I recently retired from work and had $650,000 in my retirement account with an Insurance Company. I get an annual payment of $35,838.50 at 6% compounded annually, for 30 years, but when I try to figure out the annual payment, it comes to $47,221.79!!. However, I do recall my investment advisor at the Insurance Comapny telling me that my payments were "indexed for inflation", but when I asked him "at what rate of inflation", he said he didn't know and that it was "calculated by computer"!. I was wondering if any of you folks can figure the inflation rate of my annuity payments? Sorry to bother you, but can't figure by myself.I thank you for any help.
47221.79 / 35838.5 them multiply by 100. The inflation rate is 1.3176 %.
Enjoy the retirement. I bought a Harley for mine.
+37097 So......you are supposed to get equal payments annually for 30 years to a balance of zero, with the balance gaining value at 6% per year......do I have that correct?
Inflation has been pretty low over the last 10 years High 3.8 low -.4)
http://tinypic.com/r/344wo77/9
.....what does your account mean when it says 'indexed for inflation'
Your payments go DOWN with inflation?
I would certainly press a little harder for clarification from your agent about the values used for inflation....'calculated by a computer' should make it even easier to get the numbers used yearly !
There are some financial gurus online here that will be able to give you some better/good answers.....
Without inflation, compounded annually at 6%, annual payments for 30 years to balance of zero should yield payments of:
47221.79 as you found
First, Happpy retirement!. Your agent at the Insurance Company has an obligation to tell you what the inflation rate is!.
Second, the Insurance Company should furnish you with an "amortization schedule". From that you should be able to see the increase in your retirement payments by dividing the 2nd year's payment by the 1st year's payment.
Third, there is a specific, rather complicated formula, to figure out the inflation rate. I suspect that that is the formula the computer used to figure out your initial annual payment of $35,838.50. I happened to know the formula, which is programmed in my computer. I plugged in all your numbers and the computer came up with the rate of exactly 2.5% per year. This means that your first payment of $35,838.50 already includes 2.50% inflation rate. Your initial payment will increase by 2.5% each and every year for 30 years, so that your last payment would be:$35,838.50/1.025 x 1.025^30=$73,340.17.
Good luck and happy and healthy retirement years. If you want any clarification, just let us know here.
Thank you very much to all of you for the great help.
A question to Guest #3. Can I do my own "amortization schedule" on my computer? And would I go about it? Thanks a lot.
You most certainly can, especially if you know how to use a "spreadsheet" such as Excel. But it is very easy even without a spreadsheet. All you do is Multiply your principal of $650,000 by 1.06 every year. Then you subtract your annual payment after you multiply it by 1.025. So, it should look somethig like this:
1-[$650,000 x 1.06] - $35,838.50 =$653,161.50 Balance after 1 year. This 1st payment already includes 2.5% inflation rate.
2-[$653,161.50 x 1.06] - [$35,838.50 x 1.025] =$655,616.73 Balance after year 2.
3-[$655,616.73 x 1.06] - [$36,734.46 x 1.025] =$657,300.91 Balance after 3 years. And so on, so that at the end of the 30th year you should have a balance of zero or close to it.
Good luck.
