Understanding Inflation Modes
Plan in Decades provides three different methods for modeling inflation in your projections. Each mode has different use cases depending on your planning needs.
The main inflation settings also include a separate Wage Inflation Rate. This rate is available for wage-linked assumptions and is used before the calculation retirement age when an Australian super present value is shown. The consumer-inflation setting is used from that calculation retirement age. Both values are editable.
Available Modes
Fixed Rate
The simplest approach - use a constant inflation rate throughout your scenario.
- Best for: Quick projections, conservative planning
- How it works: The same rate applies to every year
- Typical values: 2-3% for developed economies
This is the default mode and works well for most basic planning scenarios.
Historical CPI (US, 1928-2024)
Use actual historical Consumer Price Index data from the United States.
- Best for: Understanding how past inflation patterns would affect your plan
- Data range: 1928 to 2024 (96 years of data)
- Historical start year: Choose where to begin reading the data
Configuration options:
- Historical Start Year: Pick a year from 1928-2024 to begin reading inflation data
- Wrap Historical Data: When enabled, if your scenario extends beyond available data, it loops back to your start year. When disabled, the final year’s rate repeats.
This mode is useful for stress-testing scenarios against real economic history, including periods of high inflation (1970s-80s) and low inflation (2010s).
Monte Carlo Simulation
Generate random inflation rates based on statistical parameters.
- Best for: Understanding the range of possible outcomes
- How it works: Each simulation year gets a randomly generated rate
- Parameters: Mean inflation rate and standard deviation
Configuration options:
- Mean Inflation Rate: The average inflation rate (leave at 0 to use the historical average of approximately 3%)
- Standard Deviation: How much rates can vary year-to-year (historical standard deviation is approximately 4%)
Monte Carlo simulations help you understand best-case, worst-case, and most-likely outcomes for your financial plan.
Choosing the Right Mode
| Scenario | Recommended Mode |
|---|---|
| Quick estimate | Fixed Rate |
| “What if 1970s inflation returned?” | Historical CPI |
| Understanding outcome ranges | Monte Carlo |
| Conservative planning | Fixed Rate (3-4%) |
| Optimistic planning | Fixed Rate (2%) |
Historical Context
US inflation has varied significantly over the past century:
- 1920s-30s: Periods of deflation
- 1940s: War-time inflation spikes
- 1970s-80s: High inflation (peaked at ~14%)
- 1990s-2020s: Generally low and stable (2-3%)
- 2021-2023: Post-pandemic inflation spike
The historical data in Plan in Decades captures all these periods, allowing you to model scenarios that account for real economic volatility.
Future Enhancements
Currently, only US CPI data is available. Support for additional countries (Australia, UK, New Zealand) is planned for future releases.
Keep the working beside the model.
Use the sidebar for related articles, or move back into the app and compare what you see with the explanation here.
For related planning concepts, continue in Financial Independence is a Number or Coast FIRE.