1. If Sue died today, how much would the Wrights need in the family maintenance fund? Explain the reasons behind your calculations.
2. Suppose the Wrights found that Sue and Tom each had a life insurance protection gap of $50,000. How might they go about searching for protection to close that gap?
Sue and Tom Wright are assistant professors at the local university. They each take home about $40,000 per year after taxes. Sue is 37 years old and Tom is 35. Their two children, Mike and Karen, are 13 and 11.
Were either one to die, they estimate that the remaining family members would need about 75 percent of the present combined take-home pay to retain their current standard of living while the children are still dependent. This does not include an extra $50 per month in child-care expenses that would be required in a single-parent household. They estimate that survivors’ benefits would total about $1,000 per month in child support. Both Sue and Tom are knowledgeable investors. In the past, average after-tax returns on their investment portfolio have exceeded the rate of inflation by about 3 percent.