medium · Certified Financial Planner Risk Management
The Lindstroms want to determine the human life value of the primary breadwinner, who earns 185,000 and spends52,000 on personal expenses. They assume a 6.0% investment return and 3.4% wage inflation.
What is the first step in this calculation?
- Determine the cost of a term life insurance policy with a 2,440,000 death benefit.
- Subtract personal expenses from total income to find the net annual contribution.
- Calculate the inflation-adjusted rate using the formula ((1.060 / 1.034) - 1).
- Multiply the total income by the life expectancy to find the gross contribution.
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