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Calculate effect inflation on the split of a payout in future

  • 09-02-2018 6:59pm
    #1
    McDonkey
    Registered Users Posts: 8 ✭


    Hi folks
    My siblings and I are working out the effect of inflation on the share we get from a life cover policy taken out by our parents which will pay out when they die (grim topic, but needs to be sorted now).
    Essentially, my parents are not in a position to keep up the payments on the policy.
    2 of us siblings will take over the monthly payments until D-day (when the second parent dies and the policy pays out).
    We have agreed that those who pay into the policy will get the total of their policy payments back (adjusted for inflation) and THEN the remainder will be split between the 3 of us.
    I know no-one has a crystal ball that can predict the future rate of inflation but if we cast ourselves forward NN years when the policy has paid out, is there a website/Excel formula we could use to calculate how much "X" total amount of premiums paid would be, adjusted for the inflation between 2018 and 20NN.
    Even an approximation would be helpful.
    Ta.


Comments

  • #2
    andrew
    Moderators, Science, Health & Environment Moderators, Society & Culture Moderators Posts: 3,372 Mod ✭✭✭✭andrew


    So I think you're looking for a table like this?
    Calc 1.PNG

    The underlying calculations look like this:
    Calc 2.PNG

    I think an assumption of 2% inflation is as good as any, since that's the ECB's target. Over long period of time you'd expect (or hope!) that they meet it. But once you've made the sheet you can play around with it a little and see what happens when you change the inflation figures around.

    Note: the first column there is A and the first row is 1. So A1 refers to the top left hand cell which says 'year' and so on.


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