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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
Osamas Pajamas
April 22, 2013 at 9:35 pm

Spacelink wrote.... "This administration is treading on thin ice with the American People."

Not thin enough for MY liking --- and you can take THAT to the bank.

Osamas Pajamas
April 22, 2013 at 9:31 pm

"OhBummer proposes capping IRAs" --- If his intended victims prefer capping him, I'll be dancing in the streets. ~:<) And no, I have no IRA or other savings, alas --- it's all gone, now.

Sam
April 22, 2013 at 8:43 pm

"And then they came for me...." This is just the first step in the plot bu the socialist scum to steal our retirement accounts. If you doubt me, remember how "healthcare reform" started....one socialist step at a time....I you don't defend the "rich" now, you will be the next target.

mark jons
April 22, 2013 at 10:30 am

maybe start the means test for ss when someone hits a million dollar agi....then every other year need to qualify for SS benefits.

dogbone59
April 22, 2013 at 9:52 am

A means test for S.S.? So why work real and save money when those like Mr. Obama punish you for it? Frankly I'm sick of supporting his mother in law and watching her attend White House concerts on our dime. Does she pay for Medicare? Does she get the same medical insurance as her son in law? I'll bet her records are sealed as are the Presidents academic record.

mark jons
April 21, 2013 at 12:46 pm

also...they are going to get all the taxes on this money...its not like they are not when the person dies. they just want it sooner.

they should adjust the social security benefits - on a one by one case basis. every other year a retired person collecting social security sends in a one page statement of income...and if they are over the threshold the money goes to pay national debt (not increase the spending on other programs)

mark jons
April 21, 2013 at 12:34 pm

this is frigging stupid! They will definitely target roth IRA after they just got a lot of people to convert over and pay the taxes...if you want postal....that it what is going to happen for some of these people that paid the tax early and voluntarily to convert over to roth and now will be taxed again.

really 205k is enough to live on? how do they know there are not problems of medical, bad investments, tanking real estate value, kids still at home? this won't get thru, but they are knocking on the door and the roth or other stuff might stick in the deferral arena.

John
April 20, 2013 at 5:17 pm

I wasn't good at english, but i know semantics when I see them. Romney WILL pay taxes on it, maybe even more than he would have when he first had the income, so don't taint the article! Tax is DEFFERRED, not avoided!

Spacelink
April 19, 2013 at 7:22 pm

Yvonne, he'll just have Congress 'exempt' themselves like they just did this week regarding 'insider trading' and them NOT being prosecuted for doing it!

This administration is treading on thin ice with the American People.

Yvonne
April 19, 2013 at 6:55 pm

How much is President Obama worth now - that is, how much money is in his current estate? What was he worth when he became president?
What will his retirement benefits be for being president? Why am I the only person asking these questions?