IPS - Inflation return, please, always, scenario

DoubleDip

so in what scenario do we have to add inflation to the return in the first step of calculation

for ex - 100 * 1.03/5million.

I know we always have to add in the last step.

please help

Analyze_This

When they are looking for next years return. You would need to multiply your salary (if there is one) by its growth/inflation rate. You would also have to multiply any living expenses by inflation for the next year.

Be on the lookout for fixed expenses like a mortgage however. This will not be multiplied by inflation.

lcai

page 198 of schweser has not calculated in that way even though it is asking for coming year.

Can you please check?

bboo

so, to answer pupdawg, you have to add inflation if they are maintaining the portfolio's real value - always the case

canadiananalyst

It looks like they tell you that she will need 60,000 in her first year of retirement (which is one year from now). They also tell you she will need 30,000 next year(one year from now). They are giving you amounts they will need in next years monetary terms (inflation already included), you do not need to inflate them. This would be doing it twice.

infinitybenzo

Neveruse is talking about the last step in his post. if you are maintaining portfolios real value, you always add inflatin as the last step. I think you got this tho you said in your original post. We are surely confusing you now.

Chuckrox

Thanks cfadreams. Nice catch.

so bottom line is always take inflation in first step if the above case is not given and again add it to the final answer.

How about Taxes then? Is her income from portfolio tax free? If not, why they haven't taken to calculate it?

I mean 90/0.75 to make 120K before taxes

Windjammer

Sorry, my Schweser's book's at the office... just using my notes at this point.

PalacioHill

no worries man. Thanks for your help

mcmc

has anyone of you guys taken the BSAS 2010? If yes; could you please explain why inflation was not accounted for in what you are referring to the 1st step?

thanks
M.