Expanded AllocatorI have built an expanded version of the Income Stream Allocator. It includes 5 income streams and a cash management account. DescriptionI simulate five independent investments plus TIPS for a cash management account. I treat each investment as an initial dividend yield with a fixed (nominal) growth rate. I exclude all purchases and sales.I use a fixed inflation rate. I use a fixed TIPS interest rate. All calculations are in real dollars (that is, with an inflation adjustment). I determine the income stream (dividend amount including growth) from each investment. I multiply each individual amount by a manually entered value, typically 1. This manual entry allows me to consider investments with wildly fluctuating income streams. Each product represents the income stream from an investment. I add all five income streams together to calculate the total income. Next, I enter the amount withdrawn by a retiree. I take the difference and enter it into my TIPS account. If the retiree withdraws less than the income stream, the TIPS balance grows. If he withdraws more, the TIPS balance decreases. I allow the TIPS balance to grow each year at its real interest rate. When using the Expanded Allocator, your goal is to withdraw the highest (steady) amount of (real) income without allowing the TIPS balance to fall below zero. You can vary your allocations to achieve this goal. For convenience, I list the year in column A, the Total Real Dividend Income in column B and the Real TIPS Balance in column D. I enter the withdrawal amounts (or Real Retiree Income) in column C. Yahoo BriefcaseYou can download this spreadsheet from my Yahoo Briefcase. It is the Expanded Allocator file. It is in the Allocators folder.Yahoo Briefcase Have fun. John Walter Russell April 8, 2007 |