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Inflation and Your Coast Number: What Rising Prices Do to the Math

What inflation is, how it erodes purchasing power over decades, the rule of 72, and how it changes your coast number.

By J.J. Allan LLC · Published October 17, 2026 · About 10 min read

Inflation is the gradual rise in the general level of prices, which means each dollar buys a little less over time. Year to year the change can feel small. Over the decades a retirement plan covers, it is one of the largest forces in the math, as large as the investment returns themselves.

That makes inflation central to Coast FIRE. Your coast number is a bet that money invested today will grow into a retirement portfolio decades from now. Whether that portfolio buys the life you expect depends on what prices do in between. This guide explains what inflation is, how it erodes purchasing power over long stretches, the rule of 72 as a quick way to estimate it, and exactly how the Coast Clock Calculator handles it.

The short definition

Inflation is usually reported as an annual percentage: the change in the cost of a typical basket of goods and services compared with a year earlier. In the United States, the best-known measure is the Consumer Price Index (CPI), published monthly by the Bureau of Labor Statistics. The Federal Reserve aims for inflation of 2% a year over the longer run, measured by a related index, because it views modest, predictable inflation as consistent with a healthy economy.

Actual inflation does not follow the target neatly. U.S. consumer prices have risen at an average of roughly 3% a year over the past century, but with wide swings: double digits in the late 1970s and early 1980s, long stretches near 2% in the 2010s, and a jump to around 9% in 2022. For long-range planning, what matters is the average over many years, and nobody knows in advance what that will be.

The opposite effect, a sustained fall in prices, is called deflation. It has been rare in the U.S. since the 1930s, and most retirement planning, including ours, assumes prices keep rising.

Why inflation matters for Coast FIRE

Every Coast FIRE plan has three moving parts: what you'll spend in retirement, how much you have invested now, and how fast it grows. Inflation touches all three.

Coast FIRE is especially exposed because of its time horizon. The whole idea is to stop contributing and let a balance compound for 20, 30 or 40 years. A traditional saver who contributes until retirement keeps topping up the plan as prices rise. A coaster is relying on the money already invested to outrun inflation for decades on its own. Getting the inflation assumption roughly right, and understanding how sensitive your coast number is to it, matters more for coasting than for almost any other strategy.

How inflation erodes purchasing power

Inflation compounds the same way investment returns do, only in reverse. At a steady 3% a year, prices are multiplied by 1.03 each year, so the cost of living grows by 1.03ⁿ over n years, and each dollar's purchasing power shrinks by the same factor.

What a dollar becomes (illustrative only)

Here is what $1 of today's purchasing power looks like at a steady 3% inflation rate:

Put another way, $100,000 sitting in cash for 30 years at 3% inflation would still read $100,000 on the statement, but it would buy only what about $41,200 buys today.

What $50,000 a year becomes

The same math applied to a yearly budget shows how far the dollar figures drift. To keep the lifestyle that $50,000 a year buys today, at 3% inflation you would need about:

Nothing about the lifestyle changes in those figures. The groceries, rent and travel are the same; only the price tags are larger. This is why a retirement number that sounds enormous today can turn out to be ordinary decades from now, and why a plan built entirely in future dollars is hard to judge.

Small differences in the rate add up, too. At 2% inflation, $50,000 a year becomes about $90,600 in 30 years; at 4%, about $162,200. Over 30 years, the gap between 2% and 4% inflation is the difference between a cost of living that nearly doubles and one that more than triples.

The rule of 72

The rule of 72 is a quick mental shortcut for compounding: divide 72 by an annual rate, and the result is roughly the number of years it takes for something growing at that rate to double. The SEC's Investor.gov describes it as a way to estimate how long an investment takes to double, and it works just as well for prices.

Years to double ≈ 72 ÷ annual rate (in percent)

Applied to inflation

When prices double, the purchasing power of a dollar halves. So the rule of 72 also tells you roughly how long it takes for inflation to cut your money's buying power in half:

For a 30-year-old planning to retire at 65, a 3% inflation rate means prices roughly double by their mid-50s and are close to triple by retirement, which matches the 35-year figures above.

Applied to returns

The same rule shows why the gap between nominal and real returns matters so much. At a 7% headline return, money doubles in about 10 years (72 ÷ 7 ≈ 10.3). But if inflation runs at 3%, the real return is about 3.9%, and the purchasing power of that money doubles only about every 18 to 19 years. Over 35 years, that is the difference between nearly three and a half doublings on paper and fewer than two in what the money can actually buy.

The rule is an approximation. It is most accurate for rates between about 6% and 10% and slightly off at very low or very high rates, but for back-of-the-envelope planning it is close enough to be useful.

