Re: Inflation Adjusted Home Profits Means ??
Sorry -- the description may be a bit misleading.
Your portfolio is assumed to grow (or decline) based on the historical results of the stream that is being calculated. No inflation gets figured in separately, because that is already embedded in the historical returns.
Your withdrawals normally ARE inflation adjusted. The idea is that your spending power remains stable throughout. So if you started taking 4%, and inflation was rampant, you might wind up taking 6-7% of the original portfolio balance at retirement after a number of years.
Changes to your portfolio might be in the form of a future sale of a house. Say the house is worth 250k today, but you won't sell it until 10 years from now. The (optional) adjustment for inflation means that the sale will be based on what a 250k house today would sell for in 10 years, assuming real estate prices tracked inflation. *(You might elect a non-inflation-adjusted increase instead, as with the maturing of a large CD, or any other lump sum where the future amount is not dependent on changing values.)
Once the sale is made, then the inflation adjustments stop, and the now-larger portfolio continues to change with the historical results.
Does that help?
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