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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
Harvey
April 17, 2013 at 8:29 pm

How in the hell does this man, this thief, this charlatan, this swindler, this con man, still have a 49% approval rating?

49% of the country must not have a job. That's all I can figure.

Cathy
April 17, 2013 at 7:52 pm

It is not Obama's business to tell someone how much retirement they can have. He will drawing a pension of $192,000 for the rest of his life when his second term ends and will probably get cost of living adjustments. He will also be getting health care and protection from the Secret Service for the rest of his life.

There are very few defined benefit plans, if any, for people working now. They will only have their IRA's and 401k's to depend on. I've read articles that the government is frothing at the mouth to get access to the trillions of dollars people have in their savings for retirement. Obama would rather see people on welfare, food stamps and disability than work hard and save for their futures.

Craig
April 17, 2013 at 7:18 pm

There is nothing here that says you need to be dependent on the government, only that you can't stash away tons of money without paying taxes on it. Every dollar that someone doesn't pay taxes on raises the percent needed from someone else's dollars.
This proposal says that if you are doing well enough to save $3 million, with the government tax break help, then you probably don't need more free money from the government. I believe that the money the government would be giving that person would be better used to pay down the debt or contribute to keeping this country the strongest and best in the world.
You can still have your other $30 million dollars in a taxable retirement savings account and no one will take your money.
But then again, I guess I should just leave it to the Republicans to subsidize the millionaires (which I hope to be among some day, millionaires, not Republican)

JackDharma
April 17, 2013 at 5:01 pm

I see a lot of ad hominem attacks here, but I don't see any reasoned arguments. And I can't even begin to guess what "bring the USA down completely" could possibly mean. The blog is merely reporting that Obama has suggested that there should be a limit on how much we can put into a tax-deferred IRA. In other words, you can save as much as you'd like, and no one is going to take it away from you, but you'll have to pay taxes immediately on anything over $3,000,000, rather than waiting until you're retired and drawing the money out (and since we're paying the lowest tax rate since the 1920s, that doesn't seem too big a burden). I think it's a reasonable idea, but I think that the limit is too low. It should probably be around $5,000,000.

Ratt
April 17, 2013 at 3:23 pm

WTH business is it of Obama if I have more than $3 Million in MY retirement package.

Luckydog
April 17, 2013 at 1:47 pm

Zillionare?
This is just one more twist in the Obama trap to "redistribute the savings of producers" and give it to his lemmings.

Daniel West
April 17, 2013 at 12:04 pm

It is obvious that the Obama Aministration is purposely transferring the U.S.A. into a socialist state or even a communistic sociëty. I would not even be surprised if there is nationalization of industries,transportation and agriculatural economy. Also there would be one party control by the Deocratic Party!!

Gregg
April 17, 2013 at 12:03 pm

4/17/2013 at 1055AM. Pres. Obama's financial misdoings are but
one part of the whole: to bring the USA down completely ! I have
asked my Senators a number of times to consider Impeachment Proceedings as the man in office is neither competent to perform
the duties nor of the proper mindset. It is past time to get
rid of this man and his staff, before this nation can't come
back. Liberals are fast wearing out their welcome in this country.

Jay
April 17, 2013 at 10:52 am

There's no doubt Obama and his socialist buddies know this is just one step in the 'wrong' direction. The ultimate goal is to make everyone forcibly dependent on the government. Forced participation in gov't run health care. Forced contributions to social programs like social security and medicare, etc. Then...take away anyone's ability to be independent by reducing and/or eliminating their ability to provide for themselves 'outside the system', lest someone else think it's possible. Anyone who doesn't understand this is just part of a multi-generational push by liberals to make the US a socialist country is a fool.

Paul
April 17, 2013 at 10:30 am

How to wake-up a Wealthy dimmoKKKRAT Liberal?
Steal his money and give it away!
We working Republicans TOLD YOU SO!
You called us RACISTS for labeling OBowMao a SOCIALIST!
WELL????
How say you now???