Multiplicative vs. additive method for IPS difference, method, points, really

prashantsahni

What is the CFA preferred method? Does it really not make a difference which method is used, or do you get extra points for using one or the other?

kseniaru

It doesn’t make a difference.

mamuka12

(1+Spending)(1+inflation)(1+fee)-1 is the best measure of After tax return requirement.

Unforseen

CFAI says either is ok. I always used multiplicative just to be safe because it’s more precise. Just pick a method and stick with it.

studyn

either one of them is ok, but they recommend using multiplicative approach especially for calculating return for Foundations (to account for the impact of costs and inflation for long time horizons).