How the Coast Clock Calculator handles inflation

The Coast Clock Calculator has an Inflation slider under Advanced assumptions. It starts at 3% and ranges from 0% to 8% in quarter-point steps. Here is exactly what it does with that number.

A worked example (illustrative only)

Take the calculator's starting values: a 30-year-old with $70,000 take-home pay, $40,000 a year in spending, $100,000 invested, retiring at 65, with a 7% expected return and a 4% withdrawal rate. The retirement number is $1,000,000 in every case below. Only the inflation assumption changes:

A single percentage point of inflation, in either direction, moves this person's coast age by three or four years. That is the same order of effect as changing the expected return by a point, and for the same reason: the calculator only cares about the gap between the two. Raise both the return and inflation by one point, to 8% and 4%, and the real return stays close to 3.9%, so the coast number (about $267,000) and the coast age (about 36) barely move.

It also shows why we work in today's dollars. In the 3% case, the plan's $1 million target is about $2.8 million in the dollars this person would see at 65. Both numbers are correct, but only the first is easy to picture.

These figures are illustrative, not projections or recommendations. Actual returns and inflation vary year to year, and an average rate over decades can hide long stretches that look very different.

Common misconceptions

"I should enter a return that's already after inflation." Not in the Coast Clock Calculator. The return slider expects a nominal, headline figure, and the calculator subtracts inflation for you. If you enter a real return and leave inflation at 3%, inflation is counted twice and your coast number will look higher than it should. If you'd rather think in real terms, enter your real return and set inflation to 0%.

"My retirement number should be in future dollars." It can be, but it doesn't have to be. A future-dollar target and a today's-dollar target describe the same plan, as long as you pair each with the matching return: nominal returns with future dollars, real returns with today's dollars. Mixing them, such as a today's-dollar target with a nominal return, makes a plan look far closer than it is.

"Low inflation lately means I can assume it stays low." A few years of data says little about the next 30. Inflation has surprised in both directions within a single working lifetime. It's worth testing your plan at 1 point above and below your best guess and seeing whether the result still works for you.

"Cash is safe." Cash is stable in dollars, but not in purchasing power. Money held in cash for decades loses value at the rate of inflation minus whatever interest it earns. That is a real cost even when the balance never falls. Some investments, such as Treasury Inflation-Protected Securities (TIPS), are designed to adjust with the CPI for exactly this reason.

Risks and caveats

Your inflation won't match the index. The CPI tracks a typical basket of goods. Retirees often spend more on health care and housing, which haven't always followed the overall index. If your own costs rise faster, your real need will grow faster than the calculator assumes.

Inflation and returns are linked. We treat them as two separate, steady assumptions. In reality, periods of high inflation have sometimes coincided with weak real returns on both stocks and bonds, which is harder on a coasting portfolio than either assumption alone suggests.

Taxes apply to nominal gains. Taxes are generally owed on the dollar amount of a gain, not just the part above inflation. In a taxable account, that makes the effective real return lower than the simple formula suggests. The calculator doesn't fully model taxes or fees.

Other income may be indexed differently. Social Security benefits are adjusted each year through a cost-of-living adjustment tied to inflation, while many pensions and annuities are fixed in dollars. We don't model either yet, so the calculator assumes your investments cover all of your retirement spending.

The bottom line

Inflation turns a dollar today into roughly 41 cents of purchasing power after 30 years at 3%, and it halves a dollar's value about every 24 years at that rate. For a coast plan that relies on decades of growth, that makes it a core input, not a footnote. What counts is the real return: how much faster your investments grow than prices do.

The Coast Clock Calculator keeps everything in today's dollars and converts your expected return to a real one using the inflation rate you choose. To see how much your own plan depends on it, visit Coast Clock or go straight to the Coast Clock Calculator, open Advanced assumptions and move the inflation slider a point in each direction.

Further reading

For the long-run evidence on how different investments have fared against inflation, Jeremy J. Siegel's Stocks for the Long Run is a standard reference. It looks at long-term historical returns on stocks, bonds and other assets and emphasizes real, after-inflation results, the same measure the coast number depends on.

Every cost you pay comes out of your real return, which is often only a few percent to begin with. John C. Bogle's The Little Book of Common Sense Investing makes the case for low-cost, broad index funds and shows how fees and costs compound against investors over decades.

And for a plain-spoken guide to a simple long-term approach, J.L. Collins's The Simple Path to Wealth explains why low-cost index fund investing and avoiding debt are enough for most people working toward financial independence.

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This article is for general education only and is not financial, tax or legal advice. Inflation, returns and tax rules vary, and past market performance doesn't guarantee future results. For decisions about your own money, consult a licensed financial professional.

Sources

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