﻿ Accumulation and Distribution Example

Accumulation and Distribution Example

A 25 year old client spends \$50 a week on coffee and a couple lunches. They might consider saving it for retirement but do not think it would be worth much. How much monthly income could \$50 a week produce for 25 year old when they are 65?

Data Entry

Use the following values for the prompts:

Calculation Type

Accum. & Dist

## Accumulation Values

Current Account Value

\$0

Interest Rate

6%

Number of Years

40

Type of Distribution

Level Deposits

Deposits per Year

52

Deposit Amount

\$50

End of Period

Calculated Projected Value

\$414,103.81

## Distribution Values

Calculate

Distribution Amount

Interest Rate

5%

Number of Years

30

Type of Distribution

Level Withdrawals

Distributions per Year

12

End of Period

Future Value

\$0

Calculated Withdrawal Amount

\$2,194.98

In summary, with no lump sum deposit, the \$50 per week of frill expenses at a relatively conservative rate of return can produce \$2,194 of income per month in retirement--not a bad investment!

This example could easily be modified:

1.Include annual increasing the deposit by 2% to 3%;

2.Include a COLA of a similar value to the distribution time period; and

3.Changes to the accumulation and/or distribution time period.

Other assumptions could also be easily changed.

 Sales Idea When working with young individuals, or groups of younger individuals, this powerful tool use to run an illustration for the younger people--the very people who are often less included to make contributions!