# Inflation Settings

> Choose how inflation is modeled in your financial scenarios.

## Understanding Inflation Modes

Plan in Decades provides three methods for modelling inflation. Each mode applies a different calculation method to the scenario.

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.

- **Illustrative use**: Applying one constant rate throughout the scenario
- **How it works**: The same rate applies to every year
- **Typical values**: 2-3% for developed economies

This is the default mode. The selected rate remains an editable scenario assumption.

### Historical CPI (US, 1928-2024)

Use actual historical Consumer Price Index data from the United States.

- **Illustrative use**: Applying a recorded historical sequence to the scenario
- **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.

- **Illustrative use**: Producing a range of results from randomised rates
- **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 produce a distribution of numerical results from the selected mean and standard deviation. They do not identify a best, worst, or most likely course of action.

## Comparing the Modes

| Question to model                    | Mode that performs that calculation |
| ------------------------------------ | ----------------------------------- |
| A constant inflation assumption      | Fixed Rate                          |
| A recorded historical sequence       | Historical CPI                      |
| A distribution from randomised rates | Monte Carlo                         |

## 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.

## Australian super net returns

The annual net return for a new Australian super account includes investment tax and investment fees, but is still **before inflation**. Enter a nominal net return; the model applies inflation and the Australian super present-value conversion separately. A return-change milestone does not change the calculation retirement age used for that conversion. See [Australian Super Assumptions](/help/finances/getting-started/australian-super-assumptions/).

Canonical page: https://planindecades.com/help/finances/features/inflation-settings/