Salary Depreciation Calculator

A pay rise that only matches inflation is not a rise at all. Enter your current salary, an annual inflation rate and a number of years to see what your salary’s purchasing power will be worth in today’s money, how much real value inflation quietly takes, and the raise you would need just to stand still. Seeing the damage is step one. Step two is knowing the fix: our effective raise calculator tells you exactly what raise you’d need to keep pace with the inflation rate you just entered.

Quick Answer

Worked example, checked against this exact tool

A $75,000 salary with 4% annual inflation over 5 years: real value = 75,000 ÷ (1.04)⁵ = 75,000 ÷ 1.216653 = $61,644.53. Inflation quietly takes $13,355.47, or 17.8% of your purchasing power. To keep pace you would need a nominal salary of 75,000 × 1.216653 = $91,248.97. Enter 75000, 4 and 5 to reproduce these figures exactly.

Why “depreciation” and not a pay cut

Your nominal salary can stay flat while its real value falls every year as prices rise. Economists call this the difference between nominal and real income: nominal is the number on your payslip, real is what that number buys. The formula used here, real value = nominal ÷ (1 + inflation)^years, is the standard purchasing-power discount. It assumes inflation compounds, which it does: 4% for five years is not 20% erosion, it is 1.04⁵ = 21.7% cumulative price growth.

The number that matters in negotiations

The most useful output is the keep-pace salary: the nominal pay you need at the end of the period to buy exactly what you buy today. In the example it is $91,249, which means a 21.7% raise over five years is not a raise at all, it is maintenance. Any increase above that line is a genuine real-terms gain; anything below it is a real-terms cut. Bring that figure, not your gut feeling, to a salary review. To benchmark against the job market rather than inflation alone, the market adjustment raise calculator shows what a competitive pay bump looks like. And the purchasing power salary calculator puts a dollar figure on what your salary buys today versus any past year.

The other formula you will see (and why it differs)

Some calculators model salary erosion the way accountants depreciate equipment: salary × (1 − inflation)^years. This page uses the purchasing-power model instead: salary ÷ (1 + inflation)^years, which is the standard way economists convert nominal amounts to real terms. At low rates the gap is small: $100,000 at 4% for 5 years gives $81,537.27 under the asset model versus $82,192.71 here. At 8% over 20 years the models diverge more seriously ($18,869.33 versus $21,454.82), so when two tools disagree, check which formula each one uses before trusting either number.

Watch it happen year by year

The erosion compounds because each year’s inflation builds on the last. A flat $75,000 salary at 4 percent inflation loses $2,884.62 of purchasing power in the first year alone, and the cumulative bite reaches $13,355.47 by year five. The year-by-year path:

The middle column is the number to bring to a salary review: it is the nominal pay that buys exactly what $75,000 buys today, one year at a time. The tool’s headline figures match the year-5 row: enter 75000, 4, and 5 above to reproduce them.

Did your raise beat inflation?

A raise beats inflation only when (1 + raise) ÷ (1 + inflation) is greater than 1. At 8 percent inflation, a 10 percent raise is a 1.85 percent real gain (1.10 ÷ 1.08 − 1), while a 4 percent raise is a 3.70 percent real cut (1.04 ÷ 1.08 − 1). The much-discussed 3 percent merit increase, handed out while prices rise 5 percent, is a 1.90 percent pay cut wearing a congratulatory email (1.03 ÷ 1.05 − 1).

Run the division before celebrating or complaining: the nominal percentage on the letter is not the economic event. Salary bands, job offers, and cost-of-living adjustments all deserve the same test, because a move that looks like progress in nominal terms can still leave you poorer in real ones. Anything above the keep-pace line from the table above is a genuine gain; anything below it quietly shrinks what your pay buys. Over a multi-year freeze the effect is brutal: five years of 4 percent inflation with no raise is the 17.8 percent cut from the worked example.

What competing calculators miss

Calculator Academy’s wage-decrease tool handles pay cuts well but frames everything as old-vs-new wage, with no compounding inflation model. Generic inflation calculators show what prices will do but never translate it back into your salary or the raise you need. This page does both directions in one pass: what your pay will be worth, and what your pay must become.

Frequently asked questions

References

1. Federal Reserve Bank of Minneapolis. Inflation Calculator.
2. Board of Governors of the Federal Reserve System. How does the Federal Reserve measure inflation?
3. U.S. Securities and Exchange Commission. Purchasing Power.
4. Congressional Research Service. Introduction to U.S. Economy: Inflation.
5. Bureau of Economic Analysis. Personal Consumption Expenditures Price Index.
6. U.S. Bureau of Labor Statistics. Consumer Price Index Factsheet: Income. Note: BLS blocks automated bots; text-fetch confirmed live: Income and the CPI factsheet (real income equals nominal income divided by the CPI relative; last modified September 23, 2026).
7. Board of Governors of the Federal Reserve System. Statement on Longer-Run Goals and Monetary Policy Strategy.
8. Social Security Administration. Cost-of-Living Adjustment. Note: SSA blocks automated bots; text-fetch confirmed live: Latest Cost-of-Living Adjustment (3.6 percent for December 2026 benefits).
9. Investopedia. Inflation. Note: Investopedia gates automated fetches (402); text-fetch confirmed live: Inflation article (loss of purchasing power and CPI-based measurement).
10. Federal Reserve Bank of St. Louis. Consumer Price Index for All Urban Consumers (CPIAUCSL).