Real return: what your savings earn after tax and inflation

An advertised rate is the start of the sum, not the answer. Two adjustments show whether your money is actually growing.

4 min read · Updated November 1, 2026. Monsave team.
Rate − tax
Step 1: what reaches your account
− inflation
Step 2: what that money can buy
≈ 1%
Real return at a 5% rate, 20% tax and 3% inflation
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In short

Your real return is what is left after tax and inflation. A 5% rate with 20% tax and 3% inflation gives about 1% in real terms. If the real return is negative, your balance grows while what it can buy shrinks.

The two steps

First, take away tax on the interest. The rate depends on your country, and allowances may reduce it, so use the figure that applies to you.

Net rate = advertised rate × (1 − tax rate)

Then adjust for inflation. Subtracting is a good shortcut, and the exact formula is only slightly different.

Real return = (1 + net rate) ÷ (1 + inflation) − 1

Rates compared

Same assumptions for each line: 20% tax on interest and 3% inflation.

Advertised rate After tax Real return
3% 2.4% -0.58%
5% 4% 0.97%
7% 5.6% 2.52%

Illustrative assumptions, not a forecast and not an offer.

Over 10 years

Small differences compound. Here is 10,000 at 5% with 20% tax and 3% inflation: the balance keeps climbing, while its buying power rises much more slowly.

10,000 saved over 10 years
Balance after tax: 14,802 Buying power today: 11,014
10,000 12,000 14,000
Year 0 Year 2 Year 4 Year 6 Year 8 Year 10

Assumes a constant rate, tax and inflation, with interest reinvested each year.

Try it with your numbers

Change any value and the result updates straight away. Nothing is saved.

What you plan to set aside, in any currency.
The yearly rate your bank or fund advertises.
Check what applies in your country.
What you expect prices to rise each year.
How long the money stays invested.

Balance after tax
Buying power today
Real return a year

Assumes constant values, with interest reinvested each year.

How to use it

  • Compare offers on their net rate, not on the headline rate.
  • Use expected inflation for your currency and your own spending, not a figure from another country.
  • Compare like with like: same currency and a similar term.

What this leaves out

The formula says nothing about risk, access to your money or fees. A higher real return can come with a lock-in period or weaker protection, so read the terms and check how deposits or securities are protected where you live.

Run it with your own numbers

Enter your amount, term, rate, tax and inflation. The calculator shows net interest and real growth, with no signup.

This material is educational and is not investment, tax or legal advice. Tax rules differ by country and can change.