Calculate a return after inflation

Divide the investment growth factor by the price-growth factor, then subtract one: real return = (1 + nominal return) / (1 + inflation) − 1. An 8% nominal return with 6% inflation is therefore about 1.8868%, not exactly 2%. Subtraction is close when both rates are small and the period is short, but the factors compound, so the gap becomes material when a savings plan runs for decades.

What to take away

Returns and inflation are multiplicative growth factors, which is why division—not subtraction—is exact.
Use rates covering the same period and the same compounding convention before comparing them.
A positive nominal balance can still have a negative real return when prices rose faster than the investment.

The full explanation

Every figure on a statement is nominal — it counts units of currency rather than what they buy. Inflation is the conversion between that and the thing people actually care about, and it compounds, which is why the gap between the two grows far faster than a single year's rate suggests. Read the complete guide for the reasoning, examples and definitions behind this answer.

Use the idea

Inflation Impact Calculatorwhat will my money be worth after inflation Compound Interest Calculatorhow much will my savings grow in 10 years Savings Goal Calculatorhow much do i need to save each month to reach my goal

Sources

Consumer Price IndexU.S. Bureau of Labor Statisticschecked Jul 31, 2026applies to 2026
Price stability and the inflation targetEuropean Central Bankchecked Jul 31, 2026applies to 2026