3. How much life insurance do you need? Calculating resources Part 2 Stasia and Patrick Strong have completed Step 1 of their needs analysis worksheet and determined that they need $2,745,000 to maintain the projected lifestyle of Patrick (age 38) and their two children (ages 8 and 10) in the event of Stasia's (the primary earner's) death. The Strongs also have certain financial resources available after Stasia's death, however, so their life insurance needs are lower than this amount. If Stasia dies, Patrick will be eligible to receive Social Security survivors' benefits-approximately $3,500 a month ($42,000 a year) until the youngest child graduates from high school in 10 years. After the children leave home, Patrick will be able to work full-time and earn an estimated $52,000 a year after taxes) until he retires at age 65. After Patrick turns 65, he'll receive approximately $3,100 a month ($37,200 a year) from his own Social Security and retirement benefits. The life expectancy for a man within Patrick's demographic is 80. The couple has also saved $42,300 in a mutual fund, and Stasia's employer provides her 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 entero" to receive credit.) 1. Income Period 1 Period 2 Period 3 a. Annual Social Security survivors' benefits b. Surviving spouse's annual income $37,200 c. Other annual pensions and Social Security benefits d. Annual income (1a + 10 + 1c) e. Number of years in time period f. Total period income (10 x 10) $1,862,000 0. Total Income 2. Savings and Investments 3. Other life insurance 4. Other resources Total Financial Resources Available (10 + 2+ 3+ $2,004,300 $2,004,300 Total Financial Resources Available (19 + 2 + 3 + Finally, to determine the value of life insurance Patrick and Stasia 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: $2,745,000 $2,004,300 True or False: Alternatively, the Strongs 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