Question: Incorporating inflation in monte carlo model

[Hexanova]

Question for the collective...

I've developed a personal spreadsheet over the last few years that uses monte carlo simulation to model different return scenarios and variance assumptions. I used monte carlo as part of the engineering design process while I was working, so I have experience with it...and I'm a spreadsheet nerd.

My question is how do I include inflation and assumed variance in my model?

- Do I include it simply as another variance that erodes my overall returns assumption?
- Do I include it as an erosion to portfolio withdrawal only? OR
- Do I include it as an inflation added to my returns calculation only? OR
- Some combo/something else I'm missing...?

Hopefully that makes sense. Thanks.

 

[target2019]

Here is a wealth of "Gummy Stuff" that might interest you. He covered a lot of ground in his Excel models.

https://www.gummy-stuff.org/Excel/

 

[Hexanova]

Here is a wealth of "Gummy Stuff" that might interest you. He covered a lot of ground in his Excel models.

https://www.gummy-stuff.org/Excel/

Holy crap, where do I start? Thanks I guess...

 

[target2019]

Holy crap, where do I start? Thanks I guess...[emoji23]

Thirsty? Here's the firehouse!