Inflation-protected Income Simulator

Published: January 19, 2014 at 6:32 pm

Last Updated on

Last week I wrote about an inflation protected income can be generated by dividing a corpus into 4/5 portions and investing each into financial instruments of varying risk and tenure, while setting up an income ladder for the first few years. As the investment in each bucket matures a new income ladder will be set up with it.

If you have not read that post, I strongly suggest you read it first and then get back to this one:  Generating an inflation-protected income with a lump sum

I was surprised by the popularity of that post and received many requests to post a calculator with which different possibilities based on this strategy can be simulated. This post describes such an inflation-protected income simulator.

The calculator has two sheets:

  • Single Bucket Income Ladder This helps to understand what an income ladder is.

The idea is to invest in fixed-income instruments of varying maturity. The maturity value of each investment corresponds to the income needed that year taking an assuming rate of inflation into account. For more details see here 

This is an offshoot of my popular income ladder calculator  This describes two ways of creating the ladder: cumulatively or with payouts.

Last weeks post and the present calculator assumes investments are cumulative.

  • 0+6 Buckets income ladder

This sheet allows you to determine the total corpus required to generate an inflation-protected income for desired period ( a maximum of 210 years!!).

This period can divided into  a maximum of 7 buckets of varying risk (as determined by the return).

When the buckets mature, an income ladder of some assumed return is set up to generate income.

The calculator is flexible, and the buckets can be constructed with different tenures and different returns.

Note: Please use appropriate post-tax returns everywhere.

This is a deterministic simulator. That is the returns are assumed to be fixed. If you use higher returns, they are likely to be associated with a non-zero standard deviation and therefore, volatility. This will have a huge impact on the final results.

If you are interested in trying out buckets with volatility, try out this popular and addictive: Retirement ‘Bucket Strategy’ Simulator

Download the Inflation-protected Income Simulator

Do share if you found this useful
Share your thoughts on this topic at the  Reddit freefincal_user_forum

Reach your financial goals like a pro! Join our 1600+ Facebook Group on Portfolio Management! You can now reduce fear, doubt and uncertainty while investing for your financial goals! Sign up for our lectures on goal-based portfolio management and join our exclusive Facebook Community. The 1st lecture is free!
Want to check if the market is overvalued or undervalued? Use our market valuation tool (will work with any index!) or you buy the new Tactical Buy/Sell timing tool!
About the Author Pattabiraman editor freefincalM. Pattabiraman(PhD) is the founder, managing editor and primary author of freefincal. He is an associate professor at the Indian Institute of Technology, Madras. since Aug 2006. Connect with him via Twitter or Linkedin Pattabiraman has co-authored two print-books, You can be rich too with goal-based investing (CNBC TV18) and Gamechanger and seven other free e-books on various topics of money management. He is a patron and co-founder of “Fee-only India” an organisation to promote unbiased, commission-free investment advice. He conducts free money management sessions for corporates and associations on the basis of money management. Previous engagements include World Bank, RBI, BHEL, Asian Paints, Cognizant, Madras Atomic Power Station, Honeywell, Tamil Nadu Investors Association. For speaking engagements write to pattu [at] freefincal [dot] com
About freefincal & its content policy Freefincal is a News Media Organization dedicated to providing original analysis, reports, reviews and insights on developments in mutual funds, stocks, investing, retirement and personal finance. We do so without conflict of interest and bias. We operate in a non-profit manner. All revenue is used only for expenses and for the future growth of the site. Follow us on Google News Freefincal serves more than one million readers a year (2.5 million page views) with articles based only on factual information and detailed analysis by its authors. All statements made will be verified from credible and knowledgeable sources before publication. Freefincal does not publish any kind of paid articles, promotions or PR, satire or opinions without data. All opinions presented will only be inferences backed by verifiable, reproducible evidence/data. Contact information: letters {at} freefincal {dot} com (sponsored posts or paid collaborations will not be entertained)
Connect with us on social media
Our publications

You Can Be Rich Too with Goal-Based Investing

You can be rich too with goal based investingPublished by CNBC TV18, this book is meant to help you ask the right questions, seek the right answers and since it comes with nine online calculators, you can also create custom solutions for your lifestyle! Get it now. It is also available in Kindle format.
Gamechanger: Forget Startups, Join Corporate & Still Live the Rich Life You Want Gamechanger: Forget Start-ups, Join Corporate and Still Live the Rich Life you wantThis book is meant for young earners to get their basics right from day one! It will also help you travel to exotic places at low cost! Get it or gift it to a young earner

Your Ultimate Guide to Travel

Travel-Training-Kit-Cover-new This is a deep dive analysis into vacation planning, finding cheap flights, budget accommodation, what to do when travelling, how travelling slowly is better financially and psychologically with links to the web pages and hand-holding at every step. Get the pdf for Rs 199 (instant download)
Free android apps