Understanding Real vs. Nominal Rates of Return

Why is it crucial to understand real vs. nominal rates of return, especially when nearing retirement? Inflation matters. A 5% nominal return sounds good, but with 3% inflation, your real return is only 2%, before taxes. Investing aims for returns that beat inflation long-term and sustain your lifestyle in retirement. Although it may look different based on your stage of life and risk tolerance, having a balanced and diversified investment portfolio can help you generate a real rate of return that stays ahead of inflation and helps grow your purchasing power.

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