What Inflation Has Done to the Real Value of $1 Million in Savings
Written by
Jordan Rosenfeld
Edited by
Molly Sullivan
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A million dollars once symbolized lifelong financial security, but its slowly eroding purchasing power now tells a different story. Inflation, especially over the last few years, has quietly chipped away at the value of money, meaning $1 million no longer buys what it used to.
Here’s a look at what’s changed, how it’s influenced the real value of $1 million and what savers can do to protect their nest eggs.
Inflation’s Impact: The Shrinking Dollar
Inflation is one of those things you don’t really notice until your usual grocery bill, utility payment or restaurant tab suddenly feels steep. The Federal Reserve, the nation’s central bank, aims to keep inflation around 2% per year, adjusting interest rates to help control it. But in certain years, global or economic upheaval can push prices much higher. During the pandemic for example, inflation spiked to 9.1% in mid-2022 — the highest in four decades, according to the Bureau of Labor Statistics. When inflation rises, the same amount of money buys less.
If a couple retired in 2010 with a $1 million nest egg, for example, they’d need about $1.48 million today just to have the same purchasing power, according to the U.S. Inflation Calculator. Even moderate inflation adds up: At just 3% per year, $1 million loses roughly half its buying power in 24 years. Between 2020 and 2025, inflation averaged about 4% annually, reducing overall purchasing power by nearly 20%.
Investments Aren’t Exempt Either
Even investments that earn interest can lose real value over time. Traditional savings accounts, money markets and CDs that yield less than inflation lose purchasing power in real terms.
That means diligent savers can still fall behind when inflation outpaces returns. Those with decades yet until retirement may recover, but retirees and others living on fixed incomes may be harder hit. Their savings may look stable on paper, yet their dollars buy less every year.
What $1 Million Buys Now
Inflation has quietly shrunk what $1 million can buy. In 1990, that amount had the same buying power as about $2.48 million today, according to Bureau of Labor Statistics Consumer Price Index data.
Even in the past decade, the effect is clear: $1 million in 2015 is worth roughly $1.32 million in 2025 dollars, a 30% loss in value. That means the “millionaire” milestone doesn’t stretch nearly as far as it once did.
Costs for housing, healthcare and everyday expenses have grown faster than wages or interest rates. A nest egg that could once fund a 25-year retirement might now last only 18 to 20 years at a similar lifestyle.
How To Protect Your Savings
Since inflation is a given, but wage increases are not, here are some things you can you do to protect the savings you have:
- Diversify: Balance your cash savings with assets that tend to outpace inflation, such as stocks, real estate or inflation-linked bonds.
- Shop for higher yields: Even a small boost in your savings or CD rates can help reduce losses.
- Revisit goals regularly: Adjust your retirement targets to account for inflation.
- Consider your time horizon: The longer your savings will sit, the more inflation compounds its bite.
A million dollars is still a lot of money, but it’s not immune to time. Inflation’s steady erosion reminds savers that financial goals need to adjust with the cost of living.
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