1. What is Real Future Value?

The Real Future Value represents the purchasing power of your investment after accounting for inflation. It shows what your future investment value would be worth in today's dollars.

2. How Does the Calculator Work?

The calculator uses two formulas:

Where:

• \( P \) — Principal investment amount ($)
• \( r \) — Annual interest rate (decimal)
• \( i \) — Annual inflation rate (decimal)
• \( t \) — Investment period in years

Explanation: First calculate the nominal future value, then adjust it for inflation to get the real purchasing power.

3. Importance of Inflation Adjustment

Details: Inflation reduces purchasing power over time. A dollar today buys more than a dollar in the future. The real value shows what your investment will actually be worth in terms of today's purchasing power.

4. Using the Calculator

Tips: Enter your initial investment, expected annual return, estimated inflation rate, and investment period. All values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: Why calculate both nominal and real future values?
A: Nominal shows the actual dollar amount, while real shows purchasing power. Both are important for financial planning.

Q2: What's a typical inflation rate to use?
A: Historically, inflation averages 2-3% annually in developed countries, but this can vary significantly.

Q3: How does this differ from regular compound interest?
A: Regular compound interest gives nominal returns. This calculator adjusts for inflation to show real returns.

Q4: Should I use this for retirement planning?
A: Yes, understanding real future value is crucial for retirement planning to ensure your savings maintain purchasing power.

Q5: How accurate are these projections?
A: They're estimates based on your inputs. Actual returns and inflation may differ from your assumptions.