How Do You Calculate An Annuity Withdrawal Considering Inflation?
If you purchase an annuity with a minimum withdrawal guarantee, it seems like you have all basis covered. But wait–there’s one tiny flaw in the overall picture. That flaw is inflation. Inflation changes the buying power of the dollar and in turn actually lowers the value of your money. Find a comfortable rate of inflation that you believe exists. Usually the number is 1 to 2 per cent, but you can use 3 percent to be more comfortable that you’re correct. Calculate the number of years that you need to wait until you draw the money. If you’re getting the payment immediately, calculate the number of years you need the money. Use 3 percent as the inflation rate. To find the buying power of the rate, multiply it by .97. That is the effect of one year of 3 percent inflation on the dollars you recieve. Multiply the answer again by .97 to get two years. If you want the answer for 10 years, you can multiply the number first by .97 and the multiply each answer by .97 nine more times. Add a guara
