☰

Real return calculator: What is your return after inflation?

A larger amount in the account does not necessarily mean you can buy correspondingly more. When prices rise, the purchasing power of money falls. The real return shows how much your investment grows once inflation is taken into account.

No connection. Your numbers have been kept. Please try again.

Applies to the amounts in this calculator.

The amount you invest.

USD

The return per year in percent, before inflation.

%

The annual price increase in percent.

%

How many whole years the investment runs.

years

Before tax. A fixed return and fixed inflation are assumptions.

…

Worked example
  • Starting amount: 100,000.00 USD
  • Nominal annual return: 7 %
  • Annual inflation: 2 %
  • Number of years: 20 years

Result

Real return per year

4.902 %

Nominal final amount

386,968 USD

Purchasing power in today's money

260,419 USD

Working

  1. real return = 100 × ((1 + r/100) / (1 + p/100) − 1)
    100 × ((1 + 7/100) / (1 + 2/100) − 1) = 4.902 %
  2. nominal final amount = K × (1 + r/100)ⁿ
    100,000.00 USD × (1 + 7/100)^20 = 386,968.45 USD
  3. purchasing power = K × ((1 + r/100) / (1 + p/100))ⁿ
    100,000.00 USD × ((1 + 7/100) / (1 + 2/100))^20 = 260,418.67 USD

Enter the amount, annual return, inflation and number of years. The result shows both the future amount and its value in today's money.

The real return formula

Real return = (1 + nominal return) / (1 + inflation) − 1. The percentages must be written as decimals in the formula.

With small percentages, the result is close to the return minus inflation. The exact calculation uses the ratio between the two growth factors, though, because both the investment and the price level change over time.

Example with a 7% return and 2% inflation

The annual real return is about 4.90%. An investment of 100,000 grows in nominal terms to about 386,968 after 20 years when the return is 7%.

With 2% annual inflation, the final amount equals a purchasing power of about 260,419 in today's money. The difference is not a fee deducted from the account. It describes that goods and services have become more expensive.

Use the real return for long-term goals

The calculation is useful when you save for something many years ahead. A goal of one million can have different purchasing power depending on when the money will be used.

Both the return and inflation are kept constant in this scenario. Tax is not included. If you want to see how much extra saving is needed for a higher target amount, you can use the monthly savings calculator.