How JustAnswer Works:

  • Ask an Expert
    Experts are full of valuable knowledge and are ready to help with any question. Credentials confirmed by a Fortune 500 verification firm.
  • Get a Professional Answer
    Via email, text message, or notification as you wait on our site.
    Ask follow up questions if you need to.
  • 100% Satisfaction Guarantee
    Rate the answer you receive.

Ask jgordosea Your Own Question

jgordosea
jgordosea, Enrolled Agent
Category: Tax
Satisfied Customers: 2995
Experience:  I've prepared all types of taxes since 1987.
Type Your Tax Question Here...
jgordosea is online now
A new question is answered every 9 seconds

Why does Clark Howard say that a variable universal life insurance

Customer Question

Why does Clark Howard say that a variable universal life insurance is only worthwhile for folks making over $350,000 per year? I understand that the rich are more likely to care about tax advantages and estate planning, while they don't have to worry much about such a policy lapsing. However, what calculation or what prior reference from the financials literature could he have used to come to that exact cut-off of $350,000 per annum?

http://webcache.googleusercontent.com/search?q=cache:wcserUr9qp8J:clarkhoward.com/shownotes/category/9/81/+clark+howard+$350,000&cd=2&hl=en&ct=clnk&gl=us

It is in the last 2 sentences in that link: "If you make more than $350,000 a year, you may benefit. Otherwise, stick with term life insurance."
Submitted: 3 years ago.
Category: Tax
Expert:  jgordosea replied 3 years ago.

Greetings,

 

Although we can not be certain how Clark Howard came to that figure, my best guess is that it is based on the tax rates in effect in 2004, the year of the article.

 

According to 2004 Tax Rate Schedules: Marginal Ordinary Income Tax Rates for 2004 the highest marginal rate was for taxable income over $319,100.

Allowing for at least the standard deduction and exemption amount the total income would be close to the $350,000 amount in the article.

 

Presumably Mr. Clark was not saying that if your income was $349,000 that this type insurance is not to be considered; but was likely using that round number of $350,000 as the a reference to those in the highest marginal tax bracket.

My reading is that was not an exact cut-off; but rather an example of the range of income under which he opined that insurance should be considered.

 

There would be no reason to have an exact cut-off; but it would make sense to refer to an income amount rather than taxable income or highest marginal tax rate as the use of the $350,000 would mean more to most people than reference to taxable income or marginal tax rates.

 

Best regards.

 

jgordosea, Enrolled Agent
Category: Tax
Satisfied Customers: 2995
Experience: I've prepared all types of taxes since 1987.
jgordosea and 5 other Tax Specialists are ready to help you
Customer: replied 3 years ago.
What do you think of Variable Universal Life Insurance's ability to achieve the goal of long term investment, after taxes, compared to traditional investing in the same assets that the separate accounts which the policy invests in?

Very good answer. Thanks!
Expert:  jgordosea replied 3 years ago.

Hello again,

 

The main disadvantage of variable universal life insurance is that the fees within those policies are usually much higher than if the same assets were held in mutual funds or another vehicle.

 

Also, the premium for the permanent insurance will be higher than a comparable term policy with the same face value. There may also not be a real need for the entire face for the lifetime of the insured so term would be better in that case.

 

Policies can lapse or require additional premiums if the investment performance is not adequate.

 

See the article, for example, at Variable Life Insurance, Universal Life Insurance, And Variable ... for more details (and note gross rate discussion).

 

Please understand that I am not currently licensed as an insurance agent and this is not insurance and not investment advice (even though I am a Registered Investment Advisor currently).

 

Thank you.

 

JustAnswer in the News:

 
 
 
Ask-a-doc Web sites: If you've got a quick question, you can try to get an answer from sites that say they have various specialists on hand to give quick answers... Justanswer.com.
JustAnswer.com...has seen a spike since October in legal questions from readers about layoffs, unemployment and severance.
Web sites like justanswer.com/legal
...leave nothing to chance.
Traffic on JustAnswer rose 14 percent...and had nearly 400,000 page views in 30 days...inquiries related to stress, high blood pressure, drinking and heart pain jumped 33 percent.
Tory Johnson, GMA Workplace Contributor, discusses work-from-home jobs, such as JustAnswer in which verified Experts answer people’s questions.
I will tell you that...the things you have to go through to be an Expert are quite rigorous.
 
