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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
Jim
April 19, 2013 at 6:52 pm

Why must everything this President do be designed to punish success and encourage dependency? What business is it of his how much we earn? Cut back on the welfare payments and get rid of Obamacare if you want a cash cow to tap into.

Larry
April 19, 2013 at 5:07 pm

My issue is that he says 205K should be enough for anyone to live. While that may be true, it is up to the individual to decide. Obama says one thing to the public, then does the opposite for himself. It is not the governments decision on how people should live. Stop this nanny nonsense. Do something to HELP people, everything he does hurts. Obamacare will not happen as it will destroy the US economy. but as long as he and his buddies make millions, he doesnt care--

Justin
April 19, 2013 at 10:35 am

I'm a young guy 24. And my wife and and I are maxing our roth every year. If they touch anything related to ROTH's I'm going to be furious. Because I'm planning ahead I"m going to be punished... That makes no sense

Quincy
April 18, 2013 at 1:18 pm

I do agree with everyones opinions but the problems relies within ourselves, We all have been brain washed, bambusseld , lied to through politians, religion through our hold life. We have to take all of what we have learned through life experience the good bad ugly decissions, and figure it out. Cant blame Obama former President Bush. Its life experience that create our out come in the future to come. Stand up and fight for what you believe for you and your family. make your children a stronger Nation. Listen observe and apply.

Brenda
April 18, 2013 at 12:16 pm

The government gave the tax break on IRAs, and they can take it away. The question is, why would they do that? One would think they would prefer that less people rely on social security in their old age, and not discourage people saving for retirement. I agree with Anthony. Once it starts, who knows where it will end. We can only hope for new leadership with the next election, leadership who's agenda is economic growth and job creation; not redistributing wealth so everyone has a "fair" chance!

bobby freedom
April 18, 2013 at 11:18 am

Why does Bama dislike capitalism so much? If he thinks our way government and economy are so bad why doesn't he go to Kenya and try and prosper and have equality that he so desires! No where in the U.S. Constitution does it mention fairness. Any way one man's fairness is another man's unfairness. So lets stop using the term fairness.

Frank
April 18, 2013 at 10:34 am

JackDharma
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.
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There is a proposed limit. If Obama gets his way, he is effectively taking away a persons ability to invest more than a certain amount into a tax-deferred IRA.

Anthony
April 18, 2013 at 9:56 am

I agree that this is the beginning of the slippery slope. If the Feds can cap the limit at 3 million, why not 1 million or maybe 500,000? This all fits very nicely with the concept being promoted by some that the Fed government should just seize all private IRA's, 401k's and give the account owners some "guaranteed" monthly amount.

asychis
April 18, 2013 at 9:31 am

More rights being stripped away. Why does our august President believe he has to decide how much money people can have or what they do with it? He says he is not socialist, but 99.9% of his actions are definitely socialist or worse.

paul
April 17, 2013 at 10:47 pm

I agree with Daniel west Obama and thedeocratic party wonts to control every part of are lives making it a communist society.we need to stop the liberals and get Obama empeched so we can stay a free people don't you wont to stay free.