Returns are multiplied, not added, if you want to be precise. In financial textbook jargon, so you can play along at home:

An investor earns a 9% nominal return. She knows that inflation was 2.5%. What was her real return?

1+Rn = (1+Ri) x (1+Rr)

Rn = Nominal return

Ri = Return due to inflation

Rr = Real return

1+0.09 = 1.025 x (1+Rr)

1.09 = 1.025 x (1+Rr)

1.09 / 1.025 = 1+Rr

1.0634 = 1 + Rr

0.0634 = Rr

Her real return was 0.0634, or 6.34%. Notice that this is close, but not equal to, her nominal return minus inflation: 9% minus 2.5% = 6.5%.

Most people use real return + inflation = nominal return. It's "close enough" for most applications, including MMM and others.

If you want to be precise, use the steps above.

**EDIT: I misread your initial post. I agree with Dodge - you are comparing apples and oranges.**

Both your spending and your savings are affected by the 2.5% inflation. Your yearly spending amount will go UP by 2.5%. Your overall 'staches purchasing power will go DOWN by 2.5% worth of purchasing power.

The latter effect (your stache now buys 2.5% less) is not something you can see - all you see is the 9% nominal return, or the fact that your million bucks now shows an account balance of $1,090,000. But the fact is, your stache actually only buys 6.34% worth of stuff than it did a year ago. That is, your nominal $1,090,000 buys as much as $1,063,400 did one year ago. You'll notice that this is the *real* return I was showing you how to calculate above: this is that 6.34% real rate of return.

Does that make more sense?