Nominal vs. today’s dollars: the toggle that changes everything
Every retirement projection has to answer a question most people never think to ask: which dollars are we talking about? A “nominal” dollar is a dollar of whatever year it appears in — the number actually printed on the withdrawal or the account statement. A “real” or “today’s dollars” figure has been deflated back to current purchasing power. Over a weekend the distinction is trivia. Over the 30-to-60-year horizon of a retirement plan, it changes every number on the screen — and misreading which one you are looking at is one of the easiest ways to fool yourself about a plan.
The inflation illusion
Inflation compounds just like returns do, only against you. At 3% — roughly the long-run U.S. average since 1928 — prices double about every 24 years (the rule of 72). A 60-year-old planning to age 95 spans 35 years: the $100,000 lifestyle of year one costs about $281,000 in nominal dollars by the end. Run it the other direction and the illusion appears: a projection that shows $3 million in the 40th year sounds like wealth, but at 3% inflation it buys what about $920,000 buys today. Nominal charts flatter. Balances march up and to the right even when purchasing power is flat or falling, because the yardstick itself is shrinking.
Nor is 3% guaranteed. The historical record the simulator samples from includes 13.5% inflation in 1980, 8.0% in 2022, and outright deflation in the early 1930s. Which sequence you get matters enormously — a decade of 5% inflation early in retirement is a very different plan than the same decade at 2%.
What each mode is for
Real dollars answer the questions you actually care about: Can I keep this lifestyle? What is this legacy worth? Is my purchasing power growing or eroding? When comparing a balance at 65 to one at 90, only real dollars make the comparison honest. Nominal dollars are the right lens for anything fixed in nominal terms: a mortgage payment that never rises, a pension without a cost-of-living adjustment (inflation quietly melts it), and — sneakily — several tax thresholds that Congress froze in nominal dollars, like the Social Security taxability tiers and the $250,000 NIIT line. Those cliffs never move, so nominally growing incomes drift into them over the decades. That drift is invisible in real dollars and obvious in nominal ones.
The Monte Carlo subtlety
In a Monte Carlo simulation there is no single inflation rate to divide by. Each simulated path draws its own sequence of yearly inflation, so the honest deflator is path-specific: a year-30 balance on a high-inflation path must be deflated by that path’s cumulative CPI, not an average. This is also why real and nominal fan charts can rank paths differently — a path that looks rich nominally may just be a path where inflation ran hot, inflating balances and prices alike. Percentile bands drawn in real dollars are the ones that reflect lived outcomes.
One habit worth keeping
Whenever a retirement number surprises you — pleasantly or otherwise — check the units first. “You will have $4 million at 90” and “you will have $4 million of today’s purchasing power at 90” differ by roughly a factor of 2.5 at average inflation over that horizon. Most planning mistakes of this kind are not math errors; they are unit errors.
Try it in Deorbit Plan
The Display toggle at the top of the results dashboard switches every dollar figure between Nominal $ and Today’s $ — the fan chart, account-bucket areas, the Tax & MAGI and RMD charts, the stat tiles, the Year table, CSV exports, and Compare-view deltas all flip together, so the two modes are always describing the same simulation. Today’s $ deflates each path by its own cumulative simulated CPI back to start-year (2026) dollars. Flip the toggle on a long horizon and watch the ending-balance fan compress — the gap between the two views is the inflation illusion, drawn to scale.
Educational content only — not financial, tax, or investment advice.
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