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Obama proposes capping IRAs

By Jennie L. Phipps · Bankrate.com
Wednesday, April 10, 2013
Posted: 5 pm ET

President Barack Obama unveiled his new budget Wednesday, and it included a proposal to cap retirement savings at an amount that would yield an annual annuity payment of $205,000. In today's annuity market, that's about $3 million.

You might recall that last August, in the heat of the presidential campaign, critics bashed Republican candidate Mitt Romney for having what they estimated to be $100 million in his individual retirement account. This Obama proposal is obviously an effort to prevent zillionaires like Romney from amassing that kind of money without paying tax on much of it.

What you should know about social security benefitsFor the most of us, this proposal seems like a big shrug. The Employee Benefit Research Institute, or EBRI, reported that its IRA database at year-end 2011 showed that 0.03 percent of the approximately 20.6 million accounts had more than $3 million in assets. Some people have more than one of these accounts, so in all, 0.06 percent of the total number of account holders and 0.11 percent of account holders who are age 60 or older have more than $3 million saved in tax-advantaged accounts.

It's true that younger workers could feel the impact of this proposal more than those at or near retirement. Looking at the accounts in its database of workers 26 to 35 and assuming "no change in asset allocation over their future careers, real returns of 6 percent on equity investments, and 3 percent on nonequity investments, 1 percent real wage growth, and no job turnover," EBRI says just under 1 percent, or 0.9 percent, of these younger workers would hit the $3 million cap, after adjustments for inflation.

Are you worried yet? Some people are. A few pundits are predicting that this is only the beginning of a government assault on tax-advantaged retirement savings. The American Society of Pension Professionals & Actuaries warns that this change could discourage small businesses from offering retirement savings plans because the boss couldn't benefit as much as he'd prefer. Other pundits say this is a slippery slope and taxes on Roth 401(k)s could be next.

Will these things happen? Maybe, but, personally, I can find lots of more pressing retirement planning risks to worry about. I'm going to keep saving in hopes that I'll be lucky enough to have this problem.

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161 Comments
Dingus
May 14, 2013 at 5:02 pm

Point 1: Did anyone ever consider that Romney may have accumulated that much in an IRA because he rolled over from a company pension plan when he left their employ? That is the only way he could accumulated that much, it can't be done in a traditional IRA because of the annual deduction limit which is also phased out at well under what Romney's AGi would have been. He hasn't made a small enough amount anually to qualify for an IRA in years.
Point 2: IRA's are income in repect of a decedent, it is either taxed in the estate or to the estate beneficiaries, it will never escape taxation even under the current taxation system, it will eventually have it's "fair share" of tax paid on it.
Using Romney as a rich man example of what's wrong with the IRA deduction in the tax system is completely bogus, only another liberal lie talking point!

rudyran65
May 14, 2013 at 1:56 pm

THE MORE WE AS CITIZENS LET THIS GO ON.THE MORE OBAMA WILL TRY

TO GET AWAY WITH. HOW PEOPLE EVER REELECTED HIM IS BEYOND ME.

GOD BLESS AMERICA

Ron Tate
May 13, 2013 at 4:10 pm

Good example of what you can believe that was written about Romney during the pre-election hype. The maximum IRA contribution in 2013 is $6,500 for all accounts by a single person. That is the largest that it has ever been. Romney must have had a heck of a return on all his prior contributions, because at a max on $6,500 per year, it would take over 15 thousand years to accumulate a hundred million.

RANDALL NIERMAN
May 12, 2013 at 7:32 am

WHEN THEY SAID HE WAS RUNNING FOR PRESIDENT,I TOLD EVERYONE THAT I COULD HE WAS NO GOOD,EVERYTIME SOME THING CAME UP HE WOULD PULL THE RACIST CARD, THAT ALL THOSE DEMOCRATS KNOW.I WAS A DEMOCRAT UP
TILL BUSH RAN AND I SEEN HOW THE DEMOCRATS ACT, WHEN THEY LOST. OBAMA THE WORST EVERY PRESIDENT WE EVER HAD "PRIOD"!!!!!

Bobby R.
May 11, 2013 at 2:56 pm

Obama is doing his best to destroy the wealth base of this country.

He has another 3 + years to do it but we can only hope that congress can keep him in check, the en-titlists sure will not.

MPOC
May 09, 2013 at 8:46 pm

Welcome to socialism. The government cannot support those who are on (and will be getting on) entitlement programs so we are going to penalize those who have enough forethought and work ethic by limiting how much they accumulate in their OWN retirement plans? SWELL!!! There are so many repugnant shenanigans being pulled everyday by government employees to "max out" their already bloated retirement benefits and we the taxpayers are paying for those too! I cannot believe that more citizens are not vocal about lining the wallets of many government employees.

juma35
May 09, 2013 at 3:33 pm

CashMcCall, Govt employees do not get 100% base pay retirements. Their retirement is based upon their time in service and their contributions to their retirement fund. Only the President receives a full retirement for life without having to pay into his IRA or pension plan.

CashMccall
May 09, 2013 at 10:19 am

Yet it is perfectly acceptable for a gov employee, a blood sucking tic, to get a pension of 100% of their salary in retirement with cost of living increased to infinity and in some cases in excess of $500K a year. This gov bloat has to end. Obama is a lame duck and should not be treated with and ounce of respect. He's irrelevant. But you have these RINO republican and Liberals selling out citizens on everything.

DJ65
May 08, 2013 at 9:36 pm

For someone who gets a lifetime retirement, he's certainly interested in making sure nobody else has money.

amliddiard
May 07, 2013 at 12:17 pm

MIKE HOW CORRECT YOU ARE.,THESE LIBERALS UNEDUCATED SHOULD GO BACK TO SCHOOL!! OUR CLOWN IN THE CIRCUS CALLED "the white house "???is no more!!!educated than their herd of beeehhh!!! beeehhh!!! thank you for your educated discovery!!! a l.