$500,000 in 1985 has the same purchasing power as $1,271,222.12 today. Over the 36 years this is a change of $771,222.12.

The average inflation rate of the dollar between 1985 and 2021 was 2.66% per year. The cumulative price increase of the dollar over this time was 154.24%.

## The value of $500,000 from 1985 to 2021

So what does this data mean? It means that the prices in 2021 are 12,712.22 higher than the average prices since 1985. A dollar today can buy 39.33% of what it could buy in 1985.

These inflation figures use the Bureau of Labor Statistics (BLS) consumer price index to calculate the value of $500,000 between 1985 and 2021.

The inflation rate for 1985 was 3.56%, while the current year-over-year inflation rate (2020 to 2021) is 5.25%.

## USD Inflation Since 1913

The chart below shows the inflation rate from 1913 when the Bureau of Labor Statistics' Consumer Price Index (CPI) was first established.

## The Buying Power of $500,000 in 1985

We can look at the buying power equivalent for $500,000 in 1985 to see how much you would need to adjust for in order to beat inflation. For 1985 to 2021, if you started with $500,000 in 1985, you would need to have $1,271,222.12 in 1985 to keep up with inflation rates.

So if we are saying that $500,000 is equivalent to $1,271,222.12 over time, you can see the core concept of inflation in action. The "real value" of a single dollar decreases over time. It will pay for fewer items at the store than it did previously.

In the chart below you can see how the value of the dollar is worth less over 36 years.

## Value of $500,000 Over Time

In the table below we can see the value of the US Dollar over time. According to the BLS, each of these amounts are equivalent in terms of what that amount could purchase at the time.

## US Dollar Inflation Conversion

If you're interested to see the effect of inflation on various 1950 amounts, the table below shows how much each amount would be worth today based on the price increase of 154.24%.

## Calculate Inflation Rate for $500,000 from 1985 to 2021

To calculate the inflation rate of $500,000 from 1985 to 2021, we use the following formula:

$$\dfrac{ 1985\; USD\; value \times CPI\; in\; 2021 }{ CPI\; in\; 1985 } = 2021\; USD\; value $$

We then replace the variables with the historical CPI values. The CPI in 1985 was 107.6 and 273.567 in 2021.

$$\dfrac{ \$500,000 \times 273.567 }{ 107.6 } = \text{ \$1,271,222.12 } $$

$500,000 in 1985 has the same purchasing power as $1,271,222.12 today.

To work out the total inflation rate for the 36 years between 1985 and 2021, we can use a different formula:

$$ \dfrac{\text{CPI in 2021 } - \text{ CPI in 1985 } }{\text{CPI in 1985 }} \times 100 = \text{Cumulative rate for 36 years} $$

Again, we can replace those variables with the correct Consumer Price Index values to work out the cumulativate rate:

$$ \dfrac{\text{ 273.567 } - \text{ 107.6 } }{\text{ 107.6 }} \times 100 = \text{ 154.24\% } $$

## Inflation Rate Definition

The inflation rate is the percentage increase in the average level of prices of a basket of selected goods over time. It indicates a decrease in the purchasing power of currency and results in an increased consumer price index (CPI). Put simply, the inflation rate is the rate at which the general prices of consumer goods increases when the currency purchase power is falling.

The most common cause of inflation is an increase in the money supply, though it can be caused by many different circumstances and events. The value of the floating currency starts to decline when it becomes abundant. What this means is that the currency is not as scarce and, as a result, not as valuable.

By comparing a list of standard products (the CPI), the change in price over time will be measured by the inflation rate. The prices of products such as milk, bread, and gas will be tracked over time after they are grouped together. Inflation shows that the money used to buy these products is not worth as much as it used to be when there is an increase in these products’ prices over time.

The inflation rate is basically the rate at which money loses its value when compared to the basket of selected goods – which is a fixed set of consumer products and services that are valued on an annual basis.