I want to confirm Net Estate is real dollars. My understanding is that assets and retirement accounts grow at the specified nominal rate, adjusted by the inflation rate specified in Assumptions. The Net Estate, then, should be stated in real dollars, correct? So growth in the Net Estate column means growth of the estate in real dollars, with inflation accounted for, right?
Since returns for regular assets and retirement accounts are set using nominal rates, does adjusting the inflation rate in a future year reduce the real returns going forward?
If that's the case, then if one adjusts the inflation rate at a future year, one should also adjust the nominal rates of return for those accounts at that same future year. This nuance didn't occur to me until recently.
The property tax and homeowner's insurance numbers that I enter on the "Primary Home" tab appear to be adjusted yearly for inflation on the "Housing" page of the final report.
By contrast, the "Annual Maintenance and Condo Fees" number is held steady on the report for the duration of home ownership (no matter how long that may be).
Under my Federal Employee Pension plan my pension benefits are indexed. The only way I have been able to get the ESP model to correctly show what is effectively a real constant benefit is to set the overall inflation rate to zero. This makes some of the other values incorrect. I would like to set the inflation parameters to what I expect over time and allow different rate of indexation to various forms of income and expense.
I would like to test an all TIPS portfolio. In ESPlanner "Inflation Indexed Government Bonds" a.k.a "TIPS" show a mean return of 2.99% in the Monte Carlo section. The benefit of TIPS is supposed to be they hedge against high inflation: the kind forecast in Kotlikoff & Burns book "The Coming Generational Storm". My question is if the return of TIPS in ESPlanner matches the inflation rate. If not, and they hold at 2.99% their benefit will not be shown in a high inflation scenario.