Real Return Calculator
Enter a nominal return and an inflation rate above and this real return calculator shows your inflation-adjusted rate of return using the exact Fisher equation. The answer updates as you type, and nothing you enter leaves your browser.
How to use the real return calculator
There is no calculate button. Fill in the two fields and the result changes with every edit:
- Nominal return (%): the return before inflation, such as 7 for 7%.
- Inflation rate (%): the expected or historical inflation over the same period, such as 3.
The big figure is the Real return. Below it, a small line shows the shortcut answer, Nominal minus inflation, for comparison. Both rates can be negative, but a rate of −100% or less cannot be used.
The real rate of return formula (Fisher equation)
Real return = (1 + nominal) ÷ (1 + inflation) − 1, with both rates as decimals. Seven percent becomes 0.07 before it goes in, and the answer is multiplied by 100 to show a percentage. Because it divides rather than subtracts, it is exact: it measures how much more (or less) your money can buy, not just how much the balance grew.
Real return vs nominal return
Nominal return is the rate a fund, account or bond states. Real return is that rate after inflation has eaten into it. Subtracting inflation from the nominal rate is a quick approximation. It lands close when rates are low, and drifts further from the exact answer as the rates rise.
Worked examples
Real return = +3.88% (simple difference 4.00%)
12% nominal, 8% inflation
Real return = +3.70% (simple difference 4.00%)
2% nominal, 4% inflation
Real return = −1.92%: the balance grows but buys less
0% nominal, 3% inflation
Real return = −2.91%: cash left idle loses purchasing power
Frequently asked questions
How do you calculate real return after inflation?
Divide one plus the nominal return by one plus the inflation rate, then subtract one. For example, a 7% return with 3% inflation gives 1.07 ÷ 1.03 − 1 = 3.88%. The calculator does this as you type.
What is the real rate of return formula?
Real return = (1 + nominal) ÷ (1 + inflation) − 1, with both rates written as decimals. This is the exact Fisher equation. The result is the growth in purchasing power, not just in the number on the statement.
What is the difference between real return and nominal return?
Nominal return is the stated gain before inflation. Real return is that gain after inflation has reduced what the money can buy. A 7% nominal return is about 3.9% real when inflation is 3%.
How do you calculate inflation-adjusted rate of return?
Enter your nominal return and the inflation rate for the same period, such as a yearly return with yearly inflation. The big number is your inflation-adjusted rate of return. Negative rates are allowed, and a rate of −100% or less is rejected because it breaks the formula.
What is the Fisher effect?
It is the relationship between nominal rates, real rates and inflation, named after the economist Irving Fisher. The exact form is (1 + nominal) = (1 + real) × (1 + inflation). This calculator solves it for the real rate.
Recommended
-
I Will Teach You to Be Rich (Ramit Sethi)Put your real return to work with a simple saving and investing plan.
-
HP 12C Platinum financial calculatorCheck growth, rates and cash flows beyond inflation.
-
Sharp EL-1801V printing calculatorKeep a paper tape of the figures behind your returns.
Helps keep the tools free. ✨
Images are for illustration only. As an Amazon Associate I earn from qualifying purchases.
