# Retirement Account Report Calculation

In the year 1, 2015, on the Retirement Account report the displayed retirement income is calculated using the real rate of return but the displayed retirement assets include retirement income that has been calculated using the nominal rate of return. Thus the displayed assets for year 1 do not equal beginning/prior assets plus displayed income. In year 2 displayed assets do equal prior assets plus year 2 displayed income. This situation also occurs on the Regular Assets report. Why is year 1 being calculated this way?

### If I’m understanding this

If I’m understanding this correctly, the final retirement assets for 2015 (correctly computed with nominal rate of return, not the displayed real rate, as you say) are then (internally, not displayed) reduced by inflation (e.g. divided by 1.03, if inflation is 3%) before computing the line for 2016. So in 2016 ESPlanner seems to be adding in the real (displayed) return rather than the nominal return, but it’s actually adding the nominal return, with the 2016 year-end total reduced by the (un-displayed) application of the inflation factor to the 2015 year-end balance. The arithmetic works out whichever way you do it, either don’t reduce the year-end 2015 assets by inflation, and just add the real return for 2016; or do the inflation reduction, then add the nominal return. I did the arithmetic on my report for the first two lines, and it works out exactly, to the dollar, either way.

I’m just a new user – if one of the support guys can explain this better, or disagrees with me, please say so.

### that's a good way to explain

that's a good way to explain it. I can look around for some other explanations. But it's a matter of representing the dollars in terms of 2015 denomination.

### Agreeing with Chertz above:

Agreeing with Chertz above:

We're interpreting the inputted balances for 2015 to be the end of year balances as of 31 Dec 2014 in 2014 dollars. So, the first thing we need to do is convert 2014 balances to 2015 dollars by multiplying by 1 plus your inflation rate. Then they earn the real return on investment during 2015 plus any savings and minus any withdrawals. After 2015 we're in 2015 dollars, so there are no additional base year dollar conversions.

### Thanks for the explanation.

Thanks for the explanation.

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