Human Life Value
Human Life Value Definitions
- Years until retirement
- Number of years before retirement.
- Current annual income
- Your current annual income. If you are married, this should not include any income from your spouse.
- Return on investments
- This is the annual rate of return you expect from your investments after taxes. The actual rate of return is largely dependent on the types of investments you select. The Standard & Poor's 500® (S&P 500®) for the 10 years ending Dec. 1st, 2015, had an annual compounded rate of return of 7.76%, including reinvestment of dividends. From January 1970 through to Dec. 2015, the average annual compounded rate of return for the S&P 500®, including reinvestment of dividends, was approximately 10.5% (source: www.standardandpoors.com). Since 1970, the highest 12-month return was 61% (June 1982 through June 1983). The lowest 12-month return was -43% (March 2008 to March 2009). Savings accounts at a financial institution may pay as little as 0.25% or less but carry significantly lower risk of loss of principal balances.
It is important to remember that these scenarios are hypothetical and that future rates of return can't be predicted with certainty and that investments that pay higher rates of return are generally subject to higher risk and volatility. The actual rate of return on investments can vary widely over time, especially for long-term investments. This includes the potential loss of principal on your investment. It is not possible to invest directly in an index and the compounded rate of return noted above does not reflect sales charges and other fees that Separate Account investment funds and/or investment companies may charge.
Insurance products may additionally include mortality, expense risk charges, cost of insurance, administrative, and surrender charges that will have a significant impact on the total rate of return for the investment.
- Expected annual inflation rate
- This is what you expect for the average long-term inflation rate. A common measure of inflation in the U.S. is the Consumer Price Index (CPI). From 1925 through 2015 the CPI has a long-term average of 2.9% annually. Over the last 40 years highest CPI recorded was 13.5% in 1980. For 2015, the last full year available, the CPI was 0.0% annually as reported by the Minneapolis Federal Reserve.
- Expected income growth
- Annual percent increase you expect in your annual income.
- Human life value
- This is the total amount you would need invested today, to equal the total earnings of a person's lifetime. Two values are calculated for you. The first includes only your expected income growth, the second includes your expected income growth plus the impact of inflation.