Inflation-Adjusted Return Calculator
Convert a nominal return into a real return after inflation.
Please note: For information only, not investment advice. Projections assume constant rates; real markets fluctuate and capital is at risk.
What the Inflation-Adjusted Return Calculator does
Real return is what your money actually gained in purchasing power. Subtracting inflation from the nominal return is a rough approximation; the exact answer divides the growth factors, which is the Fisher equation.
Formula
Real return = (1 + Nominal) ÷ (1 + Inflation) − 1After tax: apply tax to the nominal return firstReal value = Amount × (1 + Real return)^Years
Inputs explained
| Input | Unit | Required | Notes |
|---|---|---|---|
| Nominal return | % | Yes | — |
| Inflation rate | % | Yes | — |
| Investment amount | selected currency | Optional | Accepts 0 or more. |
| Number of years | number | Optional | Accepts 0 or more, up to 100. |
| Tax on returns | % | Optional | — |
| Currency | one of 10 options | Optional | — |
How to use it
- Choose Currency.
- Enter Nominal return and Inflation rate.
- Optionally add Investment amount, Number of years and Tax on returns.
- Select Calculate.
Worked example
An 8% nominal return with 3% inflation and 15% tax on returns.
- Nominal
- 8
- Inflation
- 3
- Tax
- 15
After tax 6.8%, real return (1.068 ÷ 1.03) − 1 = 3.689%.
Frequently asked questions
Why not just subtract inflation?
It is close at low rates but drifts as rates rise. At 20% nominal and 15% inflation, subtraction gives 5% but the true real return is 4.35%.
Should I plan in nominal or real terms?
Real terms. A projection showing a large nominal sum decades away can be misleading — what matters is what it will buy.
Method and sources
Method. The Fisher relation: real return = (1 + nominal) ÷ (1 + inflation) − 1, rather than the subtraction that approximates it.
Assumptions
- The inflation figure applies to the reader's own spending, which a national index only approximates.
- Nominal return and inflation cover the same period.
Limitations
- Subtracting inflation from nominal return is the common shortcut and is wrong by a widening margin as either figure grows — at 10% nominal and 8% inflation it overstates the real return by roughly a sixth.
- A headline inflation index is an average basket. Personal inflation differs by spending pattern, and for someone whose costs are dominated by rent or energy it can differ a lot.
- Tax is charged on nominal gains in most systems, so the after-tax real return is lower again than this shows.