Real Rate of Return Calculator

Calculate inflation-adjusted returns to understand true investment performance and purchasing power changes over time.

✓ Inflation Adjusted ✓ Purchasing Power ✓ Real Returns

Real Rate of Return Calculator

Investment Details

Annual nominal return percentage

Annual inflation rate

Starting investment amount

Time Period

Investment holding period in years

Capital gains tax rate (optional)

Real Return Formula

Inflation-adjusted return calculation

Formula:

Real Return = ((1 + Nominal Return) / (1 + Inflation Rate)) - 1
Adjusted for purchasing power changes

Quick Examples

Stock Market
10% nominal, 3% inflation
Bonds
5% nominal, 2.5% inflation
High Inflation
8% nominal, 6% inflation

Inflation Impact

Low Inflation (0-2%): Minimal impact on returns
Moderate (2-4%): Noticeable purchasing power erosion
High (4%+): Significant real return reduction
Deflation: Increases real returns

Historical Averages

📈 S&P 500: ~7% real return (long-term)
🏛️ Bonds: ~2-3% real return
🏠 Real Estate: ~4-5% real return
💰 Cash: Often negative real return
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Understanding Real Returns

Real rate of return measures investment performance after adjusting for inflation, showing the true purchasing power gained or lost.

  • Purchasing Power: What your money can actually buy
  • Inflation Erosion: How rising prices reduce real value
  • True Performance: Investment success after inflation
  • Long-term Planning: Essential for retirement planning

Why Real Returns Matter

Investment Comparison

Compare investments on equal footing after inflation.

Retirement Planning

Ensure your savings maintain purchasing power.

Goal Setting

Set realistic financial targets based on real growth.

Risk Assessment

Understand true risk-adjusted performance.