Making Adjustments…

• After coming up with dollar amounts to provide immediate cash and ongoing income, adjustments can be made before determining how much life insurance will be required.
• Clearly, existing life insurance can reduce the need for new insurance. Example: If a $100,000 education fund is required – and there’sexisting life insurance in that amount or greater – this need is already taken care of.
• Savings – such as bank accounts, certificates of deposit, securities – might also be available to help fund the identified needs.
• These and other sources can reduce the insurance need – but they must be available at the precise time the family needs the money.
• Adjustments can also change the amounts required for ongoing income needs.
• Surviving family members can usually maintain their standard of living with a percentage of the income the deceased wage earner had provided – 65 to 75 percent is common. But if the replacement income falls below 65 percent, the family will usually have to adjust its lifestyle.

Other Income Sources…

• In most cases, Social Security will be available if dependent children up to a certain age are living at home.
• For example, if Social Security will pay the survivors $20,000 per year, this amount can be subtracted from, say, a required $70,000 income need, leaving an income need of $50,000 per year for the years the benefit is available.
• If there is ongoing income from any other source – such as the deceased person’s retirement account or the surviving spouse’s income – this can also reduce the amount required to replace the wage earner’s income.
• The final step is to decide the number of years the income will be required.
• This should take into account that less income may be needed as children leave home and become self-supporting, and as the surviving spouse’s income increases.