4. Calculating life insurance needs for a couple with a child Aa Aa How Much Life Insurance Does a Family Need? Stasia and Patrick Strong are 40 years old and have one son, age 10. Stasia is the primary earner, making $65,000 per year. Patrick does not currently work. The Strongs have decided to use the needs-based approach to calculate the value of a life insurance policy that would provide for Patrick and their son in the event of Stasia's death The Strongs' Needs They estimate that final expenses (such as funeral costs and estate taxes) would be $10,000 The Strongs are cautious and decided to replace Stasia's income for 25 years, when Patrick will be 65. Assume that Patrick would invest the life insurance proceeds at a 3% after-tax, after-inflation rate of return. Even though Patrick would be eligible to receive survivor's benefits when he reaches the age of 60 and then Social Security retirement benefits five years later, they want an extra cushion Before the birth of their son, Patrick worked as a financial consultant, but his knowledge and skills are now somewhat outdated. Therefore, the Strongs will include $20,000 for Patrick to go back to school The Strongs have two auto loans of $32,200 and a credit card balance of $1,200 They have 17 years left on the mortgage on their home, but they have provided for its payment with Stasia's replaced income A college education at the local public university costs $25,000 today. They will use this figure in the needs assessment with the understanding that Patrick would invest the insurance proceeds Final expenses Income replacement Readjustment period Debt repayment College expenses The Strong's Existing Assets and Government Benefits Government benefits The family would qualify for $3,800 monthly Social Security survivor's benefits until the son is 18 years old. Assume that Patrick will invest the benefits at a 3% after-tax, after-inflation rate of return. Pay attention to the length of time the son will be eligible for benefits and compute your answer based on how long he will be eligible for those benefits There is equity in the Strong's home, as well as balances in their 401(k)s that they do not want to have to rely on for the family's support if Stasia dies There is currently no life insurance on Stasia's life Existing assets Using this information and the following table, complete the worksheet to determine how much Stasia should insure her life for. Round your answers to the nearest dollar. Enter zero (0) in any rows for which there is no figure. For Social Security survivor's benefits or allowance for any current insurance or assets, enter a minus sign followed by the dollar amount Click here for a present value of an annuity table The Strongs Figures Factors Affecting Need 1. Final-expense needs Includes funeral, burial, travel, and other items of expense just prior to and after 4. Calculating life insurance needs for a couple with a child Aa Aa How Much Life Insurance Does a Family Need? Stasia and Patrick Strong are 40 years old and have one son, age 10. Stasia is the primary earner, making $65,000 per year. Patrick does not currently work. The Strongs have decided to use the needs-based approach to calculate the value of a life insurance policy that would provide for Patrick and their son in the event of Stasia's death The Strongs' Needs They estimate that final expenses (such as funeral costs and estate taxes) would be $10,000 The Strongs are cautious and decided to replace Stasia's income for 25 years, when Patrick will be 65. Assume that Patrick would invest the life insurance proceeds at a 3% after-tax, after-inflation rate of return. Even though Patrick would be eligible to receive survivor's benefits when he reaches the age of 60 and then Social Security retirement benefits five years later, they want an extra cushion Before the birth of their son, Patrick worked as a financial consultant, but his knowledge and skills are now somewhat outdated. Therefore, the Strongs will include $20,000 for Patrick to go back to school The Strongs have two auto loans of $32,200 and a credit card balance of $1,200 They have 17 years left on the mortgage on their home, but they have provided for its payment with Stasia's replaced income A college education at the local public university costs $25,000 today. They will use this figure in the needs assessment with the understanding that Patrick would invest the insurance proceeds Final expenses Income replacement Readjustment period Debt repayment College expenses The Strong's Existing Assets and Government Benefits Government benefits The family would qualify for $3,800 monthly Social Security survivor's benefits until the son is 18 years old. Assume that Patrick will invest the benefits at a 3% after-tax, after-inflation rate of return. Pay attention to the length of time the son will be eligible for benefits and compute your answer based on how long he will be eligible for those benefits There is equity in the Strong's home, as well as balances in their 401(k)s that they do not want to have to rely on for the family's support if Stasia dies There is currently no life insurance on Stasia's life Existing assets Using this information and the following table, complete the worksheet to determine how much Stasia should insure her life for. Round your answers to the nearest dollar. Enter zero (0) in any rows for which there is no figure. For Social Security survivor's benefits or allowance for any current insurance or assets, enter a minus sign followed by the dollar amount Click here for a present value of an annuity table The Strongs Figures Factors Affecting Need 1. Final-expense needs Includes funeral, burial, travel, and other items of expense just prior to and after