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
Connect with us on social media
- Twitter @freefincal
- Subscribe to our Youtube Videos
- Posts feed via: Feedburner
- We are also on Google Plus and Pinterest
Do check out my books
Get it now. The Kindle edition is only Rs. 199.
Gamechanger: Forget Startups, Join Corporate & Still Live the Rich Life You WantMy second book is now only Rs 199 (Kindle Rs. 99) Get it or gift it to a young earner
The ultimate guide to travel by Pranav SuryaThis 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 ₹199 (instant download)
Free Apps for your Android PhoneAll calculators from our book, “You can be Rich Too” are now available on Google Play!
Install Financial Freedom App! (Google Play Store)
Install Freefincal Retirement Planner App! (Google Play Store)
Find out if you have enough to say "FU" to your employer (Google Play Store)