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Real Return Calculator

Find your inflation-adjusted real return.

Result

4.85%

How it is calculated

The tool uses the exact Fisher relation: real = (1 + nominal) / (1 + inflation) − 1, with both rates entered as percentages and divided by 100. It measures how much your purchasing power grew, not just how much your balance grew. The result is a percentage with two decimals. It is slightly lower than the quick shortcut of subtracting inflation from the nominal rate, and the difference grows with higher rates. Inflation of −100% or less is not valid. A negative result means purchasing power fell.

Worked example

An investment returns 8% in a year while prices rise 3%. Nominal factor: 1.08. Inflation factor: 1.03. Divide: 1.08 / 1.03 ≈ 1.048544. Subtract 1: 4.85% real return. The shortcut 8 − 3 = 5% overstates it slightly.

Try this example →

Common mistakes

  • Subtracting inflation from the nominal rate and stopping there. That is close at low rates but overstates the real return at high ones.
  • Mixing periods, such as a monthly return with annual inflation. Both must cover the same period.
  • Using a return before fees or tax. Real return should start from what you actually keep.
  • Entering inflation as a decimal like 0.03. Use 3.

About this calculator

This calculator finds the inflation-adjusted real return using the exact Fisher equation, real return = (1 + nominal return)/(1 + inflation rate) − 1, rather than the common but less accurate shortcut of simply subtracting inflation from the nominal rate. The exact formula matters more as rates rise, since the simple subtraction increasingly overstates real returns when both nominal returns and inflation are high.

Investors and retirees use this to see how much an investment's growth actually increased their purchasing power, not just its nominal dollar value; economists use it to analyze living-standard trends across periods of different inflation; and financial planners use it to compare bond yields, savings account rates, and other returns on a purchasing-power-adjusted, apples-to-apples basis. Enter the nominal return and inflation rate to get the real return.

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