PFRDA

Real Rate of Return

The Real Rate of Return or Inflation adjusted rate is the periodic rate of return on an investment after adjustment for inflation.

Inflation adjusted rate of Return =

(1+ Return) / (1 + Inflation Rate)

- 1

Number crunching to understand Inflation adjusted rate of

	Scenario 1	Scenario 2	Scenario 3	Scenario 5	Scenario 6
Return	10%	10%	10%	10%	10%
Inflation Rate	5%	6%	7%	8%	9%
Inflation adjusted rate of Return	4.76%	3.77%	2.80%	1.85%	0.92%

It may be observed that in the event of rising inflation, even with the same Return percentage, the Inflation adjusted Rate of Return will keep on falling. Hence, inflation protection in savings and investments has to be taken care of.

Use our calculators "Difference between Real Return and Nominal Return" to enhance your understanding of the concepts.