 
 

What Customers are Saying:

 
 
 
  • I really was impressed with the prompt response. Your expert was not only a tax expert, but a people expert!!! Her genuine and caring attitude came across in her response... T.G.W Matteson, IL
< Last | Next >
  • I really was impressed with the prompt response. Your expert was not only a tax expert, but a people expert!!! Her genuine and caring attitude came across in her response... T.G.W Matteson, IL
  • I WON!!! I just wanted you to know that your original answer gave me the courage and confidence to go into yesterday's audit ready to fight. Bonnie Chesnee, SC
  • Great service. Answered my complex tax question in detail and provided a lot of additional useful information for my specific situation. John Minneapolis, MN
  • Excellent information, very quick reply. The experts really take the time to address your questions, it is well worth the fee, for the peace of mind they can provide you with. Orville Hesperia, California
  • Wonderful service, prompt, efficient, and accurate. Couldn't have asked for more. I cannot thank you enough for your help. Mary C. Freshfield, Liverpool, UK
  • This expert is wonderful. They truly know what they are talking about, and they actually care about you. They really helped put my nerves at ease. Thank you so much!!!! Alex Los Angeles, CA
  • Thank you for all your help. It is nice to know that this service is here for people like myself, who need answers fast and are not sure who to consult. GP Hesperia, CA
 
 
 

Meet The Experts:

 
 
 
  • Wallstreet Esq.'s Avatar

    Wallstreet Esq.

    Tax Attorney

    Satisfied Customers:

    566
    10 years experience
< Last | Next >
  • http://ww2.justanswer.com/uploads/KU/KUMI95/2013-9-30_195031_kumar.64x64.jpg Wallstreet Esq.'s Avatar

    Wallstreet Esq.

    Tax Attorney

    Satisfied Customers:

    566
    10 years experience
  • http://ww2.justanswer.com/uploads/CU/Cuttinggirl/2011-10-29_03719_wcrop2.64x64.jpg Wendy Reed's Avatar

    Wendy Reed

    Enrolled Agent

    Satisfied Customers:

    3046
    10+ years tax preparation and tax advice.
  • http://ww2.justanswer.com/uploads/CATax/2009-08-04_204548_Mark.jpg Mark D's Avatar

    Mark D

    Enrolled Agent

    Satisfied Customers:

    985
    MBA, EA, Specializing in Business and Individual Tax Returns and Issues
  • http://ww2.justanswer.com/uploads/IN/insearchoftheanswer/2013-8-16_0233_attorney.64x64.jpg Richard's Avatar

    Richard

    Tax Attorney

    Satisfied Customers:

    3103
    29 years of experience as a tax, real estate, and business attorney.
  • http://ww2.justanswer.com/uploads/MY/MyVirtualCPA/2012-7-5_44024_cookmegan1.64x64.jpg Megan C's Avatar

    Megan C

    CPA, CMA, CFE

    Satisfied Customers:

    3257
    Licensed CPA, CFE, CMA who teaches accounting courses at Master's Level
  • http://ww2.justanswer.com/uploads/JG/jgordosea/2012-6-7_43138_GordosVeritas.64x64.jpg jgordosea's Avatar

    jgordosea

    Enrolled Agent

    Satisfied Customers:

    2679
    I've prepared all types of taxes since 1987.
  • http://ww2.justanswer.com/uploads/OZ/ozaukeecpa/2012-6-7_193219_Picture1croppedandshrunk.64x64.jpg MequonCPA's Avatar

    MequonCPA

    Certified Public Accountant (CPA)

    Satisfied Customers:

    2219
    CPA, Over 30 yrs experience w/individuals and small businesses. Masters in Tax.