whats your result for the personal IPS's final return rate?

CFA Level III
#121

I guess I see your point. The example I was thinking of was when income and expenses are the same and income is indexed to inflation. In that case you wouldn’t need to account for inflation. Well, I guess partial credit for me then…

#122

but for the next year i think the assumption is still valid of over all indexation as expected expense(in spending terms) would be listed post inflation, matching which we also have pension income…i think both can be correct based on the assumption… if we assume expense not indexed, then teh only adjustment wiould be to expenseand nothing on pension income. thus even this will make many other answers which we saw invalid… i guess all will be marked on assumptions when question is ambiguos

#123

peoples at CFAI reading this thread must be laughing their a$$es off

#124

.

#125

For more confusion. Wasn’t the 20% specifically on pension income? Isn’t it possible that the individual didn’t get taxed at all on the income from the portfolio net of the pension income?

#126

did they provide tax rate? 20% was the only rate i saw… my number was closer to 8.5%

#127

i had like 10 something as well, you needed to take out the 100k from from the 1 mil( for the mortgage payment. take the shortfall( adjusted for inflation on both the expense side and income side), divide by the new portfolio value at age 60( after the mortgage) add inflation to protect the principal and devide by taxes, gives you something like 10.5 or so.

#128

i’d have to go with the 9.xx% camp. you 45k after tax expenses, so you divide that by .8 to get the amount you actually have to pull out of your portfolio (45k/.8)/1mm. Then you add 4% inflation. this isn’t my forte, but i convinced myself to do taxes first for that reason (you need to know how much you’re pulling out of the portfolio). why would you do taxes after you find the rate of return?

#129

lmirochnik: I also took taxes out on 100K in the amount of 20K. So I subtracted 100K plus 20K from the base. I also subtracted the current year shortfall from the base. So it was something like this for me: Current Year Inflows: +Pension Outflows: -Living Exp -Mortgage Payment -Taxes on Mortgage Payment Withdrawal (20%) Net Cash Flow, Current Year … Year 1 Inflows: +Pension (don’t remember was it same or also adjust for i?) Outflows: -Living Exp x (1+i) Net Cash Flow, Current Year … Return Calculation: Portfolio Base = ($$$whatever they gave us) - Net Cash Flow, Current Year Return, real, after Tax = Net Cash Flow Year 1/Portfolio Base Return, nominal, after Tax (add inflation) Return, nominal, before Tax (divide by 0.8)

#130

the way i did it: pension income: 80000 expense: -125000 withrawal tax on pension income - 16000 ---------------- -53000 return required from portfolio 53000/ 1100000 = 4.81% Add: inflation to protect purchasing power of portfolio = 4% ------------ Nominal after tax 8.81% ( made a note that since tax rate is not given pre tax return canot be determined) let me know if it make sense

#131

Sydenhamite Wrote: ------------------------------------------------------- > the way i did it: > > pension income: > 80000 > expense: > -125000 > withrawal tax on pension income - 16000 > > ---------------- > > -53000 > > return required from portfolio > > 53000/ 1100000 > = 4.81% > Add: inflation to protect purchasing power of > portfolio = 4% > > > ------------ > Nominal after tax > 8.81% > > ( made a note that since tax rate is not given pre > tax return canot be determined) > > let me know if it make sense wasnt pension given was after tax