sUE AND tOM wRIGHT ARE ASSISTANT PROFESSORS AT THE LOCAL UNIVERSITY. THEY EACH HAVE 40,000 PER YEAR AFTER TAXES. sUE IS 37 AND TOM IS35. THEIR 2 CHILDREN ARE 13,11.WERE EITHER OF THEM TO DIE THEY ESTIMATE THAT THE REMAINING FAMILY MEMBERS WOULD NEED 75% OF PRESENT COMBINED TAKE HOME PAY TO KEEP THEIR CURRENT STANDARD OF LIVING FOR THE CHILDREN TILL THEY COME OF AGE. THIS DOES NOT INCLUDE THE 50. CHILDCARE A MONTH THATS REQUIRD IN A SINGLE APRENT HOUSEHOLD. THEY ESTIMATE THE SURVIVOR BENEFITS WOULD TOTAL ABOUT 1,000. PER MONTH IN CHILD SUPPORT.TOM AND SUE AR EKNOWLEADGABLE INVESTORS. IN THE PAST AVERAGE AFTER TAX RETURNS THEIR INVESTMENT PORTFOLIO HAVE EXCEEDED THE RATE OF ABOUT 3% IF ONE WAS TO DIE TODAY HOW MUCH WOULD THEY NEED IN THE FQAMILY MANITENANCEFUND? USE THE NEEDS APPROACH. IF THEY HAD A GAP OF 50,000. IN LIFE INSURANCE WHAT STEPS DO THEY TAKE TO TO MAKE UP THE GAP.
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To calculate the amount needed in the family maintenance fund and determine the steps to make up the gap in life insurance, we can follow the needs approach.
Step 1: Calculate the present combined take-home pay after taxes.
- Sue and Tom each have $40,000 per year after taxes, so their combined take-home pay is $80,000 per year.
Step 2: Determine the amount needed for the family's annual living expenses if one of them were to die.
- According to the information provided, the remaining family members would need 75% of the present combined take-home pay to maintain their current standard of living.
- 75% of $80,000 is $60,000 per year.
Step 3: Calculate the total amount needed in the family maintenance fund.
- Since we want to provide for the children until they come of age, let's assume this means until they turn 18.
- So, the total amount needed in the family maintenance fund would be $60,000 per year for 18 years.
- $60,000 * 18 = $1,080,000.
Therefore, if one of them were to die today, they would need $1,080,000 in the family maintenance fund to sustain their current standard of living for the children until they turn 18.
Now, let's address the gap in life insurance of $50,000.
To make up for the gap in life insurance, Sue and Tom can consider the following steps:
1. Evaluate their existing life insurance policies: Review their current life insurance policies, if any, to determine if there are any cash values or benefits that can be utilized to fill the gap.
2. Research life insurance options: Research different life insurance options available to them, such as term life insurance or permanent life insurance, to determine which type would best suit their needs.
3. Assess their insurability: Determine if either Sue or Tom can qualify for additional life insurance coverage based on their health, age, and other factors. This might involve reviewing their medical history, undergoing medical exams, and working with an insurance agent to find suitable coverage.
4. Calculate the additional coverage needed: Once they have identified the type of life insurance that suits their needs, they can calculate the amount of additional coverage required to fill the $50,000 gap.
5. Obtain quotes and compare policies: Shop around for life insurance quotes from different insurance companies to ensure they get the most affordable and comprehensive coverage that meets their needs.
6. Secure the additional coverage: Based on their research and evaluation, they can proceed to purchase the additional life insurance coverage necessary to fill the $50,000 gap. This might involve completing applications, paying premiums, and fulfilling any other requirements set by the insurance provider.
It is advisable for Sue and Tom to consult with a licensed insurance agent or financial advisor to guide them through the process and ensure they make informed decisions based on their specific circumstances.