Your statement shows dollars, but what you care about is what those dollars will buy. This calculator projects an investment in nominal terms, then strips out inflation — and optionally taxes — to show its value in today’s dollars and the real rate of return that drives it. It is the honest version of a growth projection.
How to use the investment inflation calculator
- Enter the amount invested today and, optionally, a fixed amount added each year.
- Enter the expected nominal return — the rate before inflation.
- Enter the expected inflation rate. The long-run US average since 1913 is a little over 3%; the Federal Reserve targets 2%.
- Optionally enter a tax rate on returns to model a taxable account that pays tax on each year’s gains.
- Enter the number of years.
The chart compares the nominal balance with the inflation-adjusted balance and the total you contributed; the table shows each year’s gain, both balances and cumulative inflation.
Real return formula
The Fisher equation links nominal returns, inflation and real returns:
With taxes, the nominal rate is first reduced to rnominal × (1 − tax rate). A future balance converts to today’s dollars by dividing by cumulative inflation:
Worked example
You invest $20,000 now and add $3,000 at the end of each year for 15 years. Your portfolio earns 6% and inflation averages 3%.
- Real return: 1.06 ÷ 1.03 − 1 = 2.913% a year
- Nominal balance after 15 years: $117,759.07
- Cumulative inflation: 1.0315 = 1.55797
- In today’s dollars: $117,759.07 ÷ 1.55797 = $75,585.07
- You contributed $65,000, so the real gain is only about $10,585 — inflation absorbed $42,174 of apparent growth
Now hold the money in a taxable account and pay 24% tax on each year’s gain. The after-tax return drops to 4.56%, the real return to 1.515%, and the inflation-adjusted value to $65,260.06 — barely above what you put in.
Real returns at a glance
| Nominal return | Inflation | Tax on gains | Real after-tax return |
|---|---|---|---|
| 4% | 3% | none | 0.971% |
| 4% | 3% | 24% | 0.039% |
| 5% | 2.5% | none | 2.439% |
| 6% | 3% | none | 2.913% |
| 6% | 3% | 24% | 1.515% |
| 8% | 3% | 15% | 3.689% |
| 3% | 4% | none | −0.962% |
The pattern is stark for interest-bearing savings: once taxes are paid, a CD or savings account yielding only a point above inflation preserves purchasing power but hardly grows it. Tax-advantaged accounts such as IRAs and 401(k)s help precisely because they defer or eliminate the tax on the inflation component of returns.
Choosing assumptions
- Inflation: check recent and long-run figures with the inflation calculator, which uses official CPI data back to 1913.
- Nominal return: use returns after fund fees. A bond fund, a balanced portfolio and an all-stock portfolio warrant very different numbers.
- Taxes: long-term capital gains and qualified dividends are taxed at lower rates than interest, and gains in a buy-and-hold stock portfolio are mostly deferred until you sell, so the annual-tax model here is most accurate for bonds, CDs and savings.
For a plain nominal projection that can also solve for contributions or time, use the investment calculator.
Projections are estimates, not financial or tax advice. Inflation, returns and tax rules change over time.
Frequently asked questions
What is the real rate of return?
It is the return measured in purchasing power rather than dollars. By the Fisher equation, real return = (1 + nominal return) ÷ (1 + inflation) − 1. A 6% return with 3% inflation is a real return of about 2.91%, not 3%.
Why not just subtract inflation from the return?
Subtracting is a quick approximation that gets worse as rates rise. It ignores the fact that inflation also erodes the gains themselves. The exact Fisher formula divides instead of subtracting.
How do taxes change the real return?
Taxes are charged on the nominal gain, including the part that only keeps pace with inflation. At a 24% tax rate, a 6% return becomes 4.56% after tax, and the real after-tax return with 3% inflation is just 1.52%.
Is the 'today's dollars' figure what I will actually have?
No. You will have the nominal amount in your account. The today's-dollars figure tells you what that future amount will buy, expressed in prices you recognize now.
Which investments protect against inflation?
Treasury Inflation-Protected Securities (TIPS) and Series I savings bonds adjust for CPI by design. Stocks and real estate have historically outpaced inflation over long periods, but not reliably over short ones. Cash and fixed-rate bonds lose ground when inflation runs above their yield.