Real Rate of Return Calculator (Inflation Adjusted)
Calculate the true purchasing power of your investments by adjusting for inflation. Visualize the "Silent Tax" on your wealth over time.
FV (Nominal): -
FV (Real Power): -
About
A nominal return of 8% sounds impressive, but if inflation is running at 5%, your actual wealth is barely growing. This tool calculates the Real Rate of Return, which is the mathematically corrected growth rate of purchasing power. The "Money Illusion" often misleads investors into believing they are richer than they are, while the silent erosion of currency value (inflation) degrades the utility of those future dollars.
Using the Fisher Equation logic, this utility shocks the user into recognizing that preserving capital requires a return strictly greater than the CPI index. It is essential for retirement planning to ensure your "Nest Egg" can actually purchase the goods and services you need in 20 or 30 years.
Formulas
The approximation rreal ≈ rnom - i is often used, but the precise Fisher Equation is:
Where i is the inflation rate. This accounts for the fact that the interest earned is also subject to inflation.
Reference Data
| Region | High Inflation Era | Avg Rate | Purchasing Power Loss (10y) |
|---|---|---|---|
| USA (Great Inflation) | 1970-1980 | 7.4% | -51% |
| USA (Recent) | 2010-2020 | 1.7% | -16% |
| UK (Stagflation) | 1970-1980 | 12.6% | -70% |
| Eurozone | 2000-2010 | 2.2% | -20% |
| Global Average | 1990-2023 | 3.8% | -31% |