Paul (45) and Erica (43) are the married parents of young children (ages 7 and 9). Paul is a self employed C.P.A. with a salary of $350,000. Erica is a teacher and has been at her job for 20 years making $200,000/year. Paul and Erica have different levels of risk tolerance. Paul tends to be a riskier investor and Erica is by far more conservative. The family has no outstanding debt outside of a mortgage on their primary residence. The outstanding mortgage balance totals $450,000 against a fair market value of the home of $700,000. Their liquid assets consist of jointly held bank deposits ($15,000), mutual fund ($155,000) and combined retirement assets of $160,000 (Erica $85,000 and Paul $75,000). They have personal property of $200,000. Neither carries any life insurance.

The family spends roughly 37% of their joint salary on taxes, etc with the remainder used to provide for their family. They plan to retire at age 67. Assume a 5% opportunity cost in any analysis.

Erica and Pauls goals are to provide enough life insurance in the event of their deaths to provide for their children to age 18 and to provide some funds for their college education ($300,000 in total for both kids). In the event of the premature death of either spouse they would like to provide their dependents with an annual income of $150,000. Both Erica and Paul would be eligible for social security survivorship benefits- Assuming $50,000/year (includes both children and surviving spouse)

Please complete the following:

• Determine the family type Erica and Paul represent and discuss the level of need for life insurance given this family type.