February 2005
Maximum Account Value Simulation:
The following simulation assumes an account holder received inheritable contributions of $50,000 at birth.
| Year: 1 | Contributions: $50,000.00 | Accrued Interest: $2,288.25 | Balance: $52,288.25 |
| Year: 2 | Contributions: $50,000.00 | Accrued Interest: $4,681.23 | Balance: $54,681.23 |
| Year: 3 | Contributions: $50,000.00 | Accrued Interest: $7,183.72 | Balance: $57,183.72 |
| Year: 4 | Contributions: $50,000.00 | Accrued Interest: $9,800.74 | Balance: $59,800.74 |
| Year: 5 | Contributions: $50,000.00 | Accrued Interest: $12,537.53 | Balance: $62,537.53 |
| Year: 6 | Contributions: $50,000.00 | Accrued Interest: $15,399.56 | Balance: $65,399.56 |
| Year: 7 | Contributions: $50,000.00 | Accrued Interest: $18,392.58 | Balance: $68,392.58 |
| Year: 8 | Contributions: $50,000.00 | Accrued Interest: $21,522.57 | Balance: $71,522.57 |
| Year: 9 | Contributions: $50,000.00 | Accrued Interest: $24,795.81 | Balance: $74,795.81 |
| Year: 10 | Contributions: $50,000.00 | Accrued Interest: $28,218.84 | Balance: $78,218.84 |
| Year: 11 | Contributions: $50,000.00 | Accrued Interest: $31,798.54 | Balance: $81,798.54 |
| Year: 12 | Contributions: $50,000.00 | Accrued Interest: $35,542.05 | Balance: $85,542.05 |
| Year: 13 | Contributions: $50,000.00 | Accrued Interest: $39,456.89 | Balance: $89,456.89 |
| Year: 14 | Contributions: $50,000.00 | Accrued Interest: $43,550.89 | Balance: $93,550.89 |
| Year: 15 | Contributions: $50,000.00 | Accrued Interest: $47,832.26 | Balance: $97,832.26 |
| Year: 16 | Contributions: $50,000.00 | Accrued Interest: $52,309.56 | Balance: $102,309.56 |
| Year: 17 | Contributions: $50,000.00 | Accrued Interest: $56,991.77 | Balance: $106,991.77 |
| Year: 18 | Contributions: $50,000.00 | Accrued Interest: $61,888.25 | Balance: $111,888.25 |
| Year: 19 | Contributions: $50,000.00 | Accrued Interest: $67,008.83 | Balance: $117,008.83 |
| Year: 20 | Contributions: $50,000.00 | Accrued Interest: $72,363.75 | Balance: $122,363.75 |
| Year: 21 | Contributions: $50,000.00 | Accrued Interest: $77,963.74 | Balance: $127,963.74 |
| Year: 22 | Contributions: $50,000.00 | Accrued Interest: $83,820.01 | Balance: $133,820.01 |
| Year: 23 | Contributions: $50,000.00 | Accrued Interest: $89,944.29 | Balance: $139,944.29 |
| Year: 24 | Contributions: $50,000.00 | Accrued Interest: $96,348.85 | Balance: $146,348.85 |
| Year: 25 | Contributions: $50,000.00 | Accrued Interest: $103,046.52 | Balance: $153,046.52 |
| Year: 26 | Contributions: $50,000.00 | Accrued Interest: $110,050.71 | Balance: $160,050.71 |
| Year: 27 | Contributions: $50,000.00 | Accrued Interest: $117,375.44 | Balance: $167,375.44 |
| Year: 28 | Contributions: $50,000.00 | Accrued Interest: $125,035.40 | Balance: $175,035.40 |
| Year: 29 | Contributions: $50,000.00 | Accrued Interest: $133,045.91 | Balance: $183,045.91 |
| Year: 30 | Contributions: $50,000.00 | Accrued Interest: $141,423.02 | Balance: $191,423.02 |
| Year: 31 | Contributions: $50,000.00 | Accrued Interest: $150,183.51 | Balance: $200,183.51 |
| Year: 32 | Contributions: $50,000.00 | Accrued Interest: $159,344.92 | Balance: $209,344.92 |
| Year: 33 | Contributions: $50,000.00 | Accrued Interest: $168,925.61 | Balance: $218,925.61 |
| Year: 34 | Contributions: $50,000.00 | Accrued Interest: $178,944.76 | Balance: $228,944.76 |
| Year: 35 | Contributions: $50,000.00 | Accrued Interest: $189,422.44 | Balance: $239,422.44 |
| Year: 36 | Contributions: $50,000.00 | Accrued Interest: $200,379.63 | Balance: $250,379.63 |
| Year: 37 | Contributions: $50,000.00 | Accrued Interest: $211,838.27 | Balance: $261,838.27 |
