Real Rate of Return Calculator
Enter your nominal return and the inflation rate to see the real rate of return after inflation.
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Enter the nominal return and inflation rate to see the real rate of return.
Worked example
With these example inputs:
- Nominal return8%
- Inflation rate3%
Real rate of return: 4.85%
- Simple difference (approximation)5.0%
- If the first figure were 10% higher5.63%
Frequently asked questions
How is the real rate of return calculated?
Divide 1 plus the nominal return by 1 plus inflation, then subtract 1. At 8% nominal and 3% inflation, that gives 4.85%. Simply subtracting gives 5%, close enough only at low rates.
Why does the real return matter more?
It reflects the actual increase in what your money can buy. A high nominal return can still lose purchasing power if inflation runs higher than the gain.
What is the real rate of return in simple terms?
It is your return after inflation has been taken away. It shows how much your buying power actually grew. A nominal return ignores rising prices, so it can mislead. The real return tells you what your money can truly buy.
Why does inflation matter to my returns?
Inflation slowly reduces what each unit of money can buy. Your savings can grow yet still fall behind rising prices. So a return must beat inflation to make you better off. The real return shows whether it actually does.
Can the real rate of return be negative?
Yes, it turns negative when inflation is higher than your return. Your money still grows in raw numbers on paper. But it buys less than it did before, which is a real loss. The nominal figure hides this, so always check the real one.