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Example data table
Sample scenarios to show how assumptions change the coverage gap.
| Scenario | Income | Replacement | Support years | Debts + goals | Assets + coverage | Indicative gap |
|---|---|---|---|---|---|---|
| Starter family | 55,000 | 70% | 18 | 45,000 | 60,000 | Medium |
| Mortgage heavy | 80,000 | 75% | 22 | 180,000 | 90,000 | High |
| Strong savings | 70,000 | 65% | 15 | 55,000 | 210,000 | Low |
Your results will differ based on real return, support years, and existing resources.
Formula used
- Real return: (1 + return) / (1 + inflation) − 1
- Income need: annual income × replacement % (optionally grossed-up for taxes)
- Present value of income: PV = P × (1 − (1 + r)−n) / r (or P × n when r ≈ 0)
- Total need: PV income + debts + final expenses + education + other goals
- Coverage gap: max(0, total need − (savings + existing coverage))
How to use this calculator
- Enter your age, retirement age, and how many years your family needs support.
- Set your income replacement percent based on your household budget.
- Add one-time needs like debts, education funding, and final expenses.
- Include current savings and any existing life coverage you already have.
- Adjust inflation and return assumptions to match your planning view.
- Click Calculate to see your recommended coverage and downloads.
Coverage Gap Drivers
In a baseline scenario with income replacement near 70%, the present value of income support often represents the largest share of total need. For example, a 60,000 income and 20 years of support can create a six‑figure present value even before adding debts or goals. Adding 25,000 debt payoff and 12,000 final costs raises needs today for most households.
Real Return and Inflation Assumptions
This calculator discounts future income needs using a real return: (1+return)/(1+inflation)−1. If nominal return is 6% and inflation is 3%, real return is about 2.91%. A 1% shift in real return can materially change the gap, which is why the sensitivity panel is included. When inflation rises faster than returns, the real rate can approach zero, making the annuity behave like simple payment × years.
Support Horizon and Retirement Timing
Support years are capped to the years remaining until retirement so the projection stays consistent. If you are 35 and plan to retire at 65, the maximum horizon is 30 years. Shorter horizons reduce the annuity present value, while longer horizons increase it sharply when real rates are modest.
Asset Offsets and Existing Policies
Existing savings and current coverage directly offset the calculated need. A household with 200,000 combined assets can reduce the required benefit by the same amount. This helps align coverage with net exposure rather than gross expenses, and supports scenario planning as savings accumulate over time. If you expect annual savings contributions, rerun the calculator periodically to capture the improving balance sheet.
Interpreting the Premium Estimate
The premium estimate uses an annual rate per 1,000 of coverage to translate a recommended benefit into an indicative cost. Adjust the rate to reflect different ages or product types. Use the output as a planning range, then confirm pricing and terms with providers. For instance, a 500,000 benefit at 0.70 per 1,000 implies 350 per year before fees or riders.
FAQs
What does “real return” mean in this estimate?
Real return is the investment return after inflation. The calculator uses (1+return)/(1+inflation)−1 to discount future income needs into today’s money, so assumptions stay comparable across long horizons.
Why are support years capped to retirement timing?
Support is intended to cover working‑years income needs. If support years exceed the years until retirement, the tool caps the horizon to avoid projecting wage replacement beyond the retirement age you entered.
How should I set the income replacement percentage?
Start with essential household spending and subtract costs that would end (commuting, payroll deductions, some childcare). Many plans target 60%–80%, but your budget, dependents, and benefits determine the right value.
Do debts and education goals get discounted?
They are treated as near‑term lump sums in today’s value for planning simplicity. If your timeline is far out, rerun the model periodically or adjust goals to reflect when you expect those expenses to occur.
What does the premium rate per 1,000 represent?
It is a planning factor to convert coverage into an indicative annual cost. Enter a rate you’ve seen in quotes or research. Actual premiums depend on age, health, underwriting, term length, and riders.
Is the recommended coverage a final answer?
No. It is an estimate based on inputs and simplified assumptions. Use it to compare scenarios, then confirm with policy illustrations, employer benefits, and a qualified advisor before making coverage decisions.
Important notes
This tool provides educational estimates, not financial, legal, or insurance advice. Coverage needs depend on policy terms, health, underwriting, taxes, and household goals. Consider reviewing results with a qualified professional.