Instructions for TIPS Ladder Withdrawals (Sheet1)

Start with $1,000,000 (the end balance prior to start of Year 1)

Have 20 steps in the ladder

All steps will have $50,000

Step -1 matures right before the start of Year 1, Step 1 matures at the end of Year 1, Step 2 matures at the end of Year 2, etc.

Assume a TIPS Real Rate of 1.3%

At the end of Year -1, an interest payment of $13,000 is received ($1,000,000 * 1.3%)

Step -1 of $50,000 matures in at the end of Year -1 (the start of Year 1)

Cash now available is $63,000 ($13,000 + $50,000)

Assume Initial Withdrawal Rate of 4%

Withdrawal at end of Year -1 will be $40,000 ($1,000,000 * 4%)

Remainder of $23,000 ($63,000 - $40,000) will be used to purchase a 20-year TIPS for Step 20

This completes Year -1 (the start of Year 1)

Assume an Inflation Rate of 3%

At the end of Year 1, inflate Steps 1 through 20 by 3%. For example, Step 1 rises from $50,000 to $51,500.

At the end of Year 1, the value of portfolio ladder is $1,002,190

At the end of Year 1, an interest payment of $13,028 is received ($1,002,190 * 1.3%)

Step 1 of $51,000 matures in at the end of Year 1

Cash now available is $65,528 ($13,028 + $51,500)

Withdrawal at end of Year 1 will be $41,200 ($40,000 * 1.03%)

Remainder of $23,328 ($64,528 - $41,200) will be used to purchase a 20-year TIPS for Step 21

This completes Year 1

At the end of Year 2, inflate Steps 2 through 21 by 3%. For example, Step 2 rises from $51,500 to $53,045.

At the end of Year 2, the value of portfolio ladder is $1,003,239

At the end of Year 2, an interest payment of $13,042 is received ($1,003,239 * 1.3%)

Step 2 of $53,045 matures in at the end of Year 2

Cash now available is $66,087 ($13,042 + $53,045)

Withdrawal at end of Year 2 will be $42,436 ($41,200 * 1.03)

Remainder of $23,651 ($66,087 - $42,436) will be used to purchase a 20-year TIPS for Step 22

This completes Year 2

At the end of Year 3, inflate Steps 3 through 22 by 3%. For example, Step 3 rises from $53,045 to $54,636.

At the end of Year 3, the value of portfolio ladder is $1,003,060

At the end of Year 3, an interest payment of $13,040 is received ($1,003,060 * 1.3%)

Step 3 of $54,636 matures in at the end of Year 3

Cash now available is $67,676 ($13,040 + $54,636)

Withdrawal at end of Year 3 will be $43,709 ($42,436 * 1.03)

Remainder of $23,967 ($67,676 - $43,709) will be used to purchase a 20-year TIPS for Step 23

This completes Year 3

Repeat procedure for Years 4 through 8

At the end of Year 9, inflate Steps 9 through 28 by 3%. For example, Step 9 rises from $63,339 to $65,239.

At the end of Year 9, the value of portfolio ladder is $970,716

At the end of Year 9, an interest payment of $12,619 is received ($970,716 * 1.3%)

Step 9 of $65,239 matures in at the end of Year 9

Cash now available is $77,858 ($12,619 + $65,239)

Withdrawal at end of Year 9 will be $52,191 ($50,671 * 1.03)

Remainder of $25,667 ($77,858 - $52,191) will be used to purchase a 20-year TIPS for Step 29

This completes Year 9

At the end of Year 10, inflate Steps 10 through 29 by 3%. For example, Step 10 rises from $65,239 to $67,196.

At the end of Year 10, the value of portfolio ladder is $959,079

At the end of Year 10, an interest payment of $12,468 is received ($959,079 * 1.3%)

Step 10 of $67,196 matures in at the end of Year 10

Cash now available is $79,664 ($12,468 + $67,196)

Withdrawal at end of Year 10 will be $53,757 ($52,191 * 1.03)

Remainder of $25,907 ($79,664 - $53,757) will be used to purchase a 10-year TIPS for Step 20

This completes Year 10

At the end of Year 11, inflate Steps 11 through 29 by 3%. For example, Step 11 rises from $67,196 to $69,212.

