Investing

Real Rate of Return Calculator

A 7% return in a 3% inflation year isn't really 7% richer. The real return is what's left after inflation — your true gain in buying power. Enter your nominal return and inflation to see the real rate, calculated exactly rather than by the rough subtraction shortcut.

Formula shown below · Tested against worked examplesHow we verify

Nominal return

The headline return before inflation.

Inflation rate

Real rate of return

3.88%

Your true gain in purchasing power after inflation.

Nominal return: 7%
Inflation: 3%
Rough estimate (subtraction): 4%

Compare scenariosTry three values of one input

Vary

Real Rate of Return Calculator results for three values of Nominal return
Nominal return
Real rate of return	3.2%	3.88%+0.68%	4.56%+1.36%
Nominal return	6.3%	7%+0.7%	7.7%+1.4%
Rough estimate (subtraction)	3.3%	4%+0.7%	4.7%+1.4%

Every other input stays at the value you set above — currently 7% for nominal return. Differences are measured against the first column.

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How this calculator works

Real return = (1 + nominal) ÷ (1 + inflation) − 1, the Fisher equation. The 'rough estimate' is nominal − inflation, shown for comparison — it's always a little higher than the exact real return.

Uses the inflation rate you enter; actual inflation varies and your personal inflation rate (based on what you buy) can differ from the headline CPI. The result is a single-period real return, not a projection.

Formula

Real return = ((1 + nominal) ÷ (1 + inflation)) − 1

nominal: The return actually earned, as a decimal
inflation: Inflation over the same period, as a decimal

This is the Fisher relation. Simply subtracting inflation from the nominal return is a close approximation at low rates and drifts as either figure rises, which is why the division form is used here.

What this assumes

The Fisher relation applied to the nominal return and inflation you enter.
It uses general inflation; your personal inflation depends on what you buy.
Taxes are not deducted, and tax is charged on nominal gains rather than real ones — which is why real after-tax returns are lower still.

What changes this number

Inflation rate: The whole point. A 4% nominal return against 3% inflation is a 1% real return, not 4%.
Tax on nominal gains: Charged on the full nominal gain, so inflation raises the effective tax rate on real returns.
Time horizon: The gap between nominal and real compounds, which is why long plans must be built in real terms.

A worked example

Take the 7% return, 3% inflation scenario. These figures are produced by the calculator above, not written alongside it, so they always match what the tool returns.

What you enter

Nominal return: 7%
Inflation rate: 3%

What it returns

Real rate of return: 3.88%
Nominal return: 7%
Inflation: 3%
Rough estimate (subtraction): 4%

Sources

This calculator uses no external data — the result follows entirely from the formula above and the values you enter, so there is nothing to cite beyond the arithmetic.

Calculator last reviewed August 8, 2026. How we verify

Try an example

7% return, 3% inflation Cash losing to inflation Strong year

Frequently asked questions

What is a real rate of return?

The real return is your investment gain after adjusting for inflation — the increase in what your money can actually buy. If you earn 7% while prices rise 3%, your real return is about 3.9%, not 7%. It's the number that matters for long-term planning, because it reflects true purchasing power.

How do you calculate real return?

The exact formula (the Fisher equation) is (1 + nominal return) ÷ (1 + inflation) − 1. A common shortcut is simply nominal minus inflation, which is close but slightly overstates the real return — the gap widens at higher rates. This calculator shows both.

Why not just subtract inflation from my return?

Subtraction is a fine quick estimate, but it's not exact because inflation compounds against the whole balance, not just the original amount. At low rates the difference is tiny; at high rates it grows. For example, 10% nominal at 5% inflation is a 4.76% real return, not 5%.

Can a real return be negative?

Yes — whenever inflation is higher than your nominal return. Money in a checking account earning near 0% has a deeply negative real return when inflation runs 3–8%, quietly losing purchasing power each year. This is the core reason long-term savings are usually invested rather than held as cash.