3. How much life insurance do you need? Calculating resources - Part 2 Sunita and Rajiv Malik have completed Step 1 of their needs analysis worksheet and determined that they need $3,522,000 to maintain the projected festyle of Rajiv (age 32) and their two children (ages 3 and 4) in the event of Sunita's (the primary earner's) death. The Maliks also have certain financial resources available after Sunita's death, however, so their life insurance needs are lower than this amount. If Sunita dies, Rajiv 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 15 years. After the children leave home, Rajiv will be able to work full-time and earn an estimated $52,000 a year (after taxes) until he retires at age 65. Alter Rajiv turns 65, he'll receive approximately $2,400 a month (528,800 a year) from his own Social Security and retirement benefits. The life expectancy for a man within Rajiv's demographic is 80. The couple has also saved $58,000 in a mutual fund, and Sunita'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 enter "O to receive credit.) Life Insurance Needs Analysis Worksheet (Part 2) Step 2: Financial Resources Available After Death 1. Income Period 1 Period 2 Period 3 a. Annual Social Security survivors' benefits b. Surviving spouse's annual income $28,800 c. Other annual pensions and Social Security benefits d. Annual income (la + 1b + 1c) e. Number of years in time period Total period income (10 x 1e) 9. Total Income $1.90 000 benefits d. Annual income (1a + 1b + 1c) e. Number of years in time period f. Total period income (10 x 1e) g. Total Income 2. Savings and investments $1,908,000 3. Other life insurance 4. Other resources Total Financial Resources Available (19 + 2+ 3+ $2,066,000 Finally, to determine the value of life insurance Rajiv and Sunita 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 $2,066,000 True or False: Alternatively, the Maliks could have estimated their life insurance needs using the multiple of earnings method, a less complicated but less accurate method than the needs analysis. False True 3. How much life insurance do you need? Calculating resources - Part 2 Sunita and Rajiv Malik have completed Step 1 of their needs analysis worksheet and determined that they need $3,522,000 to maintain the projected festyle of Rajiv (age 32) and their two children (ages 3 and 4) in the event of Sunita's (the primary earner's) death. The Maliks also have certain financial resources available after Sunita's death, however, so their life insurance needs are lower than this amount. If Sunita dies, Rajiv 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 15 years. After the children leave home, Rajiv will be able to work full-time and earn an estimated $52,000 a year (after taxes) until he retires at age 65. Alter Rajiv turns 65, he'll receive approximately $2,400 a month (528,800 a year) from his own Social Security and retirement benefits. The life expectancy for a man within Rajiv's demographic is 80. The couple has also saved $58,000 in a mutual fund, and Sunita'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 enter "O to receive credit.) Life Insurance Needs Analysis Worksheet (Part 2) Step 2: Financial Resources Available After Death 1. Income Period 1 Period 2 Period 3 a. Annual Social Security survivors' benefits b. Surviving spouse's annual income $28,800 c. Other annual pensions and Social Security benefits d. Annual income (la + 1b + 1c) e. Number of years in time period Total period income (10 x 1e) 9. Total Income $1.90 000 benefits d. Annual income (1a + 1b + 1c) e. Number of years in time period f. Total period income (10 x 1e) g. Total Income 2. Savings and investments $1,908,000 3. Other life insurance 4. Other resources Total Financial Resources Available (19 + 2+ 3+ $2,066,000 Finally, to determine the value of life insurance Rajiv and Sunita 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 $2,066,000 True or False: Alternatively, the Maliks could have estimated their life insurance needs using the multiple of earnings method, a less complicated but less accurate method than the needs analysis. False True