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Sunday, 20 December 2009

Inflation-protected Passive Income Stream?

Retirement planning should start with a projection of one's desired income in retirement, and then choosing assets that are likely to deliver and protect that income stream.

Let recall past posts on inflation:

Let assume:

1. Average personal or family inflation is 3%
2. Retirement fund or Capital Account size is 25 x yearly expected expenses or desired income.

Using the multiple of  $10,000 for the Maths:

To have a inflation-protected desired passive income stream, we will need a annualized return of at least 6.1%.

To be realistic, it is really very hard to re-invest year-on-year to get an annualized return of at least 6.1%.

Probably we will need to add new passive income streams every other year; but, is it realistic too?

Or alternatively, we may consider draw-down approach : Inflation-protected Draw-down method

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