At the end of Year 11, the value of portfolio ladder is $945,324

At the end of Year 11, an interest payment of $12,289 is received ($945,324 * 1.3%)

Step 11 of $69,212 matures in at the end of Year 11

Cash now available is $81,501 ($12,289 + $69,212)

Withdrawal at end of Year 11 will be $55,369 ($53,757 * 1.03)

Remainder of $26,132 ($81,501 - $55,369) will be used to purchase a 10-year TIPS for Step 21

This completes Year 11

At the end of Year 12, inflate Steps 12 through 29 by 3%. For example, Step 12 rises from $69,212 to $71,288.

At the end of Year 12, the value of portfolio ladder is $929,311

At the end of Year 12, an interest payment of $12,081 is received ($929,311 * 1.3%)

Step 12 of $71,288 matures in at the end of Year 12

Cash now available is $83,369 ($12,081 + $71,288)

Withdrawal at end of Year 12 will be $57,030 ($55,369 * 1.03)

Remainder of $26,339 ($83,369 - $57,030) will be used to purchase a 10-year TIPS for Step 22

This completes Year 12

Repeat procedure for Years 13 through 18

At the end of Year 19, inflate Steps 19 through 29 by 3%. For example, Step 19 rises from $85,122 to $87,675.

At the end of Year 19, the value of portfolio ladder is $740,538

At the end of Year 19, an interest payment of $9,627 is received ($740,538 * 1.3%)

Step 19 of $87,675 matures in at the end of Year 19

Cash now available is $97,302 ($9,627 + $87,675)

Withdrawal at end of Year 19 will be $70,140 ($68,097 * 1.03)

Remainder of $27,162 ($97,302 - $70,140) will be used to purchase a 10-year TIPS for Step 29

This completes Year 19

At the end of Year 20, inflate Steps 20 through 29 by 3%. For example, part of Step 20 rises from $40,331 to $41,541.

At the end of Year 20, the value of portfolio ladder is $700,425

At the end of Year 20, an interest payment of $9,106 is received ($700,425 * 1.3%)

Step 20 of $41,541 (20-year TIPS) & $34,817 (10-year TIPS) matures at the end of Year 20

Cash now available is $85,463 ($9,106 + $34,817 + $34,817)

Withdrawal at end of Year 20 will be $72,244 ($70,140 * 1.04)

Remainder of $13,219 ($85,463 - $72,244) will be used to purchase a 5-year TIPS for Step 25

This completes Year 20

At the end of Year 21, inflate Steps 21 through 29 by 3%. For example, part of Step 21 rises from $40,907 to $42,134.

At the end of Year 21, the value of portfolio ladder is $656,405

At the end of Year 21, an interest payment of $8,533 is received ($656,405 * 1.3%)

Step 21 of $42,134 (20-year TIPS) & $35,119 (10-year TIPS) matures at the end of Year 21

Cash now available is $85,786 ($8,533 + $42,134 + $35,119)

Withdrawal at end of Year 21 will be $74,412 ($72,244 * 1.03)

Remainder of $11,374 ($85,786 - $74,412) will be used to purchase a 5-year TIPS for Step 26

This completes Year 21

At the end of Year 22, inflate Steps 22 through 29 by 3%. For example, part of Step 22 rises from $41,472 to $42,717.

At the end of Year 22, the value of portfolio ladder is $608,242

At the end of Year 22, an interest payment of $7,907 is received ($608,242 * 1.3%)

Step 22 of $42,717 (20-year TIPS) & $35,397 (10-year TIPS) matures at the end of Year 22

Cash now available is $86,021 ($7,907 + $42,717 + $35,397)

Withdrawal at end of Year 22 will be $76,644 ($74,412 * 1.03)

Remainder of $9,376 ($86,021 - $76,644) will be used to purchase a 5-year TIPS for Step 27

This completes Year 22

At the end of Year 23, inflate Steps 23 through 29 by 3%. For example, part of Step 23 rises from $42,026 to $43,287.

At the end of Year 23, the value of portfolio ladder is $555,690

At the end of Year 23, an interest payment of $7,224 is received ($555,690 * 1.3%)

Step 23 of $43,287 (20-year TIPS) & $35,650 (10-year TIPS) matures at the end of Year 23

Cash now available is $86,161 ($7,224 + $43,287 + $35,650)

Withdrawal at end of Year 23 will be $78,943 ($76,644 * 1.03)

Remainder of $7,218 ($86,161 - $78,943) will be used to purchase a 5-year TIPS for Step 28

This completes Year 23

At the end of Year 24, inflate Steps 24 through 29 by 3%. For example, part of Step 24 rises from $42,567 to $43,844.

