# How can I figure out how much of a salary I need in the future, adjusting for inflation?

I looked at an inflation calculator to see what salary would be needed in 35 years to keep current "state of living." I put in 50,000 for today.

http://www.halfhill.com/inflation_js.html

(I have no connection with this site. I tried one or two others with the same result.)

and it said,

\$50,000.00 in 2019 dollars is: \$145,344.11 in 2055 dollars

Does that mean that I need to make \$145,000 in 35 years? Is that the correct way to look at it?

Does that mean that I need to make \$145,000 in 35 years?

Yes it means you will need 145K in 2055 to maintain current lifestyle at current rate of inflation. Note the actual inflation can change and so would the final number.

Is that the correct way to look at it?

The other way to look at it, after 35 years [depending on current age], one may not be working. So one would need to create a retirement corpus that would give an yield of 145 K per year. So one needs to have sufficient Stocks/Real Estate/Retirement savings / etc that would return 145 K per year.

Just to complicate things more, 145K per year will also increase till lifespan. if one is living for 30 years after retirement, the 145 K at 2055 will need to become around 380K by 2085. This means during retirement, the corpus should be slightly more than 145K, say 180K, you spend the 145 K and balance [180-145] 45K you invest during retirement so that the returns keep increasing and matching inflation.

of course when you die, you would have the corpus intact. Else if you can predict when you die, you can start dipping into the corpus.

• Note that, because of these complexities, it is common to try to calculate everything in present dollars. The assumption there is that if you can earn today enough to live a lifestyle you like, then inflation will inflate both your income and your expenses so that in the future you'll still be able to live the same lifestyle. This assumption will vary in accuracy depending on how you spend your money, but it's a common way to avoid getting tangled in inflation calculations. – BrenBarn Mar 7 '17 at 4:31
• Good Lord! That's an incredible amount of money. – johnny Mar 7 '17 at 4:32
• @johnny: \$50000 would have seemed an incredible amount of money 35 years ago in 1982. – timday Mar 7 '17 at 5:10
• @johnny exponential effects, for instance inflation, are counterintuitive. For example, the typical Fortune 500 CEO annual pay today is about what it cost to buy the middle third of the USA, in 1803. – AakashM Mar 7 '17 at 9:13
• @johnny Bear in mind that the whole point of an inflation figure, is to track how the nominal value of money changes over time. Assuming their inflation predictions are correct, \$145k in 2055 or \$380k in 2085 is exactly the same amount of money as \$50k today. – Andrzej Doyle Mar 7 '17 at 12:49

Calculations like this should only be considered for entertainment purposes. For example, if you were only interested in maintaining a standard of living, then you could probably do so with less than 50K per year, certainly less than 145K.

Back in 1982 the poorest still bought b&w televisions, only luxury cars had air bags, basic cars did not have power windows or air conditioning. Only the very wealthy had cell phones, and almost no one had a personal computer. The average size of a home was around 1500 square feet, where today it is around 2200. One thing that happens is the standard of living rises greatly.

Additionally your needs change. Will you have children? What cycle of child bearing will you be in? Will the kids be grown and gone or will they be in the middle of college. For the former you will probably need less, the later more.

Most significantly things like your financial situation changes. While they probably extrapolate rents with some inflationary figure, often times housing costs go down for many people. Lets say you buy a home large enough to raise a family in about 5 years. Then you pay it off in 25 years, sell it at a large profit, and downsize into a smaller home. It may very well that you own the new home with no mortgage plus have an extra 100K or so in cash. That 100K could be used to generate additional income decreasing your need for extra salary plus your housing costs are basically zero. Sure property tax and insurance will increase, but you won't have a rent/mortgage payment.

• At least your answer makes me feel better. I was getting worried. – johnny Mar 8 '17 at 4:08