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A “real” raise is your pay increase after adjusting for inflation. If prices rise as fast as your pay, your purchasing power is unchanged even though the number on your contract went up. The real raise is calculated as ((1 + raise) ÷ (1 + inflation) − 1) × 100 — not simply raise minus inflation.
Updated October 2026: U.S. inflation was 3.7% over the 12 months ending September 2026 (CPI-U, not seasonally adjusted), according to the Bureau of Labor Statistics release of October 14, 2026. That is the figure used in the examples below.
Nominal versus real
Your nominal raise is the percentage printed in your offer letter. Your real raise is what that increase is worth once you account for rising prices. The two can tell very different stories.
Real raise% = ((1 + Raise ÷ 100) ÷ (1 + Inflation ÷ 100) − 1) × 100
People often subtract the two percentages as a shortcut. That is close at small numbers but not exact, because a raise and inflation compound rather than add. The ratio above is the correct method.
A worked example
Say you receive a 3% raise in a year when inflation is 3.7% — the latest 12-month CPI-U figure.
- Simple subtraction suggests −0.7%.
- The correct ratio gives (1.03 ÷ 1.037 − 1) × 100 ≈ −0.68%.
Either way, the conclusion is the same: a 3% raise in a 3.7% inflation year is a small cut in real terms. Your salary went up, but it buys slightly less than before.
Check a raise against inflation →
What raise do you need just to keep up?
To hold your purchasing power steady, your nominal raise has to at least match inflation. To actually get ahead, you need more. The minimum raise for a target real gain is:
Required nominal% = ((1 + Desired real ÷ 100) × (1 + Inflation ÷ 100) − 1) × 100
With inflation at 3.7% and a goal of a 1% real gain, you would need about a 4.74% raise: (1.01 × 1.037 − 1) × 100 ≈ 4.74%.
Where to get an inflation figure
Inflation is not a single fixed number — it changes over time and depends on what you buy. For an official, current United States figure, the U.S. Bureau of Labor Statistics publishes the Consumer Price Index (CPI). Use a recent, dated figure rather than a number you half-remember, and treat any single national rate as an approximation of your personal cost of living. The latest figure at the time of this update is the 3.7% 12-month change in CPI-U for the 12 months ending September 2026, released by BLS on October 14, 2026. For context, prices rose 2.7% in the 12 months ending December 2025, the most recent full year (BLS release, January 13, 2026). A related benchmark is the Social Security cost-of-living adjustment (COLA): the Social Security Administration announced a 2.8% COLA for 2026 on October 24, 2025. COLA is a benefit adjustment, not a pay raise — see our guide to a cost-of-living raise for how these increases work, rather than using COLA as your inflation figure.
Common questions
Is a 3% raise good?
It depends entirely on inflation. In a low-inflation year it is a real gain; in a high-inflation year the same 3% can be a real cut. Always compare against a current inflation figure. Against the latest 3.7% figure, a 3% raise is slightly behind inflation, as the worked example above shows.
How do I calculate a real wage?
Divide your pay by (1 + inflation ÷ 100) to express it in the prior period’s buying power, or use the real-raise ratio above to compare two years directly.
Why not just subtract inflation from my raise?
Subtraction is a decent quick estimate but slightly off, because the two rates compound. The division method is exact and is what our calculator uses.
Sources
- U.S. Bureau of Labor Statistics — Consumer Price Index (CPI) program
- BLS — Consumer Price Index news release — September 2026 release, October 14, 2026: CPI-U rose 3.7% over the 12 months ending September 2026; the December 2025 release (January 13, 2026) reported a 2.7% rise over the 12 months ending December 2025
- Social Security Administration — 2026 COLA announcement (press release, October 24, 2025): a 2.8% cost-of-living adjustment for 2026
- Social Security Administration — 2027 COLA fact sheet (October 14, 2026): a 3.6% cost-of-living adjustment for 2027
Inflation figures change every month. Use a current, dated BLS release rather than a number copied forward.
More questions about real raises
More than inflation itself. With inflation at 3.7%, a raise has to exceed 3.7% before any of it is a real gain. A 3.5% raise, for example, is still slightly behind: (1.035 ÷ 1.037 − 1) × 100 is about −0.19% in real terms. A raise of exactly 3.7% only keeps your purchasing power level.
Take a $60,000 salary with a 3% raise. Nominally you now earn $61,800. Adjusted for 3.7% inflation, that $61,800 buys roughly what $59,595 bought last year — slightly less than your old salary bought. That gap is the −0.68% real result from the worked example above, expressed in dollars instead of percentages.
The shortfalls stack up and compound. Each year your raise trails inflation, your pay buys a little less, and the following year starts from that lower base. A single year around −0.68% feels minor; several in a row can leave your standard of living clearly behind, even though your nominal salary rose every year.
Partly, for that year. A one-off bonus raises your total pay for the year, so compare your total cash — salary plus bonus — against inflation. But a bonus does not lift your base salary, so next year’s percentage raise is still worked out from the same base, and the bonus itself may not repeat.
Keep reading — two guides that pair with this one:
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