EXAMPLE

Assume a prospect is depositing $3,000 per year into a nondeductible tax-deferred
annuity. Also assume the average earnings rate is 8 percent and that there are 15 years
until retirement. If the deposits remain level, multiply the factor from fact finder Table 3
for an 8 percent accumulation rate over 15 years:

29.324 × $3,000 = $87,972

However, if the deposits grow by 3 percent per year, you can use fact finder Table 1 to
estimate the average dollar amount of deposits for 15 years, and then multiply that figure
by 29.324. The approximate inflation adjustment to $3,000 deposits for 15 years can be
found using the 3 percent column of fact finder Table 1. Take the factor that appears in
this column that corresponds to the mid-point year between today and year 15, which is
assumed to be the number of years until the prospect retires (year 8). Multiply that factor
(1.2668) by $3,000. Next, multiply that amount by 29.324 from fact finder Table 3, which
equals $111,443, the approximate lump-sum value accumulated by making deposits of
$3,000 that increase by 3 percent per year for 15 years and earn 8 percent interest each
year:

1.2668 × $3,000 × 29.324 = $111,443

Then determine the projected income generated at retirement from the lump sum
accumulated, using either the capital-retention method or the capital-liquidation method
discussed previously. Thus, $111,443 multiplied by .08 will provide a level income
of $8,915 every year in retirement. This number will constitute the SOURCE 4 dollar
amount at the bottom of fact finder page 9, and you should also enter it as the SOURCE
4 dollar amount on page 6.

If, on the other hand, $111,443 is divided by 13.23, which is the retirement income divisor
factor from fact finder Table 4 for 8 percent interest, 3 percent inflation, and a 20-year
liquidation period, $8,424 will be generated in inflation-indexed dollars during the 20-year
retirement. You should enter this indexed income from deposits and earnings.