Real Rate of Return Calculator (Inflation-Adjusted)

Real rate of return calculator to see your inflation-adjusted investment performance

A nominal return is what an investment earns on paper. It is the percentage growth you see on statements or in performance charts. The problem is that prices also change. If inflation is running at 6% and your investment earns 10%, your purchasing power did not really grow by 10%. The real rate of return is the inflation-adjusted return that tells you how much your buying power actually changed.

This calculator is locked to one decision: estimating the inflation-adjusted annual return of an investment from a nominal return and an inflation rate. It is not a tax calculator and it does not model contributions, withdrawals, fees, or changing inflation over time. If you want a quick reality check on whether an investment return is actually building purchasing power, this is the right tool.

Start with the two required inputs. Enter the nominal annual return and the inflation rate for the same period. The calculator then converts those two numbers into a real return using a standard inflation adjustment approach. If you also want a practical feel for what that means in money terms, open Advanced options and add a starting amount and a time horizon. You will then see an estimated nominal ending value and an estimated inflation-adjusted ending value, using the same return and inflation assumptions throughout the horizon.

The main output is the real annual return. If it is positive, the investment is expected to increase purchasing power, meaning your money should buy more in the future than it buys today. If it is near zero, the investment is mostly keeping up with inflation. If it is negative, the investment may still be growing in nominal terms, but it is losing purchasing power after inflation.

The supporting figures are there to make the result actionable. The calculator can show the inflation factor over the horizon, the nominal growth factor, and the inflation-adjusted ending value. These help you compare options that look similar on paper. Two investments with the same nominal return can have different real outcomes if you assume different inflation rates, or if you compare across periods where inflation differs materially.

Use the compounding frequency only if you care about how rates compound within a year. Most people can leave it at Annual. Monthly or Daily can be useful when you are comparing products quoted with periodic compounding, but for a basic real-return sanity check, annual compounding is usually enough.

Assumptions and how to use this calculator

• Nominal return and inflation are treated as constant annual rates for the period you are evaluating.
• Real return is computed using a standard inflation adjustment (Fisher-style) approach, not a simple subtraction rule.
• Advanced future value estimates assume one lump-sum starting amount with no extra contributions, fees, taxes, or withdrawals.
• Compounding frequency, if changed, is applied consistently to both the return and inflation rates for comparability.
• The results are indicative for planning and comparison, not a guarantee of future performance or purchasing power.

Common questions

Why is real return not just nominal return minus inflation?

Subtracting is a rough shortcut that is only accurate when both numbers are small. A more accurate adjustment accounts for compounding by comparing growth factors, which is what this calculator does. The difference is usually small at low rates, but it can matter when inflation is high or returns are volatile.

What inflation rate should I use?

Use the inflation rate that matches your situation and time period. Many people use a national CPI figure as a baseline, but your personal inflation can differ if your spending is concentrated in categories that rise faster or slower than headline inflation. For a planning estimate, pick a defensible rate and rerun the calculator with a higher and lower inflation number to see sensitivity.

Can the real rate be negative even if my investment went up?

Yes. If nominal growth is below inflation, purchasing power falls. For example, a 5% nominal return during 8% inflation means you are poorer in real terms even though the account balance increased.

Does this include taxes, fees, and currency effects?

No. This tool isolates the inflation adjustment only. Taxes, platform fees, fund expenses, and currency moves can materially change the real outcome. If you want a closer-to-reality estimate, reduce the nominal return input by your expected all-in costs and rerun the calculation.

When does this calculator not apply?

It is not designed for investments with irregular cash flows, ongoing contributions, or variable returns and inflation across years. It also is not meant for bond pricing, yield to maturity, or duration-based inflation hedging analysis. It is strictly for turning a nominal annual return assumption into a real annual return estimate and optionally showing what that implies for future purchasing power.