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Life-insurance benefits
should generate enough income after you die to fill in the gap between
your family's cash requirement and its income from other sources.
This worksheet designed by San Mateo, Calif., money managers Thomas
Bailard, David Biehl and Ronal Kaiser, authors of How to Buy the Right
Insurance at the Right Price (Dow Jones-Irwin, 1989, $10.95), will
help you figure out those needs. |
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1. Enter
estimated funeral expenses ($2,500-$5,000) and
probate expenses ($2,500 if
estate is under $250,000) |
$
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2. Enter
total family debts (except mortgage) |
$ |
3. Enter twice your monthly take-home pay as an emergency
fund |
$ |
4. Enter future college expenses (Current Averages,
including room and board,
are $20,000 yearly for private
schools; $12,000 for public school.) |
$ |
5. Figure total family annual living expenses including
mortgage payments or
rent, food, clothing, insurance, child
care, auto and other expenses. |
$
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6. Enter surviving spouse's income sources*
(a) Survivor's annual after-tax pay |
$ |
(b) Survivor's annual Social Security benefits. Benefits
may vary dramatically. Use $1,600 per month as a
rough estimate if
there are surviving children. For
more accurate estimate, call the
Social Security
Administration at (800) 234-5772. |
$ |
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(c)
Add a and b |
$ |
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7. Enter net annual-income needs (5 minus 6C) |
$ |
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8. Enter investment-rate factor (from table below) |
$ |
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9. Enter total asset needs (multiply 7 by 8) |
$ |
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10. Enter
total monetary needs (add 1,2,3,4, and 9) |
$ |
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11. Enter
total investment assets |
$ |
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12. Your
life-insurance needs (10 minus 11) |
$ |
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*Income needs will be greater in retirement due to the loss of
earned wages. |
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Your Investment-rate factor |
Years until
spouse is 90 |
Rate Factor |
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Conservative |
Aggressive |
How much annual income your
life-insurance benefits will generate depends on whether you're the
cautious passbook-account type or a more daring stock, bonds and
real-estate player. To complete step 8, above, go to the line that
matches the number of years until your spouse turns 90 and then choose the
"rate factor" that best describes your family's approach.
Note: The conservative
factor assumes 2 percent real annual growth, after inflation and taxes.
Aggressive growth assumes 4 percent. |
25 |
20 |
16 |
| 30 |
22 |
17 |
| 35 |
25 |
19 |
| 40 |
27 |
20 |
| 45 |
30 |
21 |
| 50 |
31 |
21 |
| 55 |
33 |
22 |
| 60 |
35 |
23 |
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