Real Rate of Return Calculator
Adjust an investment's return for inflation, and optionally tax, to see your true gain in purchasing power.
About the Real Rate of Return Calculator
Enter your return, the inflation rate and, if you like, the tax rate on your returns. The calculator gives the real return: how much more you can actually buy each year.
The Fisher equation divides out inflation exactly. Subtracting inflation from the return is a close approximation at low rates but drifts as rates rise.
The formula
Real = (1 + nominal) ÷ (1 + inflation) − 1
- nominal
- the return you're quoted, after tax if you enter a tax rate
- inflation
- yearly rise in prices, e.g. the consumer price index
Worked example
8% return with 3% inflation
- 1.08 ÷ 1.03 − 1 = 4.854% real
- The shortcut 8 − 3 = 5% slightly overstates it
- With 30% tax on returns: 8% × 0.7 = 5.6%, then real 2.524%
Things to keep in mind
- Uses one inflation rate; your own costs may rise faster or slower than the official index.
Questions people ask
Can real returns be negative?
Yes: a savings account at 3% with 4% inflation loses about 1% of purchasing power a year.
Should I include tax?
Yes for a true after-tax real return.
Where do I find inflation?
Your country's statistics office publishes the consumer price index (CPI), usually monthly.