Inflation & Economic Assumptions Guide

Why inflation matters

Inflation reduces the purchasing power of a dollar over time. A retirement projection that ignores inflation can overstate purchasing power by 40% or more across a 30-year horizon.

Nominal vs. real

• Nominal return — return before subtracting inflation.
• Real return — return after subtracting inflation. This is what determines whether your purchasing power is growing.

Where reasonable, calculators allow you to view projections in today's dollars (real) or future dollars (nominal). Mixing them creates misleading conclusions.

Our default ranges

• Long-run U.S. inflation: ~2.5–3.0%.
• Long-run nominal equity return: ~6–8%.
• Long-run real equity return: ~4–5%.
• Wage growth: often modeled near long-run inflation, adjustable per tool.

These defaults are conservative and editable. They are not predictions.

Regime change risk

Inflation, interest rates, productivity and growth can deviate from historical averages for extended periods. Projections should be stress-tested under higher-inflation and lower-return scenarios.

Related

See Assumptions & Limitations and Projection Methodology.