Reference no: EM133716024

Question: Your clients, Jamal and Chyna Gwynn, would like you to estimate their life insurance needs based on a comprehensive needs analysis. Their son, Jarius, is currently thirteen years of age. Jamal and Chyna have high hopes for Jarius's future education. They would like to accumulate a $240,000 (in today's dollars) educational savings fund to pay for four years of college. In event of Jamal's or Chyna's passing, they will need $10,000 in transitional childcare expenses. When making your estimate, the Gwynns would like to pay off all debt and liabilities at the death of the first spouse. Use the following information to determine the life insurance need for Jamal and Chyna separately: Jamal: Age Forty-eight; Life Expectancy: Age Ninety-seven Chyna: Age Fifty; Life Expectancy: Age Ninety-five Desired Retirement Age: Age Sixty-two Full Retirement Age: Age Sixty-seven Earned Income: Jamal $145,000 Earned Income: Chyna $210,000 Bonus: Jamal $25,000 Investment Rate of Return: 7.90 Percent Inflation Rate Assumption: 3.00 Percent Marginal Federal and State Marginal Tax Rate Before Retirement: 29 Percent Marginal Federal and State Marginal Tax Rate After Retirement: 29 Percent Final Expenses: Jamal and Chyna $40,000 Each Estate Administration: Jamal and Chyna $12,000 Each Other Final Needs/Expenses: Jamal and Chyna $20,000 Each Jointly Held Credit Card Debt: $45,000 Jointly Held Installment Debt: $82,000 Jointly Held Automobile Debt: $19,000 Jointly Held Mortgage Debt: $345,000 Jointly Held Other Debt: $190,000 Transitional Child Care Expenses: $10,000 Each Household Expenses Needed in Event of Death: $296,000 Each Capital Retention Replacement Ratio: 80 Percent Expense Reduction Ratio While Jarius is at Home: 100 Percent Social Security Benefits While Jarius is at Home: $0 Expense Reduction Ratio After Jarius Leaves Home but Survivor Turns Age Sixty: 80 Percent Social Security Benefits After Jarius Leaves Home but Survivor Turns Age Sixty: 80 Percent Income Needed from Age sixty to Full Retirement: $190,000 Each Income Need While Retired: $190,000 Each Social Security Benefit of Survivor: Jamal $42,000 Social Security Benefit of Survivor: Chyna $39,000 Other Income in Retirement: $80,000 Each In-force Cash Value Life Insurance: Jamal $300,000 In-force Term and Cash Value Life Insurance: Chyna $500,000 Combined Retirement Assets: $1,500,000 Combined Other Savings: $200,000 Other Assets: $0 Based on the above info answer the following: Approximately how much additional life insurance does Jamal need? Approximately how much additional life insurance does Chyna need? How do these estimates compare to the need from the human life value approach? What helps explain the difference?