Real vs. Nominal Returns: The Inflation Gap

Nominal returns are the percentage increase in your account. Real returns are what's left after subtracting inflation.

The Money Illusion

If your investments grow by 10% but inflation is 8%, your lifestyle only improves by 2%—this is your 'real' gain.

Planning for the Future

When projecting retirement costs, always use 'real' return assumptions to ensure you can actually buy what you need's later.

Asset Positioning

Fixed-income assets (like savings accounts) often have negative 'real' returns during periods of high inflation.