# Real Rate of Return Calculator

URL: https://speedycalculator.com/calculators/finance/real-rate-of-return/
Last updated: 2026-10-25

> The real rate of return calculator adjusts a nominal investment return for inflation (and optionally tax) using the Fisher equation, showing how much your purchasing power really grew.

## Inputs

- Nominal return (%)
- Inflation rate (%)
- Tax rate on returns (%)

## Results

- Real rate of return
- Quick approximation
- After-tax nominal return

## Formula

```
Real return = (1 + nominal return) ÷ (1 + inflation) − 1
After tax: nominal × (1 − tax rate) is used in place of the nominal return
Approximation: real ≈ nominal − inflation
```

## Explanation

If your savings earn 5% but prices rise 3%, you are only about 1.94% better off in real terms. After tax, real returns on cash savings can easily be negative.

### How to use the Real Rate of Return Calculator

- **Nominal return**
- **Inflation rate**
- **Tax rate on returns**

Results update as you type, and every field accepts the units shown in its menu.

### How it works

Enter the nominal return, the inflation rate and, optionally, the tax rate on returns.

### Tips

- Use the nominal annual rate and pick the compounding frequency your bank or broker states.
- Small differences in return or fees compound into large differences over decades.
- Run the calculation with a cautious, a central and an optimistic return to see the range of outcomes.
- Past returns do not guarantee future returns – nothing here is investment advice.

### Common mistakes to avoid

- Comparing an APR with an APY or effective rate.
- Ignoring inflation, taxes and fees when judging a real return.
- Entering a percentage as a decimal (5 instead of 0.05 is correct here).

### Inputs explained

FieldWhat to enterNominal returnIn %Inflation rateIn %Tax rate on returnsIn %

### What each result means

- **Real rate of return** = ((1 + [Nominal return]÷100×(1 - [Tax rate on returns]÷100))÷(1 + [Inflation rate]÷100) - 1)×100
- **Quick approximation** = [Nominal return]×(1 - [Tax rate on returns]÷100) - [Inflation rate]
- **After-tax nominal return** = [Nominal return]×(1 - [Tax rate on returns]÷100)

### Example values

How the main result changes when **Nominal return** changes and everything else stays at the example values above:

Nominal return (%)Real rate of return (%)3.50.4855.252.18473.8838.755.58310.57.2821410.68

## Worked example

Inputs — Nominal return: 7 %; Inflation rate: 3 %; Tax rate on returns: 0 %.

Results — **Real rate of return = 3.883 %**; Quick approximation = 4 %; After-tax nominal return = 7 %.

## FAQ

**What is the real rate of return?**
The return after removing the effect of inflation.

**Why not just subtract inflation?**
That is an approximation; the exact formula divides growth factors.

**Can real returns be negative?**
Yes, when inflation exceeds your after-tax return.

**What formula does the Real Rate of Return Calculator use?**
Real return = (1 + nominal return) ÷ (1 + inflation) − 1.