How to Calculate Real Disposable Income

Real disposable income reveals your spending power after inflation.
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The government maintains a set of national accounts that reveal the current state of the economy. One of these accounts is real disposable income, or RDI, which is the amount of money Americans have to spend and save after accounting for income taxes and inflation. You can calculate your personal RDI to gauge how well your income is keeping up with inflation. The U.S. Bureau of Economic Analysis uses 2009 as the starting point for measuring RDI inflation, but you can use any year that makes sense to you.


Step 1

Determine your gross income for the last full tax year. Your gross income is the pre-tax amount you receive in salary, wages, investment income, alimony and any other forms of income. For example, you might have a gross income of $64,600.

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Step 2

Subtract your income taxes for the latest full tax year. This includes federal, state and local income taxes. The result is your disposable income for the year, the amount you can use to invest, save and pay your bills. If you paid $11,000 in income tax for the year, your disposable income is $64,600 minus $11,000, or $53,600.


Step 3

Look up the Consumer Price Index for the last full tax year and for an earlier year of your choosing. For example, if you want to measure the effect of inflation from 2009 through 2013, look up the CPIs for those years, which were 214.537 and 232.957, respectively. This information is available from several websites and is published by the U.S. Department of Labor Bureau of Labor Statistics.



Step 4

Calculate the ratio of the CPIs for the two years. In this example, divide 214.537 into 232.957, giving 1.0859.

Step 5

Apply the change ratio to find your real disposable income. In this example, divide 1.0859 into your disposable income for the latest full tax year: $53,600 / 1.0859 equals $49,361.83. This amount represents the buying power of your disposable income in 2009 dollars.


The procedure is the same no matter which year you choose as your base. The CPI statistics go back to 1913. The CPI measures the price change to American consumers of a standard basket of goods.


Do not include other taxes, such as property tax or sales tax, in your calculations.

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