Nominal returns are what your account statement shows. Real returns are what those dollars buy after inflation. Planning with nominal numbers only is like counting sticker dollars while grocery-aisle dollars shrink every year.
Flan shows both on purpose. Toggle real vs nominal so long projections talk about buying power, not just bigger numbers on a screen. This is for anyone who has ever felt great about an 8% year and still watched rent eat the raise.
You will leave with one formula, one worked example, and a habit of asking “8% of what kind of dollar?” before you trust a retirement chart. Run your own numbers in the free inflation calculator.
Nominal is the headline on your portfolio: up 8% this year. Real is what that gain means at the checkout line after prices moved too. If inflation ran 3%, your purchasing power did not jump 8%. It jumped less. Mix them up and a thirty-year projection looks safer than it is.
The clean conversion is not subtracting inflation from nominal. Use growth factors: real return ≈ (1 + nominal) ÷ (1 + inflation) − 1. Example: 8% nominal and 3% inflation gives 1.08 ÷ 1.03 − 1 ≈ 0.0485, about 4.85% real. Rule-of-thumb “8 minus 3 equals 5” is close but slightly optimistic. For decades of compounding, the extra half point matters.
$100,000 growing at 8% nominal for twenty years becomes about $466,000 on paper. At 4.85% real, the same buying power story is roughly $256,000 in today's grocery-aisle dollars. Both can be true at once. One is sticker wealth. One is what you might actually spend.
Expenses inflate too. Rent on the 1st, insurance renewals, and daycare bumps are nominal cash out the door. If your plan assumes today's $4,000 rent forever while investments compound at nominal 8%, you are mixing currencies. Real mode aligns the growth assumption with the kind of dollar your future bills use.
$100k invested at 8% nominal (20 years, 3% inflation)
Accumulation bragging uses nominal because the numbers look big. Retirement spend planning wants real because you care whether you can still afford the same life in 2042. Coast FI math that assumes 7% nominal with 3% inflation is really about 4% real. Use the wrong one and you think you coasted when you still owe years of heavy saving.
Salary raises are nominal too. A 4% raise with 3% inflation is barely more than a cost-of-living bump in buying power. Model the raise in nominal dollars on the timeline, but compare long-run goals in real so you do not confuse a bigger paycheck with a shorter path to work-optional.
When someone says “assume 7% returns,” ask: before or after inflation? Flan's real/nominal toggle is that question built into the chart. Same accounts, same events, two ways of reading the future. Neither is lying. They answer different questions.
Flan projections can display real or nominal returns so growth, goals, and long horizons stay in one consistent language. Switch the toggle when you move from “how big does the account get?” to “can I still afford this lifestyle years out?”
Nominal returns are sticker dollars. Real returns are grocery-aisle dollars. Convert with (1 + nominal) ÷ (1 + inflation) − 1, and read long plans in the unit that matches your future bills.
Play with the math in the inflation calculator (real return view). When you are ready to wire income, spend, and events together, start with You need a model.
Run your own numbers with the free inflation / real return calculator: Free inflation calculator: convert a nominal return to a real return, and see future sticker dollars vs buying power.
Flan is planning software, not a bank, broker, or licensed advisor. Nothing here is financial, tax, or legal advice.
Read more Flan Files at theflan.app/blog.
