# Calculating the present day value of a future amount?

I'd like to know what my retirement's purchasing power is. I think the best way to do that is to adjust for inflation in reverse, maybe?

I know to calculate your future salary with inflation you can do `Salary * (1+inflation%)^number of years`. Meaning if my current salary is \$100,000, and inflation is 3%, in ten years my salary should be \$134,391 if I've kept up with inflation.

But I want to know something like, if I had \$1 million 10 years from now, and inflation was 3%, what would that be like having today?

Can I do `Retirement * (1 - inflation%) ^ number of years`? That calculates to \$737,424. But is that right?

• Often it is simpler to calculate your expected retirement savings in present dollars. That way instead of knowing "I will have \$1 million in 2025 dollars" and wondering "how much is that worth in 2015 dollars", you will just know how many 2015 dollars you will have in 2025. – BrenBarn May 26 '15 at 6:58

The correct calculation is actually `Retirement / (1 + inflation%) ^ number of years`.
However, in practice for low values of inflation, `1/(1+inflation%)` is quite close to the value of `1-inflation%`, and so you'll get nearly the same answer. I get \$744,093 for your example.