How to Calculate Inflation Adjusted Return: Formula and Inputs

Separating money growth from purchasing power

Starting value, ending value and holding period produce a nominal compound annual growth rate. The calculator then adjusts that rate using the entered annual inflation rate rather than simply subtracting inflation.

Real value discounts the ending amount by compounded inflation over the full period. Real gain compares that inflation-adjusted ending value with the starting value, showing the change in purchasing power under the constant-inflation assumption.

Deflating a nominal result

The default case compares an entered nominal return with an inflation rate for the same period. It reports the real percentage and the purchasing-power result on the example amount.

Why positive nominal can mean negative real

A positive nominal return can still produce a negative real return when inflation is higher. The real result is the better measure of what the ending money can buy relative to the start.

The exact real-return relationship

Matching the period and inflation measure

Nominal return minus inflation is only an approximation. The calculator uses the displayed compounding relationship, which matters more as rates become larger.

• Nominal return and inflation cover the same time period.
• The inflation rate represents the relevant purchasing basket.
• Tax, fees and personal spending differences are excluded.

Calculations related to inflation adjusted return

The following tools examine neighbouring parts of the same calculation without changing the inputs or assumptions used above.