Forum Discussion
How to Account for Inflation
First of all, there's no attachment, so it's hard to visualize how you've laid this out, to say nothing of how you incorporate the various "ins and outs," how many "ins" or "outs" there are.
That said, I'm attaching one way to do it. You'll notice that I created a table off to the side, a table in which you can make different assumptions for different types of "ins and outs." You should always use a table like this, rather than doing what's called "hard coding," where you would put your 3% assumption into each formula where it applied. Using a table allows you to test assumptions, change scenarios, without revising the formulas; you just change an assumption.
This is a very simple example. You can enhance it to your heart's content.
Let me know if you have questions or need further clarification.
True! Common sense did tell me that. But I want to graph the projected value of the IRA against an inflation projection, based on which I will adjust my distributions to maintain an inflation-adjusted target balance for my heirs. That was how this whole workbook started for me. Of course, it got more and more complicated as I delved into it.
You and I think very much alike. Below are the column headers of the worksheet I am working on. I've included most of the items you mention - IRA projected growth, distributions, conversions, taxes, etc. It calculates my taxes based each income source and projected changes in the Fed and CA tax brackets and deductions, Medicare premiums based on those brackets (and projections), and Social Security based on a growth projection.
The final column gives me my "net net income" - post-tax, post Medicare premium...the money on which we will actually live (and hopefully travel).
Going forward, I'll adjust the next year's distributions based on market performance to maintain the targeted inflation-adjusted IRA/Roth IRA balance.
PS - I also track expenses by category. :-)
Here's a Federal tax calculator I've created, mostly for fun....it's accurate up through the most recent tax tables.
Great! I'll study it. It'll be good to double-check my calculations.