IPS Considerations already, existing, investment, benefit

grharmeyer

I just finished reviewing the am IPS for individuals from 2004-2008 and figured i would post this for the benefit of the group (not sure if someone has already tackled it).
Things to watch for (some or all are no brainers):
1)Timing of cash flows - do the cfs in the case occur between t=0 and t=1 or do they occur in year 1.
2)Carve outs - for donations, asset purchases, etcs.
3)Returns on existing portfolio - treat as cashflow into portfolio.
4)Taxes on salary, capital gains, investment income. lower rates on capital gains could factor in under the taxes constraint - investor would prefer low yielding investments.
5)inflation adjustments - is the cf in question a t=0 cf that has to be inflated or a t=1 cf that does not require inflation.
6)salary (net of taxes)  living expenses in year 0 would result in an increase in investable assets; salary (net of taxes) 7) donations
8)cash flows occuring in year 0 (living expenses that have not been drawn for the current year)
9)Education/temporary family support payments
10) Inflation rates - may be more than one rate listed, but use general rate when converting real required return to nominal required return.
11) Time Horizon - if calculating required return in year one - adjust time horizon/age of individual by one year.
If you see any holes or additions, please feel free to add to this.