Kate and Jon Alden are 52 years old and have one son, age 14. Kate is the primary care making $80,000 per year. Jon does not currently work. The Aldens have decided to use the needs analysis method to calculate the value of a life insurance policy that would provide for Jon and their son in the event of Kate's death. Kate and Jon estimate that while their son is still living at home, monthly living expenses for Jon and their child will be about $3,300 (in current dollars) After their son leaves for college in 4 years, Jon will need a monthly income of $2,750 until he retires at age 65. The Allens estimate Jon's living expenses after 65 will only be $2,300 a month. The life expectancy of a man Jon's age is 82 yeats, so the Alden family calculates that lon will spend about 17 years in retirement Using this information, complete the first portion of the needs analysis worksheet to estimate their totalling experies. Life Insurance Needs Analysis Worksheet Name of insured Jon and Kate Alden Date July 31, 2015 Step 1: Financial resources needed after death 1. Annual living expenses and other needs Period 2 Period 3 Period 1 $3,300 Monthly living expenses Net yearly income C Assignment Activity: Chapter 08 Insuring Your Life b Net yearly income S needed (ta x 12) Number of years in time period d Totalling needs 5 per time period (tb x 1c) 12 $924,600 Total living expenses (add neid for each period to check your total) In addition to these monthly expenses, other future outtays must be accounted for before they had a child, Jon worked as a financial consultant, but his knowledge and skills are now somewhat outdated. Therefore, they include $25,000 for Jon to go back to school Additionally, Kate and son want to create a colege fund of $30,000 to fund their child's colege education. They estimate that final expenses (funeral costs and estate taxes) will amount to $12,000. Finally, they have taken out a loan for a business venture of $32,200 and a credit card balance of $1,200. Because the Aldens are renters, they have no outstanding mortgage. Using this information, complete the next portion of Step to determine the total financial resources needed. 2. Special needs b Spouse's education fund Child's colege fund Other needs uring Your Life Using this information, complete the next portion of Step 1 to determine the total financial resources needed. 2. Special needs b. B SO 4 a. Spouse's education fund Child's colege fund Other needs Final expenses (funeral costs and estate taxes) Debt liquidation House mortgage Other loans Total debt (4a + 4b) Other finansal needs Total financial resources needed (add right-hand column plus the Total Living Expenses you criculated) ba is C s S sta The second half of the needs analysis worksheet is not shown on this page. To complete the workstieet and determine the value of the life insurance policy the Aldens should purchase, they need to factor in additional information, True or False: Kate's future salary if she does not die) should be accounted for in the remaining portion of the form, True O False
