Real Return (Inflation-Adjusted)
See what your returns are actually worth after inflation.
Purchasing Power Projection
| Year | Nominal Value | Real Value | Inflation Cost |
|---|---|---|---|
| 1 | $10,700.00 | $10,490.20 | $209.80 |
| 2 | $11,449.00 | $11,004.42 | $444.58 |
| 3 | $12,250.43 | $11,543.85 | $706.58 |
| 4 | $13,107.96 | $12,109.73 | $998.23 |
| 5 | $14,025.52 | $12,703.34 | $1,322.17 |
| 6 | $15,007.30 | $13,326.06 | $1,681.25 |
| 7 | $16,057.81 | $13,979.29 | $2,078.52 |
| 8 | $17,181.86 | $14,664.55 | $2,517.31 |
| 9 | $18,384.59 | $15,383.40 | $3,001.19 |
| 10 | $19,671.51 | $16,137.49 | $3,534.02 |
| 11 | $21,048.52 | $16,928.55 | $4,119.97 |
| 12 | $22,521.92 | $17,758.38 | $4,763.54 |
| 13 | $24,098.45 | $18,628.89 | $5,469.56 |
| 14 | $25,785.34 | $19,542.07 | $6,243.28 |
| 15 | $27,590.32 | $20,500.01 | $7,090.30 |
| 16 | $29,521.64 | $21,504.91 | $8,016.72 |
| 17 | $31,588.15 | $22,559.08 | $9,029.08 |
| 18 | $33,799.32 | $23,664.91 | $10,134.41 |
| 19 | $36,165.28 | $24,824.96 | $11,340.32 |
| 20 | $38,696.84 | $26,041.87 | $12,654.98 |
| 21 | $41,405.62 | $27,318.43 | $14,087.19 |
| 22 | $44,304.02 | $28,657.57 | $15,646.45 |
| 23 | $47,405.30 | $30,062.35 | $17,342.95 |
| 24 | $50,723.67 | $31,536.00 | $19,187.67 |
| 25 | $54,274.33 | $33,081.88 | $21,192.45 |
| 26 | $58,073.53 | $34,703.54 | $23,369.99 |
| 27 | $62,138.68 | $36,404.69 | $25,733.98 |
| 28 | $66,488.38 | $38,189.24 | $28,299.15 |
| 29 | $71,142.57 | $40,061.26 | $31,081.31 |
| 30 | $76,122.55 | $42,025.04 | $34,097.51 |
Inflation Scenarios Comparison (30-Year)
| Inflation | Exact Real Return | Real Future Value | Inflation Cost |
|---|---|---|---|
| 2% | 4.9% | $42,025.04 | $34,097.51 |
| 3% | 3.9% | $31,361.48 | $44,761.07 |
| 5% | 1.9% | $17,613.04 | $58,509.51 |
| 8% | -0.9% | $7,564.86 | $68,557.69 |
How It Works
Enter your nominal annual return (the percentage your investment earned before accounting for inflation) and the inflation rate over the same period. The calculator instantly computes your real, inflation-adjusted return using the Fisher equation. This tells you what your returns are actually worth in terms of purchasing power.
A projection table shows how inflation erodes your wealth over 30 years. The approximate real return (nominal minus inflation) is shown alongside the exact Fisher equation result for comparison. Multiple inflation scenarios (2%, 3%, 5%, 8%) let you stress-test your portfolio against different inflationary environments.
FAQ
What's the difference between exact and approximate real return?
The approximate real return is simply nominal return minus inflation rate. The exact real return uses the full Fisher equation: ((1 + nominal) / (1 + inflation)) - 1. The exact formula is more accurate for larger rates because it accounts for the compounding effect of inflation eating into returns.
What does purchasing power erosion mean?
Purchasing power erosion tells you what percentage of your nominal return was consumed by inflation. For example, with a 7% return and 3% inflation, roughly 43% of your nominal gain is lost to inflation: your money buys only 57% of the extra wealth you thought you earned.
How does inflation affect retirement planning?
Inflation is the silent killer of retirement plans. A 4% safe withdrawal rate works because it accounts for the real return after inflation. If inflation runs at 3% and your portfolio returns 6%, your real return is only about 2.9%, meaning you can sustainably withdraw much less than the nominal return suggests.
What happens if inflation is higher than nominal return?
If inflation exceeds your nominal return, your real return is negative: your purchasing power decreases even though your dollar balance grows. This is common in high-inflation environments. Holding inflation-protected assets like TIPS or commodities can help preserve real wealth.
What is a typical long-term inflation rate?
US long-term inflation has averaged around 3.2% historically. The Fed targets 2%. Emerging markets often experience higher rates of 5-10%. Hyperinflation scenarios (50%+ annually) are rare but devastating. Most retirement calculators use 2-3% as a conservative long-term inflation assumption.
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