In Short
Real return is what an investment earns after inflation and taxes [1]. The exact formula is (1 + return) ÷ (1 + inflation) − 1, so an 8% return with 3.7% inflation (the latest 12-month CPI-U change [2]) is a 4.15% real return, not the 4.3% you get by subtracting. $10,000 at 8% for 10 years grows to $21,589, worth $15,012 in today's dollars.
How to Use the Real Return Calculator
- Enter your nominal return: the yearly rate before inflation and taxes.
- Keep the default inflation rate (the latest CPI-U change from BLS) or type your own.
- Add a tax rate on your gains if the money is in a taxable account, plus an amount and a number of years.
- Or tap Say It All: “My investments earn 8 percent, inflation is 3 percent, tax rate 15 percent, investing 10,000 for 20 years.”
The Formula
Inflation shrinks what each dollar buys, so the real return divides growth by the rise in prices instead of subtracting. Taxes come off each year's gain first [1].
- Real return = (1 + nominal return) ÷ (1 + inflation) − 1
- Rough estimate = nominal return − inflation
- After-tax return = nominal return × (1 − tax rate)
- After-tax real return = (1 + after-tax return) ÷ (1 + inflation) − 1
- Value in today's dollars = amount × (1 + real return)^years
Worked Examples
| Scenario | Inputs | Result |
|---|---|---|
| Stocks at today's inflation | 8% return, 3.7% inflation, no tax, $10,000 for 10 years | Real return 4.15% · $21,589 on paper · $15,012 in today's dollars |
| Taxable account | 8% return, 3% inflation, 15% tax, $10,000 for 20 years | After-tax real return 3.69% · $46,610 on paper · $20,639 in today's dollars after tax |
| A CD after tax | 5% interest, 3.7% inflation, 24% tax | After-tax return 3.8% · after-tax real return 0.10% |
| Where the shortcut drifts | 10% return, 5% inflation | Exact real return 4.76% vs 5% by subtracting |
| Thirty years at 7% | 7% return, 3% inflation, $10,000 for 30 years | $76,123 on paper · $31,361 in today's dollars |
Illustrative examples, not projections. Figures use the tax year shown and the assumptions above.
What Is a Real Return?
The nominal return is the number on your statement. The real return is what is left after taxes and inflation, which is what matters for what your money can buy [1]. If your account grows 5% while prices rise 4%, you are only about 1% better off.
The default inflation here is the latest 12-month change in the Consumer Price Index for All Urban Consumers (CPI-U), published by the Bureau of Labor Statistics [2][3].
Why Not Just Subtract Inflation?
Subtracting is a fine shortcut at low rates, but it overstates the real return because it ignores that inflation also eats into the gain itself. At 8% and 3.7%, the gap is small (4.3% vs 4.15%). At 10% and 5%, it is a quarter of a point (5% vs 4.76%), and that adds up over decades.
How Do Taxes Change the Real Return?
In a taxable account, part of each year's gain goes to tax. Because inflation is not deducted first, taxes can take a big share of the real gain: a 5% CD taxed at 24% with 3.7% inflation keeps only about 0.1% of buying power a year. Tax-advantaged accounts such as IRAs and 401(k)s change the picture. This calculator applies one flat rate to each year's gain, so treat it as an estimate.
Frequently Asked Questions
What is the real return on 8% with 3% inflation?
4.85% exactly: (1.08 ÷ 1.03) − 1. Subtracting gives 5%, a little high.
What inflation rate does this calculator use?
By default, the latest 12-month change in CPI-U from the Bureau of Labor Statistics: 3.7% from September 2025 to September 2026 [2]. You can type any rate.
Can a real return be negative?
Yes. If inflation is higher than your return after tax, your buying power shrinks. 3% interest with 3.7% inflation is a real return of about −0.7%.
What is $10,000 at 8% worth in 10 years in today's dollars?
With 3.7% inflation and no tax, about $15,012. On paper it grows to $21,589.
Does the calculator include fees?
No. Subtract fees from your nominal return first; a 1% fee on an 8% return leaves 7%.
Sources
- Real Return (glossary) — U.S. Securities and Exchange Commission (Investor.gov)
- CPI for All Urban Consumers (CPI-U), U.S. city average, all items, series CUUR0000SA0 — U.S. Bureau of Labor Statistics
- Consumer Price Index — U.S. Bureau of Labor Statistics
Official sources only: the IRS, SSA, BLS and other government agencies. Read how Zentavos researches.