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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
Barbara
June 03, 2013 at 12:11 pm

Remember what the knothead said - he would break the American people and the United States would go down.

Even a liberal should be able to read between the lines and should be fearful of what the government is doing.

Oh, this is just the tip of the iceberg. If we the people don't band together and stop the government now by removing several of those in Washington, then the rape goes on.

LINDITA
May 30, 2013 at 4:51 pm

IN MY OPINION, ALL THE POLITICIANS FROM BOTH PARTIES DEDICATED COMPROMISED TO WHITE HOUSE OBAMA PUT THEM IN A COMFORTABLE CORNER AND REPLACE THEM WITH OTHERS TO KEEP IT UP. IT'S A SAME PLAN WITH A NEW TACTICAL. OBAMA RESIGN NOW!

oztooz
May 30, 2013 at 11:01 am

Instead of waiting to age 70 1/2 to begin required minimum distributions, why not start at age 66. The government will get their taxes and the wealthy will again pay their fair share (or a little more than most).

taproot
May 29, 2013 at 9:27 pm

liberals are liars or ignorant. right rothey? If Romney had $100 million in his retirement account like the liberal media reported, most of it would have been after-tax investments. There are limits for contributions to 401Ks and IRAs. Then there are income level limits on how much contributions can be deducted from incomes (the zillionaire Romney surely exceeded the limit). Then, the return on romenys retirement investments are taxable upon distribution. so where do the lying or ignorant libtards get their basis for makings their claims? oh wait, liberals don't need to back any claims they make. the head libtard lies everyday and the his voters follow his lead like lemmings.

Greg
May 29, 2013 at 4:56 pm

Do you work at being stupid or were you born that way richard rothey. There is no tax avoidance UNLESS you are cheating. Of course, only those of us that pay taxes understand that. If anyone wants to hoard their money, so what?, it is THEIR money.

dave
May 29, 2013 at 4:23 pm

part of obozo's plan that is not mentioned in this article is he would be exempt from this limit!

he is truely a putz!!

RM
May 29, 2013 at 3:54 pm

There is no clean way to earn a 100 million dollars.

Ron
May 29, 2013 at 3:04 pm

Mr. Rothery - who are you to decide how much any one can save. Last time I check we weren't communists and you have no right to take something away from people because YOU think it is too much. If you want to give all your money to the government, so they can decide how to send it, that's your privileged. Keep your friggin hands out of my pockets.

Diablo135
May 29, 2013 at 3:01 pm

So you can't save for retirement if you are rich? What a moron. Go save a whale or something and stop thinking people with money are evil.

This is nothing more than yet another money grab by the libtards so they can garner more votes. Trust me, you will not see any of the money if that is what you are hoping for.

richard rothey
May 29, 2013 at 2:34 pm

IRS's and 401(k)'s were never intended to be tax avoidance plans. They were instigated by the government to encourage saving for RETIREMENT. SAVING for RETIREMENT. Mitt nor no one else deserves to keep a hoard of anything like $100 million for retirement. His clear purpose is tax avoidance. This is a betrayal of the spirit of what is otherwise good law.