Real Return Calculator
A 7 percent return feels great until you remember that prices keep rising too. Set your nominal return and the inflation rate, and the calculator shows the real return that reflects your true gain in buying power.
A 7% return with 3% inflation is really 3.88% in buying power. Over 20 years, $100 grows to $387 on paper but only $214 in today’s dollars.
Worked examples
Real results from this calculator, computed for a few common scenarios. Move the sliders above to run your own numbers.
| Nominal return = 3% | A 3% return with 3% inflation is really 0.00% in buying power. Over 20 years, $100 grows to $181 on paper but only $100 in today’s dollars. |
| Nominal return = 7.5% | A 7.5% return with 3% inflation is really 4.37% in buying power. Over 20 years, $100 grows to $425 on paper but only $235 in today’s dollars. |
| Nominal return = 12% | A 12% return with 3% inflation is really 8.74% in buying power. Over 20 years, $100 grows to $965 on paper but only $534 in today’s dollars. |
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How this math works
The real return uses the formula (1 plus nominal) divided by (1 plus inflation) minus 1, which is more precise than simply subtracting one rate from the other. The result is the yearly growth in what your money can actually buy.
To make the gap concrete, the calculator also projects a balance over 20 years two ways: the nominal dollar figure and the same balance expressed in todays dollars.
Common questions
Why not just subtract inflation from my return?
Subtracting is a close shortcut, but dividing by (1 plus inflation) is exact. The difference grows when both numbers are large, so the formula keeps the answer honest.
What inflation rate should I use?
Long-run inflation in the United States has averaged roughly 3 percent, but recent years have run higher. Pick a rate that matches your own outlook and test a few values.
Can a real return be negative?
Yes. If inflation is higher than your nominal return, your real return is negative, meaning your money loses buying power even though the account balance went up.
Put this calculator on your website
Bloggers, teachers, credit unions, HR teams: embed the live Real Return Calculator free. Copy the snippet below — the tool keeps working and stays up to date automatically, no maintenance on your side.
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