How much life insurance do you need? Calculating resources$-$ Part $2$

Hubert and Kate Rossi have completed Step $1$ of their needs analysis worksheet and determined that they need $$2,418,000$ to maintain the projected

lifestyle of Kate $($age $38)$ and their two children $($ages $8$ and $10)$ in the event of Hubert's $($the primary earner's$)$ death. The Rossis also have certain

financial resources available after Hubert's death, however, so their life insurance needs are lower than this amount.

If Hubert dies, Kate will be eligible to receive Social Security survivors' benefits$-$approximately $$3,800$ a month $($ $$45,600$ a year$)$ until the youngest

child graduates from high school in $10$ years. After the children leave home, Kate will be able to work full$-$time and earn an estimated $$38,000$ a year

$($after taxes$)$ until she retires at age $65.$ After Kate turns $65,$ shell receive approximately $$3,200$ a month $($ $$38,400$ a year$)$ from her own Social

Security and retirement benefits. The life expectancy for a woman within Kate's demographic is $87.$ The couple has also saved $$60,000$ in a mutual

fund, and Hubert'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

Income

Finally, to determine the value of life insurance Hubert and Kate 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 $1)$ $$2,418,000$

Total financial resources available $($from Step $2)$ $$2,106,800$

Additional life insurance needed:

True or False: Alternatively, the Rossis 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