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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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April 17, 2013 at 4:58 am

Taxes Taxes Taxes, we fought a revolution because the
British put a 2 cent tax on our tea, look at us now !!!

April 17, 2013 at 4:36 am

Taxed on income, estate tax, tax on retirement accounts, everything taxed.

April 17, 2013 at 3:00 am

Then eliminate pensions for government workers that can pay over 205K a year too. Its only fair. Why should they benefit from money they didn't even earn, and "regular people" can't benefit from money they did?

April 17, 2013 at 12:54 am

You can't the goverimemt,there going to do wheath it right or wrong.alot more is going,before it get worst.cost of living,higher taxes,all kine of cuts we are going back to the 1920.higher crime rate Job leaving our Country.China taking over.With the Generation going to do in the furure.God forbide

April 16, 2013 at 9:50 pm

Anyone who understands business, trade, and savings knows Obama is an idiot. I don't believe the American people voted for him and I don't believe our constitution is protected by those who vowed to protect it. His aim is to destroy the economy and make us dependent on a weak government. I also think people seriously need to pay attention to why all his agendas are being pushed by sudden catastrophes such as shootings and bombs. Amazing on the timing ..or perhaps our gov is our own worst enemy.

April 16, 2013 at 9:16 pm

This is why we have the 2nd amendment. At some point our government is going to be too...... tyrannical and require the citizenry to take it back at any and all cost.

April 16, 2013 at 6:52 pm


Larry Bomben
April 16, 2013 at 6:28 pm

I think it is an unrealistic expectation to think that the government will allow us to keep our money. They can justify anything if it will save just one child.

April 16, 2013 at 6:01 pm

Obama should stop snorting cocaine off the resolute desk.

April 16, 2013 at 5:50 pm

The two things that concern me are:

1) 3 Million might not be 3 million in the very near future. Inflation might hit us pretty hard, and that might not be the huge amount it seems by the time we hit retirement age.

2) NOW he wants to cap it at 3 million. But once that door gets opened -- as to how much you are "allowed" to keep for retirement, it'll be on the table every single year when we need to address budget shortfalls.

Social Security is a ponzi scheme. Don't do it with our savings too.