The U.S. Federal Reserve targets a 2% annual inflation rate, but actual inflation has ranged from 0.1% (2015) to 9.1% (June 2022). The historical average since 1913 is approximately 3.2%. When planning long-term, use 3% as a conservative baseline for your inflation calculations.
To beat inflation, your investments must earn a return higher than the inflation rate. Cash in a checking account at 0.01% loses purchasing power every year. Even a high-yield savings account at 4.5% APY only beats inflation by 1.5% in real terms. For long-term wealth preservation, a diversified portfolio targeting 7-10% annual returns is essential.