far more in total than the same spell near the end. It is also worth remembering that the index is an average. Retirees tend to spend more of their budget on health care and housing, and if those costs rise faster than the overall index, the pension loses value faster than the CPI suggests. Property taxes, insurance premiums and Medicare premiums can all rise faster than inflation in some years. A sensible approach is to run the page at your central assumption, around 3% for many people, and again at 4%, and plan so that the higher case would still be survivable. If your plan pays a partial adjustment, test how it holds up when inflation runs above its cap.
Planning around a pension that loses value
A fixed pension is still valuable income, often the most reliable a retiree has. The goal is not to replace it but to plan for the gap that opens between what it pays and what life costs. Start by putting a number on the gap. The example's $2,500 pension loses about $294,346 of purchasing power over 30 years at 3% inflation, in today's dollars, and the page's table shows how the shortfall grows year by year. Several approaches help, and most retirees combine them. The first is to match the pension to costs that also stay fixed. A mortgage payment on a fixed-rate loan, for instance, does not rise with inflation, so a pension paying it keeps its effective value for as long as the loan lasts. The second is to lean on income that does rise. Social Security increases with CPI-W every year, and each year of delay past full retirement age, up to 70, raises the benefit permanently, which enlarges the part of retirement income that is protected. The third is to keep part of your savings invested for growth rather than all in cash, so the portfolio can supply more in later years when the pension buys less. Inflation-protected investments such as Treasury Inflation-Protected Securities and I bonds are designed to keep pace with CPI, and can be earmarked for later retirement years. The fourth applies before retirement. If your plan offers a lump sum instead of monthly payments, or a choice of survivor benefits, weigh those options with inflation in mind rather than comparing monthly amounts at face value. A lump sum can be invested and drawn down flexibly, while a fixed pension only shrinks, although the pension carries no investment risk and lasts for life. The pension-versus-lump-sum and pension-survivor-option calculators work through those decisions in detail.
Frequently asked questions
How much will my pension be worth in 20 years?
In purchasing power, less than the number on the check. On this page's example, a $2,500 monthly pension with no cost-of-living adjustment, at 3% inflation, buys what $1,860 buys today in ten years, 25.6% less, and what $1,384 buys today in twenty. The check still says $2,500; the groceries, rent and prescriptions it pays for cost more.
When does inflation cut a pension's value in half?
At 3% inflation, in 23.4 years. The exact figure is the natural log of 2 divided by the natural log of 1.03. For someone who is 65 now, that is age 88.4, around 2049. The rule of 72 gives 72 ÷ 3 = 24.0 years, close but slightly late, because the shortcut is an approximation of compounding.
How big would my pension need to be to keep up?
It would have to grow at the inflation rate. To buy in 30 years what $2,500 buys today at 3% inflation, a pension would need to pay $6,068 a month. A pension fixed at $2,500 buys 58.8% less by then, the equivalent of $1,030 today.
Does a partial COLA solve the problem?
It slows the loss without stopping it, unless the COLA matches inflation. With a 1% yearly COLA and 3% inflation, the example pension pays $3,050 a month in twenty years and buys what $1,689 buys today, against $1,384 with no COLA. It takes 35.3 years instead of 23.4 to lose half its value. Many public plans cap their COLA, so check your plan's rules and whether the increase is guaranteed.
What inflation rate should I assume?
Run more than one. CPI-U rose 3.4% in the 12 months to August 2026 and averaged 2.5% a year over the 20 years from 2005 to 2025. A retirement can last three decades, and a few years of high inflation early on do lasting damage to a fixed check, so a planning rate of around 3% is a sensible middle case, with a higher one as a stress test.
How much purchasing power does a fixed pension lose over a whole retirement?
Adding up every month, the example's $2,500 pension loses about $294,346 of purchasing power over 30 years at 3% inflation, measured in today's dollars. That is the amount savings or other income would have to supply to keep spending where it is today. With a 1% partial COLA the 30-year loss falls to $212,932.
Is Social Security affected the same way?
No. Social Security benefits rise every year with CPI-W; the 2026 cost-of-living adjustment is 2.8%. That makes Social Security the inflation-protected part of most retirement incomes and a fixed pension the part that shrinks, which is one reason people with a pension often delay claiming Social Security to make the protected part larger.