| Year: 38 | Contributions: $50,000.00 | Accrued Interest: $223,821.32 | Balance: $273,821.32 |
| Year: 39 | Contributions: $50,000.00 | Accrued Interest: $236,352.78 | Balance: $286,352.78 |
| Year: 40 | Contributions: $50,000.00 | Accrued Interest: $249,457.74 | Balance: $299,457.74 |
| Year: 41 | Contributions: $50,000.00 | Accrued Interest: $263,162.45 | Balance: $313,162.45 |
| Year: 42 | Contributions: $50,000.00 | Accrued Interest: $277,494.36 | Balance: $327,494.36 |
| Year: 43 | Contributions: $50,000.00 | Accrued Interest: $292,482.16 | Balance: $342,482.16 |
| Year: 44 | Contributions: $50,000.00 | Accrued Interest: $308,155.89 | Balance: $358,155.89 |
| Year: 45 | Contributions: $50,000.00 | Accrued Interest: $324,546.93 | Balance: $374,546.93 |
| Year: 46 | Contributions: $50,000.00 | Accrued Interest: $341,688.10 | Balance: $391,688.10 |
| Year: 47 | Contributions: $50,000.00 | Accrued Interest: $359,613.74 | Balance: $409,613.74 |
| Year: 48 | Contributions: $50,000.00 | Accrued Interest: $378,359.75 | Balance: $428,359.75 |
| Year: 49 | Contributions: $50,000.00 | Accrued Interest: $397,963.67 | Balance: $447,963.67 |
| Year: 50 | Contributions: $50,000.00 | Accrued Interest: $418,464.76 | Balance: $468,464.76 |
| Year: 51 | Contributions: $50,000.00 | Accrued Interest: $439,904.09 | Balance: $489,904.09 |
| Year: 52 | Contributions: $50,000.00 | Accrued Interest: $462,324.59 | Balance: $512,324.59 |
| Year: 53 | Contributions: $50,000.00 | Accrued Interest: $485,771.17 | Balance: $535,771.17 |
| Year: 54 | Contributions: $50,000.00 | Accrued Interest: $510,290.79 | Balance: $560,290.79 |
| Year: 55 | Contributions: $50,000.00 | Accrued Interest: $535,932.54 | Balance: $585,932.54 |
| Year: 56 | Contributions: $50,000.00 | Accrued Interest: $562,747.80 | Balance: $612,747.80 |
| Year: 57 | Contributions: $50,000.00 | Accrued Interest: $590,790.25 | Balance: $640,790.25 |
| Year: 58 | Contributions: $50,000.00 | Accrued Interest: $620,116.08 | Balance: $670,116.08 |
| Year: 59 | Contributions: $50,000.00 | Accrued Interest: $650,784.00 | Balance: $700,784.00 |
| Year: 60 | Contributions: $50,000.00 | Accrued Interest: $682,855.44 | Balance: $732,855.44 |
| Year: 61 | Contributions: $50,000.00 | Accrued Interest: $716,394.63 | Balance: $766,394.63 |
| Year: 62 | Contributions: $50,000.00 | Accrued Interest: $751,468.74 | Balance: $801,468.74 |
| Year: 63 | Contributions: $50,000.00 | Accrued Interest: $788,148.03 | Balance: $838,148.03 |
| Year: 64 | Contributions: $50,000.00 | Accrued Interest: $826,505.95 | Balance: $876,505.95 |
| Year: 65 | Contributions: $50,000.00 | Accrued Interest: $866,619.32 | Balance: $916,619.32 |
The ending account balance of $916,619.32 illustrates the potential for inheritable account assets to become quite substantial. Since accrued interest has the ability to flow to the account of a dependent child, this balance could potentially be even higher. Therefore, it is necessary to create a maximum account value provision so that excessive wealth does not accumulate in a select few accounts over the passage of time. Once the maximum account value has been reached, interest will no longer compound. Instead, payments will be made to the account holder in the form of monthly interest distribution checks. The ending account balance for someone who has maximum annual contributions from birth is $363,904.70. Therefore, the recommended maximum account value is $500,000, and this balance will generate tax-free monthly distribution checks of $1,875.
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