Originally Posted by
Deez340
your telling me! I think i need a pocket protector! Anywho, you can't just take the present value of the result of the inflation free calculation. You have to run the savings calculation/amortization with the inflation assumed along the life of the saving plan. there are several online saving calculators that allow you to do this by letting you select the inflation rate. However, the easiest thing to do is just use 8% return instead of twelve. it may also be that the value of the monthly deposit is increased with inflation as well.
As far as how many years i plan on drawing funds, the answer is forever. I won't touch the principal so the interest springs eternal.
Regardless of inflation and assuming the previous facts, you will have $3.2 million in the bank. Agreed. The debate is over the present value computations. I'm almost positive that using the net interest rate (8%) doesn't work because of the way compound interest works. Here's the present value formula:
Future Value = $3.2 million
i = 4%
n = 35 years
I still say having $3.2 million 35 years from now is the same as having $811k today, assuming inflation is 4%.
I will talk to my finance prof Monday and get a definite answer.