Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Jason and Eleanor Stein have completed Step 1 of their needs analysis worksheet and determined that they need $2,323,000 to maintain the projected lifestyle of

image text in transcribed
image text in transcribed
image text in transcribed
Jason and Eleanor Stein have completed Step 1 of their needs analysis worksheet and determined that they need $2,323,000 to maintain the projected lifestyle of Eleanor (age 38) and their two children (ages 8 and 10) in the event of Jason's (the primary earner's) death. The Steins also have certain financial resources available after Jason's death, however, so their life insurance needs are lower than this amount. If Jason dies, Eleanor 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, Eleanor will be able to work full-time and earn an estimated $38,000 a year (after taxes) until she retires at age 65. After Eleanor 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 Eleanor's demographic is 87. The couple has also saved $58,000 in a mutual fund, and Jason'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 "o to receive credit.) Life Insurance Needs Analysis Worksheet (Part 2) 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 (1a + 1b + 1c) e. Number of years in time period f. Total period income (1 x le) $1,639,600 g. Total Income 2. Savings and investments 3. Other life insurance 4. Other resources Total Financial Resources Available (19 + 2 + 3 + $1,797,600 Finally, to determine the value of life insurance Jason and Eleanor 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: $2,323,000 $1,797,600 True or False: Alternatively, the Steins could have estimated their life insurance needs using the multiple-of-earnings method, a more complicated but more accurate method than the needs analysis. False True

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Broadcasting Finance In Transition

Authors: Jay G. Blumler, T. J. Nossiter

1st Edition

0195050894, 978-0195050899

More Books

Students also viewed these Finance questions

Question

5. Structure your speech to make it easy to listen to

Answered: 1 week ago

Question

1. Describe the goals of informative speaking

Answered: 1 week ago