How Does Inflation Adjusted Work

[astroboy]

My question is how to input into FIRECalc an expected addition to my portfolio that will be, for example, $200,000 in year 24? The worksheet says it will use inflation adjusted numbers. What does that mean for my situation? Should I just enter the $200k in year 24 or enter an amount that is adjusted down for year 1 so that it would roughly equal $200K in year 24 (i.e at 3% inflation, it'd be worth about $100K in yr 1) and so would enter only $100K in year 24. May be making this more complicated than needed but appreciate your help so I don't over/under estimate the effect of this addition in the future. Thanks.

[bosco]

Quote:

Originally Posted by astroboy My question is how to input into FIRECalc an expected addition to my portfolio that will be, for example, $200,000 in year 24? The worksheet says it will use inflation adjusted numbers. What does that mean for my situation? Should I just enter the $200k in year 24 or enter an amount that is adjusted down for year 1 so that it would roughly equal $200K in year 24 (i.e at 3% inflation, it'd be worth about $100K in yr 1) and so would enter only $100K in year 24. May be making this more complicated than needed but appreciate your help so I don't over/under estimate the effect of this addition in the future. Thanks.

If the $200k you are referring to is in today's dollars, then enter it as $200k. If you will be receiving $200k in 24 years with no inflation adjustment, (worth maybe 75 or 80k in today's dollars), then enter 75 or 80k or whatever fits your inflation assumptions. Best to keep everything in current dollars, and that's what these calculators typically do.