2. How much life insurance do you need? Calculating resources- Part 2 Raphael and Susan Galego have completed Step 1 of their needs analysis worksheet and determined that they need $3,522,000 to maintain the projected lifestyle of Susan (age 38) and their two children (ages 8 and 10) in the event of Raphael's (the primary earner's) death. The Galegos also have certain financial resources available after Raphael's death, however, so their life insurance needs are lower than this amount. If Raphael dies, Susan will be eligible to receive Social Security survivors' benefits-approximately $3,000 a month ($36,000 a year) until the youngest child graduates from high school in 10 years. After the children leave home, Susan will be able to work full-time and earn an estimated $46,000 a year (after taxes) until she retires at age 65. After Susan turns 65, she'll receive approximately $2,400 a month ($28,800 a year) from her own Social Security and retirement benefits. The life expectancy for a woman within Susan's demographic is 87. The couple has also saved $60,000 in a mutual fund, and Raphael's employer provides him a $100,000 life insurance policy. Using this information, complete Step 2 of the needs analysis worksheet to estimate their total financial resources available after death. (Note: If the value of a certain entry is zero, be sure to enter "0" to receive credit.) Life Insurance Needs Analysis Worksheet (Part 2) Step 2: Financial Resources Available After Death 1. Income a. Annual Social Security survivors' benefits Period 1 $36,000 Period 2 Period 3 $0 $0 b. Surviving spouse's annual income $0 $ $0 c. Other annual pensions and Social Security benefits $0 $0 $28,800 d. Annual income (la + 1b + 1c) $36,000 $ e. Number of years in time period 10 17 22 $360,000 f. Total period income (1d x 1e) g. Total income 2. Savings and investments 3. Other life insurance 4. Other resources Total financial resources available (1g + 2 + 3 + 4): $1,775,600 $0 $1,935,600 Finally, to determine the value of life insurance Raphael and Susan should purchase, complete Step 3 of the needs analysis method by subtracting the total financial resources available from the total financial resources needed. Step 3: Additional Life Insurance Needed Total financial resources needed (from Step 1) Total financial resources available (from Step 2) Additional life insurance needed: $3,522,000 $1,935,600 True or False: Alternatively, the Galegos could have estimated their life insurance needs using the multiple-of-earnings method, a less complicated but less accurate method than the needs analysis. True False Grade It Now Save & Continue Continue without saving