2. How much life insurance do you need? Calculating needs - Part1 Tim and Yvette Cohen are 52 years old and have one daughter, age 14. Tim is the primary earner, making $80,000 per year. Yvette does not currently work. The Cohens have decided to use the needs analysis method to calculate the value of a life insurance policy that would provide for Yvette and their daughter in the event of Tim's death. Tim and Yvette estimate that while their daughter is still living at home, monthly living expenses for Yvette and their child will be about $3,300 (in current dollars). After their daughter leaves for college in 4 years, Yvette will need a monthly income of $2,750 until she retires at age 65. The Cohens estimate Yvette's living expenses after 65 will only be $2,300 a month. The life expectancy of a woman Yvette's age is 87 years, so the Cohen family calculates that Yvette will spend about 22 years in retirement. ss Tips Using this information, complete the first portion of the needs analysis worksheet to estimate their total living expenses. ss Tips Life Insurance Needs Analysis Worksheet OUT Name of insured Tim and Yvette Cohen Step 1: Financial resources needed after death 1. Annual living expenses and other needs a. Monthly living expenses b. Net yearly income S needed (1a x 12) Number of years in time period d. Total living needs S per time period (1bx 1c) Date July 31, 2015 Period 1 Period 2 Period 3 $3,300 S $ 4 5 9 22 Total living expenses (add Line 1d $1,062,600 for each period to check your total): In addition to these monthly expenses, other future outlays must be accounted for. Before they had a child, Yvette worked as a software engineer, but her knowledge and skills are now somewhat outdated. Therefore, they include $25,000 for Yvette to go back to school. Additionally, Tim and Yvette want to create a college fund of $30,000 to fund their child's college education. They estimate that final expenses (funeral costs and estate taxes) will amount to $12,000. Finally, they have taken out a loan for home improvements of $130,000 and an automobile loan of $5,000. They own their home but still have an outstanding mortgage of $300,000.