February 2005
Constant Rate of Inflation Simulation:
The following simulation assumes annual contributions of $1,000 over a period of 40 years when inflation is a constant 2%. Therefore, the actual percentage return will be 6.5% annually.
The following simulation assumes an account holder achieved an ending account balance of $187,465.86 by contributing $1,000 per year over a 40 year period when inflation was a constant 2% annually. Inflation will continue to remain at a constant 2% during the retirement period.
When an account holder dies, the amount of total distributions will be subtracted from the high water mark in order to determine the remaining amount of accrued interest and inheritable assets. This is because the account continued to receive annual interest payments for inflation. Therefore, an account holder who lived to age 77 would have a high water mark of $238,173.34, and he or she would have received monthly distributions totaling $114,091.84. Therefore, this would leave an accrued interest surplus of $84,081.51 for the government and inheritable contributions of $40,000 for heirs. Likewise, a person who lived to age 85 would have an accrued interest surplus of $32,563.68 and available inheritable contributions of $40,000.
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