February 2005
Divorce Benefit Sharing Simulation:
The following simulation assumes a divorce after 15 years of marriage. The husband has been a maximum contributor for 20 years and the wife had been a maximum contributor for five years prior to the marriage.
Husband’s Account:
| Year: 1 | Contributions: $1,000.00 | Accrued Interest: $17.00 | Balance: $1,017.00 |
| Year: 2 | Contributions: $2,000.00 | Accrued Interest: $80.55 | Balance: $2,080.55 |
| Year: 3 | Contributions: $3,000.00 | Accrued Interest: $192.77 | Balance: $3,192.77 |
| Year: 4 | Contributions: $4,000.00 | Accrued Interest: $355.88 | Balance: $4,355.88 |
| Year: 5 | Contributions: $5,000.00 | Accrued Interest: $572.23 | Balance: $5,572.23 |
| Year: 6 | Contributions: $6,000.00 | Accrued Interest: $844.25 | Balance: $6,844.25 |
| Year: 7 | Contributions: $7,000.00 | Accrued Interest: $1,174.48 | Balance: $8,174.48 |
| Year: 8 | Contributions: $8,000.00 | Accrued Interest: $1,565.59 | Balance: $9,565.59 |
| Year: 9 | Contributions: $9,000.00 | Accrued Interest: $2,020.36 | Balance: $11,020.36 |
| Year: 10 | Contributions: $10,000.00 | Accrued Interest: $2,541.71 | Balance: $12,541.71 |
| Year: 11 | Contributions: $11,000.00 | Accrued Interest: $3,132.68 | Balance: $14,132.68 |
| Year: 12 | Contributions: $12,000.00 | Accrued Interest: $3,796.47 | Balance: $15,796.47 |
| Year: 13 | Contributions: $13,000.00 | Accrued Interest: $4,536.40 | Balance: $17,536.40 |
| Year: 14 | Contributions: $14,000.00 | Accrued Interest: $5,355.95 | Balance: $19,355.95 |
| Year: 15 | Contributions: $15,000.00 | Accrued Interest: $6,258.78 | Balance: $21,258.78 |
| Year: 16 | Contributions: $16,000.00 | Accrued Interest: $7,248.69 | Balance: $23,248.69 |
| Year: 17 | Contributions: $17,000.00 | Accrued Interest: $8,329.67 | Balance: $25,329.67 |
| Year: 18 | Contributions: $18,000.00 | Accrued Interest: $9,505.89 | Balance: $27,505.89 |
| Year: 19 | Contributions: $19,000.00 | Accrued Interest: $10,781.70 | Balance: $29,781.70 |
| Year: 20 | Contributions: $20,000.00 | Accrued Interest: $12,161.67 | Balance: $32,161.67 |
Wife’s Account:
| Year: 1 | Contributions: $1,000.00 | Accrued Interest: $17.00 | Balance: $1,017.00 |
| Year: 2 | Contributions: $2,000.00 | Accrued Interest: $80.55 | Balance: $2,080.55 |
| Year: 3 | Contributions: $3,000.00 | Accrued Interest: $192.77 | Balance: $3,192.77 |
| Year: 4 | Contributions: $4,000.00 | Accrued Interest: $355.88 | Balance: $4,355.88 |
| Year: 5 | Contributions: $5,000.00 | Accrued Interest: $572.23 | Balance: $5,572.23 |
| Year: 6 | Contributions: $5,000.00 | Accrued Interest: $827.00 | Balance: $5,827.00 |
| Year: 7 | Contributions: $5,000.00 | Accrued Interest: $1,093.68 | Balance: $6,093.68 |
| Year: 8 | Contributions: $5,000.00 | Accrued Interest: $1,372.55 | Balance: $6,372.55 |
| Year: 9 | Contributions: $5,000.00 | Accrued Interest: $1,664.19 | Balance: $6,664.19 |
| Year: 10 | Contributions: $5,000.00 | Accrued Interest: $1,969.18 | Balance: $6,969.18 |
| Year: 11 | Contributions: $5,000.00 | Accrued Interest: $2,288.13 | Balance: $7,288.13 |
| Year: 12 | Contributions: $5,000.00 | Accrued Interest: $2,621.67 | Balance: $7,621.67 |
| Year: 13 | Contributions: $5,000.00 | Accrued Interest: $2,970.48 | Balance: $7,970.48 |
| Year: 14 | Contributions: $5,000.00 | Accrued Interest: $3,335.24 | Balance: $8,335.24 |
| Year: 15 | Contributions: $5,000.00 | Accrued Interest: $3,716.71 | Balance: $8,716.71 |
| Year: 16 | Contributions: $5,000.00 | Accrued Interest: $4,115.63 | Balance: $9,115.63 |
| Year: 17 | Contributions: $5,000.00 | Accrued Interest: $4,532.81 | Balance: $9,532.81 |
