Kathy and Kevin Woo are 40 years old and have one son, age 10. Kathy is the primary earner, making $65,000 per year. Kevin does not currently work. The Woos have decided to use the needs analysis method to calculate the value of a life insurance policy that would provide for Kevin and their son in the event of Kathy's death. Kathy and Kevin estimate that while their son is still living at home, monthly living expenses for Kevin and their child will be about $2,900 (in current dollars). After their son leaves for college in 8 years, Kevin will need a monthly income of $2,600 until he retires at age 65. The Woos estimate Kevin's living expenses after 65 will only be $2,000 a month. The life expectancy of a man Kevin's age is 82 years, so the Woo family calculates that Kevin will spend about 17 years in retirement. Using this information, complete the first portion of the needs analysis worksheet to estimate their total living expenses. Life Insurance Needs Analysis Worksheet Name of insured Kevin and Kathy Woo Step 1: Financial resources needed after death 1. Annual living expenses and other needs a. Monthly living expenses b. Net yearly income $ needed (1a x 12) C. Number of years d. in time period Total living needs per time period (1b x 1c) Date July 31, 2015 Period 1 $2,900 Period 2 Period 3 8 $ $ 17 $ 17 Total living expenses (add Line 1d for each period to check your total): $1,216,800 In addition to these monthly expenses, other future outlays must be accounted for. Before they had a child, Kevin worked as a financial consultant, but his knowledge and skills are now somewhat outdated. Therefore, they include $20,000 for Kevin to go back to school. Additionally, Kathy and Kevin want to create a college fund of $25,000 to fund their child's college education. They estimate that final expenses (funeral costs and estate taxes) will amount to $10,000. Finally, they have taken out a loan for a business venture of $32,200 and a credit card balance of $1,200. Because the Woos are renters, they have no outstanding mortgage. Using this information, complete the next portion of Step 1 to determine the total financial resources needed. 2. Special needs a. Spouse's education fund b. C. Child's college fund Other needs 3. Final expenses (funeral costs and estate taxes) $0 $ 4. Debt liquidation a. House mortgage b. Other loans C. Total debt (4a + 4b) 5. Other financial needs $0 Total financial resources needed (add right-hand column plus the Total Living Expenses you calculated): The second half of the needs analysis worksheet is not shown on this page. To complete the worksheet and determine the value of the life insurance policy the Woos should purchase, they need to factor in additional information. True or False: Kathy's future salary (if she does not die) should be accounted for in the remaining portion of the form. True False