At the end of Year 24, the value of portfolio ladder is $498,490

At the end of Year 24, an interest payment of $6,480 is received ($498,490 * 1.3%)

Step 24 of $43,844 (20-year TIPS) & $35,876 (10-year TIPS) matures at the end of Year 24

Cash now available is $86,200 ($6,480 + $43,844 + $35,876)

Withdrawal at end of Year 24 will be $81,312 ($78,943 * 1.03)

Remainder of $4,888 ($86,200 - $81,312) will be used to purchase a 5-year TIPS for Step 29

This completes Year 24

At the end of Year 25, inflate Steps 25 through 29 by 3%. For example, part of Step 25 rises from $43,093 to $44,386.

At the end of Year 25, the value of portfolio ladder is $436,368

At the end of Year 25, an interest payment of $5,673 is received ($436,368 * 1.3%)

Step 25 of $44,386 (20-year TIPS), $36,071 (10-year TIPS) & $15,324 (5-year TIPS) matures at the end of Year 25

Cash now available is $101,454 ($5,673 + $44,386 + $36,071 + $15,324)

Withdrawal at end of Year 25 will be $83,751 ($81,312 * 1.03)

Remainder of $17,703 ($101,454 - $83,751) will be left in cash

This completes Year 25

At the end of Year 26, inflate Steps 26 through 29 by 3%. For example, part of Step 26 rises from $43,602 to $44,910.

At the end of Year 26, the value of portfolio ladder is $350,805

At the end of Year 26, an interest payment of $4,560 is received ($350,805 * 1.3%)

Step 26 of $44,910 (20-year TIPS), $36,235 (10-year TIPS) & $13,185 (5-year TIPS) matures at the end of Year 26

Value of cash left from Step 25 is $18,234 ($17,703 * 1.03)

Cash now available is $117,124 ($4,560 + $44,910 + $36,235 + $13,185 + $18,234)

Withdrawal at end of Year 26 will be $86,264 ($83,751 * 1.03)

Remainder of $30,860 ($117,124 - $86,264) will be left in cash

This completes Year 26

At the end of Year 27, inflate Steps 27 through 29 by 3%. For example, part of Step 27 rises from $44,092 to $45,414.

At the end of Year 27, the value of portfolio ladder is $264,170

At the end of Year 27, an interest payment of $3,434 is received ($264,170 * 1.3%)

Step 27 of $45,414 (20-year TIPS), $36,363  (10-year TIPS) & $10,870 (5-year TIPS) matures at the end of Year 27

Value of cash left from Step 26 is $31,786 ($30,860 * 1.03)

Cash now available is $127,867 ($3,434 + $45,414 + $36,363 + $10,870 + $31,786)

Withdrawal at end of Year 27 will be $88,852 ($86,264 * 1.03)

Remainder of $39,016 ($127,867 - $88,852) will be left in cash

This completes Year 27

At the end of Year 28, inflate Steps 28 and 29 by 3%. For example, part of Step 28 rises from $44,561 to $45,898.

At the end of Year 28, the value of portfolio ladder is $176,668

At the end of Year 28, an interest payment of $2,297 is received ($176,668 * 1.3%)

Step 28 of $45,898 (20-year TIPS), $36,454  (10-year TIPS) & $8,367 (5-year TIPS) matures at the end of Year 28

Value of cash left from Step 27 is $40,186 ($39,016 * 1.03)

Cash now available is $133,202 ($2,297 + $45,898 + $36,454 + $8,367 + $40,186)

Withdrawal at end of Year 28 will be $91,517 ($88,852 * 1.03)

Remainder of $41,684 ($133,202 - $91,517) will be left in cash

This completes Year 28

At the end of Year 29, inflate Step 29 by 3%. For example, part of Step 29 rises from $45,007 to $46,358.

At the end of Year 29, the value of portfolio ladder is $88,528

At the end of Year 29, an interest payment of $1,151 is received ($88,528 * 1.3%)

Step 29 of $46,358 (20-year TIPS), $36,504 (10-year TIPS) & $5,667 (5-year TIPS) matures at the end of Year 29

Value of cash left from Step 28 is $42,935 ($41,684 * 1.03)

Cash now available is $132,614 ($1,151 + $46,358 + $36,504 + $5,667 + $42,935)

Withdrawal at end of Year 29 will be $94,263 ($91,517 * 1.03)

Remainder of $38,351 ($132,614 - $94,263) will be left in cash

This completes Year 29