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Obama proposes capping IRAs

By Jennie L. Phipps ·
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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May 22, 2013 at 3:01 pm

Please corrrect me if I am wrong. Savings in this country are used for borrowing and growth. If any of these so called leaders had to pay for their own health care, and made contibutions to thier retirement accounts with money they earned in the private sector, they might have a realistict viewpoint on taxes and spending. Our President has never had a real job outside of government. Our politicians are frightenly out of touch with reality. Do you think they really care if the cost of health care goes up and the quality goes down. Do they care if the price of fuel gores up and that we are dependent on the Middle East. Now our President is suggesting a means of discouraging saving for retirement. Believe it or not, we are all different. some work hard and smart and make this ciuntry great..Join in.

May 22, 2013 at 9:23 am

roth ira in company are tax thats why i put mine to roth ira now if the govt will put a cap on it then i will be double tax...that sucks

May 21, 2013 at 11:54 pm

The government officials can't go after the big companies because they need the "donation" from them for next election.

Rustin Chrisco
May 21, 2013 at 9:51 pm

"They say the wish to be Good Masters, but their wish is to be Masters"
Daniel Webster.

"If there is to be trouble, I wish it to be in my time, so my children may spared."

America. Please god wake up.

Don Grundy
May 21, 2013 at 8:31 pm

Contrary to what the article states the IRA is taxed. If not when it is put in the account it will be taxed when it is withdrawn. In other words Mr Romney's IRA doesn't exempt him from taxes. It may be lower when he withdraws it if his income is lower than when he put it in but he still pays taxes on it.

must see
May 21, 2013 at 8:01 pm

Search the terms ''CRAZY RICH CASH'' and go to the top site...then click their pennystocks pages to score easy cash.

May 21, 2013 at 6:42 pm

Welcome to AmeriKa a/k/a ObamaNation ... once known as America, land of the free.

May 21, 2013 at 5:49 pm

"Will these things happen? Maybe, but, personally, I can find lots of more pressing retirement planning risks to worry about."

Ms. Jennie this last flippant comment shows how naive you are. Whether I save a dollar or a billion dollars, it's my money, and having to worry about our government becoming one of the "risks" deserves more attention than a curt cut toward people who do. Our government has been, and continues to consider breaking its contract with its citizens concerning their lifetime savings, and violating the foundation of our country's unique philosophy that what is yours, IS YOURS. There is no more "pressing retirement planning risk(s)" than the ability of government entities to take your retirement investments and savings away from you for ANY REASON, and give them to someone else they decide os deserving.

Before giving any retirement planning advice you need to become more mature in the ways of government, politics, financial reality, motivation of people, the real world. The topics you write about are serious and affect the lives of real people. Given current political situations in this country and globally, the risk of government taking some of a person's retirement savings is a real concern everyone should take seriously.

May 21, 2013 at 12:21 pm

A lot of people may not worry about this because, like me, will never make that kind of money...but once you set a precedence it opens the flood gates.

Why go down that path? Fix the problem, don't create new ones. Why would you put a cap on savings?!?!

May 21, 2013 at 6:43 am

If the issue is tax revenue, close the off shore tax loopholes first. Penalizing individuals because you don't have the guts to go after companies is ridiculous.