Needs & Desires Analysis

Since COVID, more than any time in my 20 years in the industry, people have become increasingly interested in understanding how much they should calculate in their financial planning, should something happen to them, to ensure their family is taken care of and not strapped or stressed financially. I am not alone in noticing this uptick in interest.

---

According to a 2021 LIMRA survey, 44% of households said they would face financial hardship within six months if the primary wage earner were to die prematurely. For 28% of households, financial hardship would hit within one month. This was alarming, to say the least, and with the scare of the pandemic taking many lives unexpectedly, it raised the awareness of need in the minds of many. 

So, how do you calculate what is needed? It shouldn’t be just about what is needed at a basic survival and household level, but also what is desired as well. 

6 Considerations for Calculating Needs & Desires

1. Replace lost income: Whether you are the sole breadwinner or the primary breadwinner in your household, if something were to happen to you, what amount on an annual basis would need to be provided so that your family is not placed in undue stress to cover living expenses and the mortgage that your income helped supplement?
2. Pay off debt: From your home mortgage to other debt that has been incurred, planning for your family to be able to pay these debts off is something many consider within their financial plan. This is especially important if there is only one wage earner, or if there is a significant disparity in annual income between two wager earners. If either of you were to pass away, could your single income cover all obligations?
3. End-of-life expenses: As you are nearing the end of your life, due to long-term care needs, or after you have passed away, how much will be necessary to cover these expenses? There is a 50%  likelihood that someone who purchases a long-term care policy will use the policy after the age of 60 based on data from the American Association for Long Term Care Insurance. Add to this the average cost of long-term care according to Price Waterhouse Cooper being $172,000, could your family bear the burden of this cost over several months or even years? Funeral and burial costs in the United States range between $7000 - $15,000 depending on the state in which you live according to World Population Review.  
4. Cover taxes: One of the biggest surprises many beneficiaries are not prepared for is the taxes that will need to be paid on taxable assets left to them. From capital gains on real property to estate taxes to taxes on annuities or stock that is cashed in, it can come as a shock that they were not prepared to incur. This is why having a tax-free insurance policy or option within your overall financial plan is astute. 
5. Fund future plans: If you are in your 30s or 40s and have children and want to make sure their college education is paid for without student loans, then this is something to consider when calculating based on this desire. The average cost for higher education according to Education Data Initiative is at $35,331 per student per year. Multiply that by four years and the number of your children you want to cover, and it adds up. Then you need to take into account how these costs will rise by the time your children begin college. A variety of options can help you in preparing and saving now tax-free and make accommodations should something happen to you. 
6. Fund a lasting legacy: Do you desire to leave a legacy through wealth transfer to your next generation or for philanthropic purposes within your community, to your alma mater, or a favorite charity? Knowing what amount you would like to give will help your financial advisor make customized recommendations on the best options for accomplishing your goals. You can even specifically name a charitable 501(c)3 organization as a beneficiary of a life insurance policy or stocks owned. 

​Part of preparing for life’s unexpected is to have peace of mind. Here are some calculators to help:

• Human Life Calculator
• Disability Calculator
• Life Insurance Needs - Life Happens

• Advanced Markets Needs Analysis
• Long Term Care Costs Calculator
• Life Insurance Needs - Forbes

For Your Future,

Lori Capozza Zeind
www.lczconsulting.com

P.S. Check out LCZ Consulting's ever-growing Insights Library. Confused by insurance terms. Check out our Glossary!