| Year: 18 | Contributions: $5,000.00 | Accrued Interest: $4,969.08 | Balance: $9,969.08 |
| Year: 19 | Contributions: $5,000.00 | Accrued Interest: $5,425.31 | Balance: $10,425.31 |
| Year: 20 | Contributions: $5,000.00 | Accrued Interest: $5,902.43 | Balance: $10,902.43 |
Under the terms of the divorce, assets are to be divided evenly. The combined assets for husband and wife amounted to $25,000 in contributions and $18,064.10 in accrued interest. An account rebalancing will occur, and each person will now have $12,500 in contributions and $9,032.05 in accrued interest. However, the husband will be issued a catch-up contribution allowance of $7,500 because he lost $7,500 of his contributions in the divorce. Therefore, the spouse who is subject to a withdrawal of contributions will be issued a catch-up contribution allowance for the amount of those lost contributions. The wife will simply receive a $7,500 credit to her contributions and a $3,129.62 credit to her accrued interest.
The husband will begin making maximum contributions of $1,000. He will also make a catch-up contribution of $500 for the first year after the divorce and a $1,000 catch-up contribution for each of the next seven years.
| Year: 20 | Contributions: $12,500.00 | Accrued Interest: $9,032.05 | Balance: $21,532.05 |
| Year: 21* | Contributions: $14,000.00* | Accrued Interest: $10,042.92 | Balance: $24,042.92 |
| Year: 22* | Contributions: $16,000.00* | Accrued Interest: $11,177.33 | Balance: $27,177.33 |
| Year: 23* | Contributions: $18,000.00* | Accrued Interest: $12,455.11 | Balance: $30,455.11 |
| Year: 24* | Contributions: $20,000.00* | Accrued Interest: $13,882.90 | Balance: $33,882.90 |
| Year: 25* | Contributions: $22,000.00* | Accrued Interest: $15,467.55 | Balance: $37,467.55 |
| Year: 26* | Contributions: $24,000.00* | Accrued Interest: $17,216.26 | Balance: $41,216.26 |
| Year: 27* | Contributions: $26,000.00* | Accrued Interest: $19,136.53 | Balance: $45,136.53 |
| Year: 28* | Contributions: $28,000.00* | Accrued Interest: $21,236.21 | Balance: $49,236.21 |
| Year: 29 | Contributions: $29,000.00 | Accrued Interest: $23,506.29 | Balance: $52,506.29 |
| Year: 30 | Contributions: $30,000.00 | Accrued Interest: $25,926.25 | Balance: $55,926.25 |
| Year: 31 | Contributions: $31,000.00 | Accrued Interest: $28,502.72 | Balance: $59,502.72 |
| Year: 32 | Contributions: $32,000.00 | Accrued Interest: $31,242.87 | Balance: $63,242.87 |
| Year: 33 | Contributions: $33,000.00 | Accrued Interest: $34,154.19 | Balance: $67,154.19 |
| Year: 34 | Contributions: $34,000.00 | Accrued Interest: $37,244.51 | Balance: $71,244.51 |
| Year: 35 | Contributions: $35,000.00 | Accrued Interest: $40,522.02 | Balance: $75,522.02 |
| Year: 36 | Contributions: $36,000.00 | Accrued Interest: $43,995.29 | Balance: $79,995.29 |
| Year: 37 | Contributions: $37,000.00 | Accrued Interest: $47,673.29 | Balance: $84,673.29 |
| Year: 38 | Contributions: $38,000.00 | Accrued Interest: $51,565.37 | Balance: $89,565.37 |
| Year: 39 | Contributions: $39,000.00 | Accrued Interest: $55,681.34 | Balance: $94,681.34 |
| Year: 40 | Contributions: $40,000.00 | Accrued Interest: $60,031.44 | Balance: $100,031.44 |
The ending account balance after 40 years is $100,031.44. If the husband had not experienced a divorce, his ending account balance would have been $110,870.11. Therefore, the divorce did not have a big impact on his final account value. This is because he was issued a catch-up contribution for $7,500 and took full advantage of it. His monthly distribution check will amount to $375.12. The husband would also have the option of working an additional two years to bring his account value up to the standard ending balance.
