Mr. & Mrs. Smiths Life insurance

Today, I worked on my financial planning portfolio for American Research and Management. I researched into what sort life insurance would suit them and how much should be allocated incase one spouse was to die before the other. 

The average women life expectancy is 80 years in the US while the men life expectancy is 75 years. Based on this information I will work out the Mr and Mrs Smiths life insurance quotes at http://www.accuquote.com/tools/term-life-insurance-calculator.cfm

Average inflation rate =

The total average over 12 years = 30.54% divided by the 12 years:

30.54%  / 12 = 2.545% (3%)

The average interest rate is based on a 10-year average of 6%

Mr. Smith:

Annual income before tax: $105,000
% Of income needed by dependents: 57%
Age: 40
Numbers of year’s benefits are needed: 35
Annual inflation rate (estimate): 4%
Annual interest rate (estimate): 6%

Mr. Smiths needs to earn $1,881,421 in life insurance to insure Mrs. Smith is financial secure from his loss of income.

If income doesn't keep up with inflation, the purchasing power of Mr. Smiths will diminish. For example, if inflation rises five percent every year over the next 35 years, a earnings are $105,000.00 he would need a salary increase of $3,150.00 each year just to keep pace. At the end of the 35-year period, the salary would total $215,250.00, but would only offer the same purchasing power of the original $105,000.00.

Mrs. Smith:

Annual income before tax: $51,000
% Of income needed by dependents: 27 %
Age: 40
Numbers of year’s benefits are needed: 40
Annual inflation rate (estimate): 4%
Annual interest rate (estimate): 6%

Mrs. Smith needs to earn $360,666 in life insurance to insure Mr. Smith is financial secure from her loss of income.

If income doesn't keep up with inflation, her purchasing power will be diminished. For example, if inflation rises five percent every year over the next 40 years, Mrs. Smiths earnings of $51,000.00 would need a salary increase of $1,040.00 each year just to keep pace. At the end of the 40-year period, the salary would total $82,600.00, but would only offer the same purchasing power of the original $51,000.00.