Example #1 (price inflation, backward in time): Suppose you just paid $3.25 for a gallon of regular gasoline. Somebody tells you that gasoline cost only 50 cents a gallon in 1975. But was gasoline really cheaper back then, after allowing for inflation? To find out, first make sure to choose the correct data set: U.S. retail price inflation. The correct data set is always indicated below the row of Inflation Calculator buttons, and you can change it by clicking the Options button. (The Inflation Calculator automatically starts with U.S. retail price inflation by default.) Now enter 3.25 in the Dollar Amount field; enter 2008 (the default) in the Starting Year field; enter 1975 in the Target Year field; and then click on the Calculate button. The answer -- in this case, $0.77 -- appears in the Converted Amount field. Yes, the gasoline you bought in 2008 is indeed more expensive than it was in 1975.

Example #2 (wage inflation, forward in time): Let's say you were making $25,000 a year in 1998. Have your wages kept pace with everyone else's wages over the last ten years? To find out, first make sure to choose the correct data set: U.S. wage inflation. (If necessary, click the Options button to choose this data set.) Now enter 25,000 in the Dollar Amount field; enter 1998 in the Starting Year field; enter 2008 (the default) in the Target Year field; and then click on the Calculate button. The answer -- in this case, $32,150.13 -- appears in the Converted Amount field. If your current salary is less than that amount, you haven't kept up with general wage inflation. Time for a raise! (You can also perform this calculation with the U.S. retail price inflation data to see if your wages have kept up with prices. The answer should be $32,309.58.)

Medical-cost inflation: New since version 4.0 is a data set for calculating U.S. medical-cost inflation going back to 1936. My thanks to Sam Baker for suggesting this addition. Please note that this data set tracks the inflation of actual medical costs, not the inflation of health-insurance premiums, which are rising much faster than medical costs.

Far-future forecasts: New since version 5.0.2 are retail-inflation estimates extending as far forward as the year 2070. These inflation rates are based on forecasts by the Congressional Budget Office (for the years 2008-2017) and my own guesstimates for years beyond the CBO forecasts. (I'm guessing 3.0 percent per year.) These inflation estimates allow you to roughly estimate how much your retirement savings will be worth in future years. My thanks to Penelope Reznor and Kodi Wolf for suggesting these extensions.

Wage inflation: New since version 6.0 is a data set for U.S. wage inflation since 1914. This replaces the data set for wholesale-price inflation (the U.S. government's Producer Price Index) found in previous versions of the Inflation Calculator. I have decided that wage-inflation data is more useful, for two reasons: many people use the Inflation Calculator to compare wage growth over the years; and one proposal for reforming Social Security is to tie the annual cost-of-living adjustments (COLAs) to wage inflation for lower-income recipients and to price inflation for higher-income recipients. The revised Inflation Calculator allows you to compare the differences between those two inflation rates.

Note: This program assumes the target year isn't finished yet, so it doesn't include the target year's inflation rate in the calculation. For instance, if you calculate inflation from 1990 to 2007, the program uses inflation rates from 1990 through 2006 to compute the answer. To include the target year's inflation rate in the calculation, choose a target year one year past your target -- e.g., 2008 for 2007.

In other words, the program has a worst-case error of 12 months and an average error of 6 months. In the worst case, it will understate the actual amount of inflation by 12 months if the target date of your target year is December 31. If the program were written to include the target year's inflation rate in the calculation, the worst-case error would still be 12 months, except it would tend to overstate the actual amount of inflation if the target date of your target year were January 1. I've chosen the first method because you're more likely to be seeking an inflation-corrected amount for sometime during the target year, not for the last day of the year. (However, note that if you display the annual inflation rates by clicking the Show Rates button, the target year's rate will appear in the window, even though it's not included in the calculation.)

Retail inflation figures for future years through 2017 are forecasts from the Congressional Budget Office, which usually predicts an average rate of 2.2 percent per year. Retail inflation figures for future years beyond 2017 are my own guesstimates, based on an average rate of 3.0 percent per year.

If you want to learn more about how the U.S. Bureau of Labor Statistics gathers inflation data, the San Francisco Chronicle published an interesting article about a BLS "shopper." These professional shoppers spend their days canvassing stores, checking retail prices on the kinds of products American consumers are buying. The article was published on April 30, 2006, and is headlined, "A Measure of What's in Store". On February 24, 2008, the San Francisco Chronicle published an article discussing the shortcomings of the CPI: "Consumer Price Index a Real Guessing Game".

The U.S. government has several inflation calculators on a NASA website. One calculator uses CPI data like mine, but others use different inflation data. The NASA page includes links to additional inflation calculators on various private websites.

For an Italian inflation calculator, see www.rivaluta.it

Your feedback on Tom's Inflation Calculator is welcome. Click here for the contact page.