| Year: 41 | Contributions: $41,000.00 | Accrued Interest: $64,625.93 | Balance: $105,625.93 |
| Year: 42 | Contributions: $42,000.00 | Accrued Interest: $69,476.9 | Balance: $111,476.91 |
Assume that the wife begins making maximum annual contributions for the remainder of her career.
| Year: 20 | Contributions: $12,500.00 | Accrued Interest: $9,032.05 | Balance: $21,532.05 |
| Year: 21 | Contributions: $13,500.00 | Accrued Interest: $10,034.42 | Balance: $23,534.42 |
| Year: 22 | Contributions: $14,500.00 | Accrued Interest: $11,128.47 | Balance: $25,628.47 |
| Year: 23 | Contributions: $15,500.00 | Accrued Interest: $12,318.36 | Balance: $27,818.36 |
| Year: 24 | Contributions: $16,500.00 | Accrued Interest: $13,608.48 | Balance: $30,108.48 |
| Year: 25 | Contributions: $17,500.00 | Accrued Interest: $15,003.39 | Balance: $32,503.39 |
| Year: 26 | Contributions: $18,500.00 | Accrued Interest: $16,507.92 | Balance: $35,007.92 |
| Year: 27 | Contributions: $19,500.00 | Accrued Interest: $18,127.06 | Balance: $37,627.06 |
| Year: 28 | Contributions: $20,500.00 | Accrued Interest: $19,866.07 | Balance: $40,366.07 |
| Year: 29 | Contributions: $21,500.00 | Accrued Interest: $21,730.42 | Balance: $43,230.42 |
| Year: 30 | Contributions: $22,500.00 | Accrued Interest: $23,725.87 | Balance: $46,225.87 |
| Year: 31 | Contributions: $23,500.00 | Accrued Interest: $25,858.40 | Balance: $49,358.40 |
| Year: 32 | Contributions: $24,500.00 | Accrued Interest: $28,134.30 | Balance: $52,634.30 |
| Year: 33 | Contributions: $25,500.00 | Accrued Interest: $30,560.11 | Balance: $56,060.11 |
| Year: 34 | Contributions: $26,500.00 | Accrued Interest: $33,142.71 | Balance: $59,642.71 |
| Year: 35 | Contributions: $27,500.00 | Accrued Interest: $35,889.27 | Balance: $63,389.27 |
| Year: 36 | Contributions: $28,500.00 | Accrued Interest: $38,807.28 | Balance: $67,307.28 |
| Year: 37 | Contributions: $29,500.00 | Accrued Interest: $41,904.61 | Balance: $71,404.61 |
| Year: 38 | Contributions: $30,500.00 | Accrued Interest: $45,189.45 | Balance: $75,689.45 |
| Year: 39 | Contributions: $31,500.00 | Accrued Interest: $48,670.38 | Balance: $80,170.38 |
| Year: 40 | Contributions: $32,500.00 | Accrued Interest: $52,356.39 | Balance: $84,856.39 |
The ending account balance after 40 years is $84,856.39. If the wife had not experienced a divorce, her ending account balance would have been only $26,681.24 if she had not made any additional contributions during her marriage. Her monthly distribution check will amount to $318.21. The wife would also have the option of working an additional five years to bring her account value up to the standard ending balance.
| Year: 41 | Contributions: $33,500.00 | Accrued Interest: $56,256.85 | Balance: $89,756.85 |
| Year: 42 | Contributions: $34,500.00 | Accrued Interest: $60,381.58 | Balance: $94,881.58 |
| Year: 43 | Contributions: $35,500.00 | Accrued Interest: $64,740.85 | Balance: $100,240.85 |
| Year: 44 | Contributions: $36,500.00 | Accrued Interest: $69,345.38 | Balance: $105,845.38 |
| Year: 45 | Contributions: $37,500.00 | Accrued Interest: $74,206.41 | Balance: $111,706.41 |
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