When I built the inflation engine behind PortfolioSim, the first real decision was which measure of inflation to use. Most retirement calculators reach for CPI. I went with the GDP deflator instead. Here's the reasoning.
CPI tracks the price of a fixed basket of consumer goods. The GDP deflator tracks the price change of everything the economy produces — which makes it less sensitive to the basket-substitution debates that CPI attracts, and gives a cleaner, consistent quarterly history back to 1947.
For a tool whose entire job is long-horizon real returns, that consistency matters more than tracking one household's grocery bill.
The two measures track closely most years, but they diverge during supply shocks. Over a 30-year retirement, that difference compounds into real dollars.
Past performance doesn't indicate future results — and simulated futures are drawn from the past.
You can read the full methodology here, or launch the app and see it in action.