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[haha]

Quote:

Originally Posted by bosco never mind, my mistake When I do these kind of calculations, I do it differently.* I keep the withdrawal amount the same and adjust the principle for inflation, or for after-inflation earnings.*

If I understand you correctly, this is the way that TIPS do it also. Let me ask if this is how you do it: Say principle Jan 1, 2005 is $1,000,000. Say principle Jan 1, 2006 is $950,000. Further say that CPI Jan 2006/CPI Jan 2005 =1.04. Then your Adjusted Principle is $950,000/1.04 or $913, 462. So if your assumed SWR is 4%, in 2005 you withdrew $40,000, and in 2006 you will withdraw $36,538.

If this is your idea, it seems quite sound to me. I imagine it would be hard to run out of money this way, though I suppose given enough stagflation the withdrawals could get tight.

Ha

[bosco]

Quote:

Originally Posted by HaHa Let me ask if this is how you do it:

not exactly. I have a number at the top of my spreadsheet for inflation. If it's 3%, I use 1.03. I have enother number for investment rate of return. Say 1.055 (in the case of a 5.5% CD).

I will adjust my principle by the ratio of (1.055)/(1.03) every year. If I want to experiment with other rates, I change the two numbers at the top. I can break things out further if I want.

I will continue to leave my withdrawal as the same number (i.e. not adjust it). That way, I don't have to adjust social security estimates which (supposedly) the government will increase with the CPI. If something, like, say my wife's pension, receives a 50% CPI adjustement, I will divide it by 1.015.

It really doesn't matter if you apply inflation (or discount rate or whatever) to the principle or the withdrawal. But not to both, which is what I did yesterday. The whole day more or less continued on in the same vein.....

[justin]

Quote:

Originally Posted by bosco When I do these kind of calculations, I do it differently. I keep the withdrawal amount the same and adjust the principle for inflation, or for after-inflation earnings. I do it this way because for my situation it is easier. But in my pre-coffee morning haze, I did both. I stand corrected.

I do that too for "back of the envelope" type spreadsheets. Deflate the principal amount by inflation to keep it in "real" terms instead of nominal terms. Then keep the future withdrawals constant since they are in real terms too.

[spideyrdpd]

Gee I was thinking you were going to be talking one of those really really expensive world cruises.
As a retired person I have read that you can get good deals.

Do yall have a thread on that ?