IAmNeil

ditto....although I do wrestle with it, I am convinced the following steps work:

Convert the case into a simple TVM problem--
1) First figure out n, PV, FV, PMT (ALL on after-tax basis) Details below.
2) Next compute i
3) Then Add inflation and management fees (multiplicative)
4) Optionally if pre-tax number is desired divide by (1 - tax%)

(i) PV is always net of any immediate disposals of cash / liabilities (credit card debt, house repair, downpay). Typically don't include residence in PV
(ii) FV = PV usually due to clients' bequest desire, then the required rate is simply PMT/PV. Things get complex if PV <> FV, e.g. (a) lump-sum needed to buy annuity (FV > PV), or (b) retiree with no charitable intention (FV <PV)
(iii) PMT = Salary - Expenses
(iv) n = Time horizon for planning (First of multi stage)



Edited 3 time(s). Last edit at Sunday, May 8, 2011 at 07:56PM by jbaphna.