Before inflation and after inflation are different answers.

One investment, two ways to describe it

Start with 100,000, add no contributions and assume 7% annual return for 20 years. The nominal balance is 100,000 × 1.07²⁰ = 386,968.

With 3% inflation each year, prices grow by 1.03²⁰ = 1.8061. Divide the future balance by that factor: 386,968 ÷ 1.8061 = 214,255 in today’s money.

The exact real return is 1.07 ÷ 1.03 − 1 = 3.8835%. Growing 100,000 at that rate for 20 years gives the same purchasing-power result.

How to enter this in FourPercent

1. Open the compound-interest calculator.
2. Enter 100,000 starting balance, zero monthly contribution, 7% return, 3% inflation and 20 years.
3. The final balance is about 214,255 in today’s money.

Do not enter 3.8835% return and also 3% inflation. That subtracts inflation twice. To supply a real return directly, set inflation to zero.

Contributions need the same convention

In the real-value calculators, a monthly contribution of 500 means 500 in today’s purchasing power throughout the plan. With 3% inflation, maintaining that saving effort would require a cash contribution of about 672 after ten years.

If you expect to keep the cash amount fixed instead, your real contribution would decline. These calculators currently assume constant real contributions unless the main FIRE planner’s additional contribution-growth input is used.

Why subtraction is only an approximation

7% minus 3% gives 4%, which is close to 3.8835% but not identical. The ratio accounts for the fact that the price level also compounds. The difference grows with higher rates and longer horizons.

These are constant-rate examples. Actual returns and inflation vary. See our formulas and the SEC’s compounding tool for the accumulation mechanics.