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3. How much life insurance do you need? Calculating resources- Part 2 Ginny and Eric Juarez have completed Step 1 of their needs analysis worksheet and determined that they need $3,522,000 to maintain the projected lfestyle of Eric (age 41) and their two children (ages 7 and 11) in the event of Ginny's (the primary earner's) death. The Juarezs also have certain financial resources available after Ginny's death, however, so their life insurance needs are lower than this amount. If Ginny dies, Eric will be eligible to receive Social Security survivors' benefits--approximately $3,500 a month ($42,000 a year) until the youngest child graduates from high school in 9 years. After the children leave home, Eric will be able to work full-time and earn an estimated $57,000 a year (after taxes) until he retires at age 65. After Eric turns 65, he'll receive approximately $3,100 a month ($37,200 a year) from his own Social Security and retirement benefits. The life expectancy for a man within Eric's demographic is 80. The couple has also saved $42,300 in a mutual fund, and Ginny's employer provides her 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) Step 2: Financial Resources Available After Death 1. Income Period 1 Period 3 Period 2 $0 $42,000 3. Annual Social Security survivors' benefits b. Surviving spouse's annual income c. Other annual pensions and Social Security benefits 50 SO $ $0 $0 50 $37,200 1. Income Period 1 Period 2 Period 3 $42,000 $0 $0 $0 S $0 $0 $0 $37,200 $42,000 $ 9 15 2. Annual Social Security survivors' benefits b. Surviving spouse's annual income c. Other annual pensions and Social Security benefits d. Annual income (1a + 16 + 1c) e. Number of years in time period 1. Total period income (10 x le) 9. Total Income 2. Savings and investments 3. Other life Insurance 4. Other resources Total financial resources available (19+ 2+ 3+ 4): 15 $378,000 $1,716,000 $ $ $0 $1,858,300 Finally, to determine the value of life insurance Ginny and Eric should purchase, complete Step 3 or 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) $3,522,000 Total financial resources available (from Step 2) $1,858,300 Additional life insurance needed True or False Alternatively, the Juarezs could have estimated their life insurance needs using the multiple-of-earnings method, less complicated butessasi method than the needs analysis Finally, to determine the value of life insurance Ginny and Eric should purchase, complete Step 3 of the needs analysis method by subtracting the tot financial resources available from the total financial resources needed. Step 3: Additional Life Insurance Needed Total financial resources needed (from Step 1) $3,522,000 Total financial resources available (from Step 2) $1,858,300 Additional life insurance needed: True or False: Alternatively, the Juarezs could have estimated their life insurance needs using the multiple-of-earnings method, a less complicated but less accurate method than the needs analysis O False True