February 2005

The PACT America Report

Survivor Benefits Simulation:

The following simulation assumes that the husband had contributed $600 annually over a period of 50 years, and the wife had contributed $1,000 annually over a period of 40 years.

Husband’s Account:

Wife’s Account:

The husband would receive a monthly distribution check for $418.46, and the wife would receive a monthly distribution check for $415.76. These two checks would provide the couple with a supplemental retirement income of $834.22 per month.

Assume that the husband dies at age 72. He would have collected seven years worth of tax-free supplemental retirement income amounting to $35,150.64. The value of these disbursements would be deducted from his accrued interest of $81,590.60 to leave a surplus of $46,439.96. The wife would then be eligible to receive this surplus for her account.

At the time of her husband’s death, the wife would have received monthly distributions totaling $34,923.84. Nevertheless, her account values would still reflect the high water mark. Upon her husband’s death, the widow would inherit $30,000 in contributions and $46,439.96 in accrued interest.

Wife’s Account:

The new high water mark would be established at $187,310.07, and the widow would now receive a monthly distribution check for $702.41. This is in comparison to the combined distribution of $834.22 that the couple received when the husband was still alive.

Assume that the widow lives another 15 years to age 87. She would have collected $34,923.84 before her husband’s death and $126,433.80 afterwards. Therefore, her total distributions would have amounted to $161,357.64. This figure would be deducted from her accrued interest of $117,310.07 to leave a deficit of $44,047.57 that would be deducted from her contributions. Nevertheless, there would still be $25,952.43 worth of inheritable assets remaining.

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