Real Rate of Return

Real Rate of Return Calculator

Calculate the inflation-adjusted return on your investments to understand their true purchasing power growth.

Nominal Return Rate (%)

Inflation Rate (%)

Time Period (Years)

Calculation Results

Real Rate of Return

Nominal Return

Inflation Impact

Purchasing Power

Investment Growth Comparison

$10,000 after years (nominal):

Real value (inflation-adjusted):

Purchasing power loss:

Annual Breakdown

Fisher Equation: (1 + r) = (1 + n) / (1 + i)

Approximation: r ≈ n - i

Exact calculation:

Simple calculation:

Understanding Real Rate of Return

What is Real Rate of Return?

The real rate of return is the annual percentage return on an investment adjusted for inflation. It represents the actual increase in purchasing power, showing what your returns can actually buy.

Fisher Equation

(1 + Real Rate) = (1 + Nominal Rate) / (1 + Inflation Rate)

Simple Approximation

Real Rate ≈ Nominal Rate - Inflation Rate

Key Points

Real returns show true wealth growth after accounting for inflation
Negative real returns mean purchasing power is declining
Essential for long-term investment planning
Helps compare investments across different time periods

Example Scenarios

Good: 8% return, 2% inflation = 5.88% real return

Neutral: 3% return, 3% inflation = 0% real return

Poor: 2% return, 4% inflation = -1.92% real return