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Jon and Kate Alden are 38 years old and have one son, age 9. Jon is the primary earner, making $140,000 per year. Kate 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 Kate and their son in the event of Jon's death Jon and Kate estimate that while their son is still living at home, monthly living expenses for Kate and their child will be about $4,000 (in current dollars). After their son leaves for college in 9 years, Kate will need a monthly income of 53,300 until she retires at age 65. The Aldens estimate Kate's living expenses after 65 will only be $2,900 a month. The life expectancy of a woman Kate's age is 87 years, so the Alden family calculates that Kate will spend about 22 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 Jon and Kate Date July 31, 2015 Alden Step 1: Financial resources needed after death 1. Annual living expenses and other needs Period 1 Period 2 Period 3 $4,000 b. $ $ $ C. Monthly living expenses Net yearly income needed (1a x 12) Number of years in time period Total living needs per time period (16 x 1c) 9 18 22 d. $1,910,400 Total living expenses (add Line 1d for each period to check your total): In addition to these monthly expenses, other future outlays must be accounted for. Before they had a child, Kate worked as a software engineer, but a her knowledge and skills are now somewhat outdated. Therefore, they include $40,000 for Kate to go back to school. Additionally, Jon and Kate want to create a college fund of $60,000 to fund their child's college education. They estimate that final expenses (funeral costs and estate taxes) will amount to $18,000. Finally, they have taken out a loan for home improvements of $150,000 and a credit card balance of $1,800. They own their home but still have an outstanding mortgage of $400,000. In addition to these monthly expenses, other future outlays must be accounted for. Before they had a child, Kate worked as a software engineer, but her knowledge and skills are now somewhat outdated. Therefore, they include $40,000 for Kate to go back to school. Additionally, Jon and Kate want to create a college fund of $50,000 to fund their child's college education. They estimate that final expenses (funeral costs and estate taxes) will amount to $18,000. Finally, they have taken out a loan for home improvements of $150,000 and a credit card balance of $1,800. They own their home but still have an outstanding mortgage of $400,000. Using this information, complete the next portion of Step 1 to determine the total financial resources needed 2. Special needs a. b. C. 3. 4. Spouse's education fund Child's college fund Other needs Final expenses (funeral costs and estate taxes) Debt liquidation House mortgage Other loans Total debt (42 +45) Other financial needs Total financial resources needed (add right-hand column plus the Total Living Expenses you calculated): ITTTTT a. b. c. 5. SO 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 Aldens should purchase, they need to factor in additional information. True or False: The value of Jon and Kate's other savings and investments should be accounted for in the remaining portion of the form. O True O False Jon and Kate Alden are 38 years old and have one son, age 9. Jon is the primary earner, making $140,000 per year. Kate 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 Kate and their son in the event of Jon's death Jon and Kate estimate that while their son is still living at home, monthly living expenses for Kate and their child will be about $4,000 (in current dollars). After their son leaves for college in 9 years, Kate will need a monthly income of 53,300 until she retires at age 65. The Aldens estimate Kate's living expenses after 65 will only be $2,900 a month. The life expectancy of a woman Kate's age is 87 years, so the Alden family calculates that Kate will spend about 22 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 Jon and Kate Date July 31, 2015 Alden Step 1: Financial resources needed after death 1. Annual living expenses and other needs Period 1 Period 2 Period 3 $4,000 b. $ $ $ C. Monthly living expenses Net yearly income needed (1a x 12) Number of years in time period Total living needs per time period (16 x 1c) 9 18 22 d. $1,910,400 Total living expenses (add Line 1d for each period to check your total): In addition to these monthly expenses, other future outlays must be accounted for. Before they had a child, Kate worked as a software engineer, but a her knowledge and skills are now somewhat outdated. Therefore, they include $40,000 for Kate to go back to school. Additionally, Jon and Kate want to create a college fund of $60,000 to fund their child's college education. They estimate that final expenses (funeral costs and estate taxes) will amount to $18,000. Finally, they have taken out a loan for home improvements of $150,000 and a credit card balance of $1,800. They own their home but still have an outstanding mortgage of $400,000. In addition to these monthly expenses, other future outlays must be accounted for. Before they had a child, Kate worked as a software engineer, but her knowledge and skills are now somewhat outdated. Therefore, they include $40,000 for Kate to go back to school. Additionally, Jon and Kate want to create a college fund of $50,000 to fund their child's college education. They estimate that final expenses (funeral costs and estate taxes) will amount to $18,000. Finally, they have taken out a loan for home improvements of $150,000 and a credit card balance of $1,800. They own their home but still have an outstanding mortgage of $400,000. Using this information, complete the next portion of Step 1 to determine the total financial resources needed 2. Special needs a. b. C. 3. 4. Spouse's education fund Child's college fund Other needs Final expenses (funeral costs and estate taxes) Debt liquidation House mortgage Other loans Total debt (42 +45) Other financial needs Total financial resources needed (add right-hand column plus the Total Living Expenses you calculated): ITTTTT a. b. c. 5. SO 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 Aldens should purchase, they need to factor in additional information. True or False: The value of Jon and Kate's other savings and investments should be accounted for in the remaining portion of the form. O True O False

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