"If it’s all an illusion, then what matters to me is my purchasing power, today and until the day of my and the spouse’s death. The averages are of no value to me, whatsoever." This is my biggest complaint about financial media and tools. Most sources use 7% as an estimate of real gains, merging gains and inflation into a single value, when they represent different things. Money grows in nominal terms, not "real terms". This does two things.
It reduces the total growth estimates in a compounding fashion in planning tools, leading people to believe they are saving much less then they are.
Neglects the future purchasing power of the retirement savings.
One million today is worth less in the future because the buying power is reduced by inflation, but it is still a million dollars. For these reasons I ended up building my own models that show nominal growth estimates, and the reduced purchasing power due to compounding inflation. Inflation is far more insidious than taxes at depleting the purchasing power of a portfolio over medium to long time frames.
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"If it’s all an illusion, then what matters to me is my purchasing power, today and until the day of my and the spouse’s death. The averages are of no value to me, whatsoever." This is my biggest complaint about financial media and tools. Most sources use 7% as an estimate of real gains, merging gains and inflation into a single value, when they represent different things. Money grows in nominal terms, not "real terms". This does two things.
- It reduces the total growth estimates in a compounding fashion in planning tools, leading people to believe they are saving much less then they are.
- Neglects the future purchasing power of the retirement savings.
One million today is worth less in the future because the buying power is reduced by inflation, but it is still a million dollars. For these reasons I ended up building my own models that show nominal growth estimates, and the reduced purchasing power due to compounding inflation. Inflation is far more insidious than taxes at depleting the purchasing power of a portfolio over medium to long time frames.Post: Real vs. Imaginary Returns – Part I
Link to comment from January 5, 2026