Question

How much life insurance do you need? Calculating resources. Shen and Valerie Wong have completed step 1 of their needs analysis workshect and determined that they need $2,418,000 to maintain the projected lifestyle of Valerie (age 41) and their two children (ages 7 and 11) in the event of Shen's (the primary earner's) death. The Wongs also have certain financial resources available after Shen's death, however, so their life insurance needs are lower than this amount. If Shen dies, Valerie 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, valerie will be able to work full-time and earn an estimated $52,000 a year (after taxes) until she retires at age 65 . After Valerie twrns 65, shem receive approximately $3,100 a month ( $37,200 a year) from her own 50cial Security and retirement benefits. The life expectancy for a wornan within Valerie's demographic is 87 . The couple has also saved $60,000 in a mutuat fund, and Shen'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 financlal resources availabie after death. (Note: If the value of a certain entry is zero, be sure to enter " 0 " to recelve credit.)

Answer 1

To calculate the Wongs' total financial resources, we add the Social Security benefits, Valerie's future earnings, their savings, and existing life insurance, which would then be subtracted from their projected lifestyle maintenance needs.

Step-by-step explanation:

Shen and Valerie Wong need to estimate their total financial resources available after Shen's death to determine their life insurance needs. These resources include Social Security survivors' benefits, Valerie's future earnings, and current savings and existing life insurance. Upon Shen's death, Valerie is expected to receive $42,000 a year in Social Security benefits for 9 years. After the youngest child graduates, Valerie will earn $52,000 annually from work until retirement at age 65.

Post-retirement, she will receive Social Security and retirement benefits of $37,200 a year. With a life expectancy of 87 years, the Wongs also have $60,000 in mutual funds and Shen has a $100,000 life insurance policy through his employer. The total financial resources after Shen's death before purchasing additional life insurance would be the sum of Social Security benefits until the youngest child graduates ($42,000 x 9 years), the value of their savings ($60,000), and Shen's employer-provided life insurance ($100,000).