Quick answer: Your real raise equals (1 + raise%) ÷ (1 + inflation%) − 1. A 3% raise in a year with 4% inflation is a real change of −0.96%: you can buy about 1% less than before. To keep pace with 4% inflation on a $70,000 salary you need at least a $2,800 raise.
Pay headlines show nominal numbers. What matters is purchasing power: how much your paycheck buys. Comparing your raise with inflation (and with your personal costs) tells you whether you are moving forward or just keeping up.
Key takeaways
- Real raise = (1 + nominal raise) ÷ (1 + inflation) − 1.
- To keep pace, your raise must at least equal inflation.
- Over several years, small shortfalls compound.
- A job change often outpaces raises, but compare benefits and costs.
- Check personal inflation; housing and healthcare may differ from CPI.
The formula and an example
Nominal raise 3%, inflation 4%: real raise = 1.03 ÷ 1.04 − 1 = -0.96%.
Real raise table
| Nominal raise | Inflation 3% | Inflation 4% | Inflation 5% |
|---|---|---|---|
| 2% | -0.97% | -1.92% | -2.86% |
| 3% | +0.00% | -0.96% | -1.90% |
| 4% | +0.97% | +0.00% | -0.95% |
| 5% | +1.94% | +0.96% | +0.00% |
| 6% | +2.91% | +1.92% | +0.95% |
Dollars needed to keep pace on $70,000
| Inflation | Raise needed (dollars) | New salary |
|---|---|---|
| 3% | $2,100 | $72,100 |
| 4% | $2,800 | $72,800 |
| 5% | $3,500 | $73,500 |
Compounding over years
If you get 3% raises while inflation runs 4%, your real pay falls each year.
| Year | Salary at 3% raises | Salary needed at 4% inflation | Gap |
|---|---|---|---|
| 1 | $72,100 | $72,800 | $700 |
| 3 | $76,491 | $78,740 | $2,250 |
| 5 | $81,149 | $85,166 | $4,017 |
| 10 | $94,074 | $103,617 | $9,543 |
What you can do
- Ask with data. Bring CPI figures and market pay for your role.
- Negotiate non-salary items: bonus, remote flexibility, retirement match.
- Change roles or employers when the market pays more.
- Cut personal inflation by controlling big categories; see average spending.
- Invest so savings outpace inflation; see real returns.
- Avoid lifestyle creep.
Tools
Use the inflation calculator, salary calculator and percentage calculator. For how CPI works, see CPI explained. More: inflation and currency tools.
Frequently asked questions
How do I calculate my real raise?
Divide 1 plus your raise by 1 plus inflation and subtract 1.
Is a 3% raise good?
It depends on inflation. When inflation exceeds 3%, a 3% raise reduces your purchasing power.
How much raise do I need to keep up with inflation?
At least the inflation rate, for example 4% in a 4% inflation year.
What if my raise is below inflation?
You have effectively taken a pay cut; consider negotiating, changing roles or cutting costs.
Does inflation affect everyone the same?
No. It depends on your spending mix, location and housing situation.
Sources and further reading
How the numbers were made: Every figure on this page was calculated from the formulas and assumptions stated above and rounded to the nearest dollar. Rates, limits and rules are for 2026 unless noted; confirm current figures with the sources listed before acting.
Keep reading
This guide is general information, not financial, tax or legal advice. Figures use stated assumptions and 2026 rules and will differ from your situation; check current rules and talk to a licensed professional before you decide. Full disclaimer.
