---
title: "Real vs Nominal Return Calculator (Fisher) | Interest Grove"
description: "Turn a nominal return into a real, inflation-adjusted one with the exact Fisher equation, compare the shortcut, or use CPI inflation between two years."
url: https://interestgrove.bond/real-return-calculator/
---

# Real vs nominal return calculator

A balance can grow while what it buys shrinks. Take inflation out of a nominal return with the exact Fisher equation, and see how far the usual shortcut drifts.

## The Fisher equation

A nominal return is growth in dollars; a real return is growth in what those dollars buy. Irving Fisher set out the link in *The Theory of Interest* (1930): (1 + nominal) = (1 + real) × (1 + inflation). Solving for the real rate gives the exact formula; subtracting inflation from the nominal rate is the familiar shortcut.

Real = (1 + nominal) ÷ (1 + inflation) − 1 ≈ nominal − inflation

The shortcut is close when rates are small and drifts as they grow: it is off by (nominal − inflation) × inflation ÷ (1 + inflation). Choose "CPI average" to use the compound average inflation between two years from the BLS CPI-U annual averages.

Example: 5% nominal with 3% inflation is a real return of 1.05 ÷ 1.03 − 1 = 1.942%, not 2%. Over 20 years $10,000 grows to $26,532.98, worth $14,690.67 in today's buying power.

## Sources

- Irving Fisher, [*The Theory of Interest*](https://oll.libertyfund.org/titles/fisher-the-theory-of-interest) (New York: Macmillan, 1930), Online Library of Liberty: money interest, real interest and the change in prices.
- U.S. Bureau of Labor Statistics, [CPI-U, U.S. city average, all items, series CUUR0000SA0](https://data.bls.gov/timeseries/CUUR0000SA0): annual averages 1913–2025 for the CPI option.

## Questions

**Can a real return be negative?**

Yes, whenever inflation is higher than the nominal return: the balance grows but buys less.

**Which inflation figure should I use?**

Any rate you want to test, or the CPI-U average between two years. Past averages describe history, not what comes next.

**Does this include taxes?**

No. Tax is usually charged on the nominal return, so the real return after tax can be lower still.