Inflation-Adjusted Return Calculator
Convert a nominal return into a real, inflation-adjusted return using the exact Fisher equation.
How it works
Real return = (1 + nominal) ÷ (1 + inflation) − 1
The real return is what your money gains in actual buying power after inflation. The exact Fisher equation divides growth factors rather than subtracting rates. Subtracting inflation from the nominal return is a handy shortcut, but it slightly overstates the real return because it ignores that inflation also erodes the return itself — the gap grows as rates get larger.
Worked example
A 7% nominal return with 3% inflation gives a real return of (1.07 ÷ 1.03) − 1 = 3.88%. Simply subtracting suggests 4%, overstating the true figure by about 0.12 of a point.
Frequently asked questions
Why not just subtract inflation from my return?
It is a fine rough estimate at low rates, but it ignores that inflation also shrinks the gain itself. At high rates the shortcut can be off by a full point or more.
Why does real return matter?
Because it reflects what you can actually buy. A 7% return feels great until 5% inflation leaves you only about 1.9% ahead in real terms.
Can a real return be negative?
Yes — whenever inflation outpaces your nominal return. Cash in a low-yield account during high inflation quietly loses purchasing power every year.
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This is an educational estimate, not financial advice. Confirm figures with your lender, advisor or tax professional.