Table 5
INCOME INSURANCE
Twenty Years of Work
Insurance Reserve (% of OASI)			35.0%	Invested in Stock Fund (% of OASI)				25.0%
Invested in Bond Fund (% of OASI)			25.0%
Income Insurance Premium			15.0%	Minimum Retirement Income				$12,000
Bond Fund Rate of Return			5.0%	Stock Fund Rate of Return				10.0%
Earning and Investment Period
			Gp 1	Gp 2	Gp 3	Gp 4	Gp 5	Insurance Fund
1a	First Year Earnings		$12,500	$12,500	$15,000	$20,000	$25,000
b	Annual Increase		$0	$400	$1,200	$2,000	$2,500
c	Fortieth Year Earnings		$0	$0	$0	$0	$0
2a	First Year FICA (OASDI)		$1,550	$1,550	$1,860	$2,480	$3,100
b	Disability Insurance (DI)		$225	$225	$270	$360	$450
c	Retirement/Survivor Ins (OASI)		$1,325	$1,325	$1,590	$2,120	$2,650
d	Insurance Reserve Fund		$464	$464	$557	$742	$928
e	Invested in Stock Fund		$331	$331	$398	$530	$663
f	Income Insurance Premium		$199	$199	$239	$318	$398	$1,352
g	Invested in Bond Fund		$331	$331	$398	$530	$663
			$1,325	$1,325	$1,590	$2,120	$2,650
3a	Twentieth Year FICA (OASDI)		$1,550	$2,492	$4,687	$7,192	$8,990
b	Disability Insurance		$225	$362	$680	$1,044	$1,305
c	Retirement/Survivor Ins (OASI)		$1,325	$2,131	$4,007	$6,148	$7,685
d	Insurance Reserve Fund		$331	$533	$1,002	$1,537	$1,921
e	Invested in Stock Fund		$331	$623	$1,002	$1,537	$1,921
f	Income Insurance Premium		$199	$374	$601	$922	$1,153	$3,249
g	Invested in Bond Fund		$331	$533	$1,002	$1,537	$1,921
h	Survivor Insurance Premium		$133	$213	$401	$615	$769
4	Value of Investments after 40 years		$156,698	$214,503	$289,831	$420,372	$525,465
a	Bond Fund		$29,062	$36,411	$56,923	$83,247	$104,059	$189,305
b	Stock Fund		$127,636	$178,091	$232,908	$337,125	$421,406
c	Income Maintenance Insurance Fund							$63,102
Calculation of Retirement Benefits1
5a	Bond Fund Annuity Value @ 2%2		$1,777	$2,227	$3,481	$5,091	$6,364	$7,718
b	Stock Fund Annuity Value @ 5%3		$10,242	$14,291	$18,689	$27,052	$33,815
c	Total		$12,019	$16,517	$22,170	$32,143	$40,179
6a	Income Insurance Paid		$0	$0	$0	$0	$0	$0
b	Dividend		$724	$907	$1,419	$2,075	$2,593	$7,718
c	Initial Retirement Benefit		$12,743	$17,425	$23,589	$34,218	$42,772
7	Percent Preretirement Income		101.9%	86.7%	62.4%	59.0%	59.0%
Retirement Income1
Year	Insured Minimum	Yearly Stock Fund Returns4	Gp 1	Gp 2	Gp 3	Gp4	Gp 5	Insurance Fund
1	$12,000	0.0%	$12,743	$17,425	$23,589	$34,218	$42,772	$63,102
2	$12,360	21.4%	$14,419	$19,752	$26,657	$38,660	$48,325	$66,257
3	$12,731	10.8%	$15,149	$20,759	$27,998	$40,603	$50,754	$69,569
4	$13,113	12.2%	$16,082	$22,050	$29,711	$43,085	$53,857	$73,048
5	$13,506	9.1%	$16,682	$22,877	$30,818	$44,690	$55,862	$76,700
6	$13,911	-2.6%	$15,763	$21,583	$29,152	$42,281	$52,851	$80,535
7	$14,329	13.0%	$16,834	$23,065	$31,117	$45,129	$56,411	$84,562
8	$14,758	-7.5%	$15,274	$20,875	$28,281	$41,026	$51,283	$88,790
9	$15,201	10.2%	$15,971	$21,835	$29,566	$42,889	$53,611	$93,230
10	$15,657	21.3%	$18,055	$24,730	$33,381	$48,413	$60,516	$97,891
11	$16,127	-8.1%	$16,302	$22,271	$30,196	$43,805	$54,756	$102,786
12	$16,611	-13.7%	$16,611	$19,176	$26,180	$37,996	$47,495	$107,925
13	$17,109	-13.3%	$17,109	$17,109	$22,983	$33,371	$41,713	$110,805
14	$17,622	25.0%	$17,622	$19,168	$26,236	$38,082	$47,603	$111,168
15	$18,151	-1.7%	$18,151	$18,370	$25,226	$36,624	$45,780	$113,214
16	$18,696	-2.4%	$18,696	$18,696	$24,187	$35,123	$43,904	$114,273
17	$19,256	21.9%	$19,256	$19,732	$27,080	$39,313	$49,142	$113,115
18	$19,834	4.0%	$19,834	$19,834	$27,118	$39,372	$49,215	$114,062
19	$20,429	41.3%	$20,429	$24,926	$33,948	$49,262	$61,577	$114,390
20	$21,042	-10.9%	$21,042	$22,102	$30,294	$43,977	$54,971	$117,975
								$119,115
1. Entries shown in red indicate that income insurance is paid.
2. Bond Fund annuities are graded annuities designed to increase over time to help counter inflation. They begin as if they were a 2% annuity and increase annually at the rate of about 3% with a 5% bond fund return. See Appendix C.
3. Stock fund annuities are variable annuities which begin as if they were a 5% annuity and are adjusted each year to reflect actual stock fund performance.
4. Yearly returns during retirement are taken from CREF historical returns for a 20-year period during which the 20-year annual return was 10.15%. See Figure 3A.