What This Calculator Does
This calculator shows the real, inflation-adjusted future value of money you invest today. A balance that looks impressive in future dollars may buy far less than you expect once inflation is taken into account. By comparing nominal growth with real growth, you can see what your investment will actually be worth in today's purchasing power.
How to Use It
Enter the amount you are investing today (present value), your expected annual nominal return, the expected annual inflation rate, and the number of years you plan to stay invested. The calculator returns three numbers: the inflation-adjusted future value, the nominal future value, and the amount of purchasing power lost to inflation.
The Formula Explained
The real future value is computed as $$\text{Real FV} = \frac{\text{PV}\left(1+\dfrac{\text{Return \%}}{100}\right)^{\text{Years}}}{\left(1+\dfrac{\text{Inflation \%}}{100}\right)^{\text{Years}}}$$ where \(r\) is your nominal return rate, \(i\) is inflation, and \(n\) is the number of years. Growing the principal by the nominal rate gives the future dollar amount, and dividing by the cumulative inflation factor converts those future dollars back into today's purchasing power.
Worked Example
Invest $10,000 at a 7% nominal return for 20 years with 3% inflation. The nominal future value is $$10{,}000 \times 1.07^{20} = \$38{,}696.84.$$ Dividing by \(1.03^{20}\) (about \(1.80611\)) gives a real future value of roughly $21,425.50 in today's money. Inflation quietly erodes about $17,271 of that nominal balance's purchasing power.
FAQ
What is the difference between nominal and real value? Nominal value is the raw future dollar amount; real value adjusts that amount for inflation so it reflects what those dollars can actually buy.
What inflation rate should I use? Many investors use a long-run average of around 2–3%, but you can enter any figure that matches your expectations.
Can the real return be negative? Yes. If your nominal return is lower than inflation, the real future value can be less than what you invested, meaning you lost purchasing power.
