How do you model return requirement when their salary or pension payment is constant and doesn’t increase each year but expenses do increase by inflation?
- Inflation is 3%
- Portfolio is $1 million
- Expenses this year is $50,000 and grows with inflation.
- Pension payment is $20,000 fixed
Next year the return requirement is 31,500 / 1,000,000 = 3.15% + 3% = 6.15%.
But the return requirement will continue growing???