What is a real return?

Nominal return minus inflation. A 7% nominal return at 3% inflation is roughly a 4% real return.

Why does inflation matter?

Cash and low-yielding accounts lose real value when their yield is below the inflation rate.

See how inflation erodes purchasing power over time and compute real (inflation-adjusted) returns on an investment.

Erosion of purchasing power and real (inflation-adjusted) returns over time.

Today's amount

Expected inflation

Nominal investment return

Years

Future purchasing power of today's $

$55,368

Nominal future value

$386,968

Real future value

$214,255

Real annual return

3.88%

Visualize growth from principal, contributions and interest.

Required monthly savings for retirement, education, FIRE.