Kevin and Kathy Woo are 38 years old and have one daughter, age 9. Kevin is...

  

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Kevin and Kathy Woo are 38 years old and have one daughter, age 9. Kevin is the primary earner, making $140,000 per year. Kathy 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 Kathy and their daughter in the event of Kevin's death. Kevin and Kathy estimate that while their daughter is still living at home, monthly living expenses for Kathy and their child will be about $4,000 (in current dollars). After their daughter leaves for college in 9 years, Kathy will need a monthly income of $3,300 until she retires at age 65. The Woos estimate Kathy's living expenses after 65 will only be $2,900 a month. The life expectancy of a woman Kathy's age is 87 years, so the Woo family calculates that Kathy 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 Kevin and Kathy Woo Date July 31, 2015 Step 1: Financial Resources Needed after Death 1. Annual Living Expenses and Other Needs Period 1 Period 2 Period 3 Monthly living expenses $4,000 $ а. b. Net yearly income needed (1a x 12) $ 2$ $ Number of years in time period 9. 18 22 с. d. Total living needs per time period (1b x $ 2$ 1c) Total Living Expenses (add Line 1d for each period to check your total): $1,910,400 In addition to these monthly expenses, other future outlays must be accounted for. Before they had a child, Kathy worked as a financial consultant, but her knowledge and skills are now somewhat outdated. Therefore, they include $40,000 for Kathy to go back to school. Additionally, Kevin and Kathy 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 a business venture of $40,000 and an automobile loan of $3,000. 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 Spouse's education fund а. b. Child's college fund Other needs $0 С. 3. Final Expenses (funeral costs and estate taxes) 4. Debt Liquidation а. House mortgage b. Other loans С. Total debt (4a + 4b) 5. Other Financial Needs $0 Total Financial Resources Needed (add right-hand column plus the Total Living Expenses you $2,071,400 calculated previously to check your math): %24 %24 Kevin and Kathy Woo are 38 years old and have one daughter, age 9. Kevin is the primary earner, making $140,000 per year. Kathy 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 Kathy and their daughter in the event of Kevin's death. Kevin and Kathy estimate that while their daughter is still living at home, monthly living expenses for Kathy and their child will be about $4,000 (in current dollars). After their daughter leaves for college in 9 years, Kathy will need a monthly income of $3,300 until she retires at age 65. The Woos estimate Kathy's living expenses after 65 will only be $2,900 a month. The life expectancy of a woman Kathy's age is 87 years, so the Woo family calculates that Kathy 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 Kevin and Kathy Woo Date July 31, 2015 Step 1: Financial Resources Needed after Death 1. Annual Living Expenses and Other Needs Period 1 Period 2 Period 3 Monthly living expenses $4,000 $ а. b. Net yearly income needed (1a x 12) $ 2$ $ Number of years in time period 9. 18 22 с. d. Total living needs per time period (1b x $ 2$ 1c) Total Living Expenses (add Line 1d for each period to check your total): $1,910,400 In addition to these monthly expenses, other future outlays must be accounted for. Before they had a child, Kathy worked as a financial consultant, but her knowledge and skills are now somewhat outdated. Therefore, they include $40,000 for Kathy to go back to school. Additionally, Kevin and Kathy 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 a business venture of $40,000 and an automobile loan of $3,000. 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 Spouse's education fund а. b. Child's college fund Other needs $0 С. 3. Final Expenses (funeral costs and estate taxes) 4. Debt Liquidation а. House mortgage b. Other loans С. Total debt (4a + 4b) 5. Other Financial Needs $0 Total Financial Resources Needed (add right-hand column plus the Total Living Expenses you $2,071,400 calculated previously to check your math): %24 %24

Answer rating: 100% (QA)

1 Period 1 answers Net yearly income needed 48 000 Total living needs 432 000 Total living expenses ... View the full answer