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Inflation in Timeline Planning
Inflation rules - Inflation minus % reduction
Inflation rules - Inflation minus % reduction

Description and example of the Inflation minus % reduction rule in Timeline Planning

Gonzalo Podgaezky Folguera avatar
Written by Gonzalo Podgaezky Folguera
Updated over a week ago

Summary

  • Withdrawal is increased in line with CPI minus a certain percentage.

  • This strategy moderates the effect of inflation on withdrawal amounts.

Description

The inflation minus X% adjustment strategy dictates that the withdrawal amount is increased each year in line with the Consumer Price Index (CPI), minus a certain percentage chosen by the user (ranging from 1% to 5%). This essentially softens the impact of inflation on the withdrawal amounts and provides some control over how rapidly withdrawals can increase.

Example

If you start with a withdrawal of £60,000 and choose 1% as your X%, and the CPI for the next year is 3%, your withdrawal would increase by 2% (3% - 1%), making your next withdrawal £61,200 (£60,000 * 1.02). This continues each year with the same calculation, helping to moderate the effect of inflation.

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